Tuesday, October 14, 2014

Oversold markets recover while MLPs continue to be sold

Dow rebounded 91, advancers over decliners a mild (all considered) 2-1 & NAZ bounced back 41.  The Alerian MLP index plunged once again, down 16+ to the 446s (off a monumental 93 from the recent peak), & the REIT index rose 5+ to the 303s (some of that is from MLP selling).  Junk bond funds slid lower & Treasuries are rallying after stocks have been sold.  Oil sold off again & gold found a few bargain hunters with increased global turmoil.

AMJ (Alerian MLP Index tracking fund)

CLX14.NYM...Crude Oil Nov 14...84.87 Down ...0.87  (1.0%)

GCX14.CMX...Gold Nov 14.....1,232.60 Up ...3.10 (0.3%)

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Germany cut its growth outlook & investor confidence fell to the weakest level in 2 years as recession concerns mount in Europe’s biggest economy.  The Economy Ministry reduced its 2014 economic-growth forecast to 1.2% from 1.8%, & its 2015 prediction to 1.3% from 2%.  The ZEW Center for European Economic Research said its index of investor & analyst expectations slid to minus 3.6 in Oct from 6.9 in Sep, the 10th monthly decline & the first negative reading since Nov 2012.  ZEW President Clemens Fuest said he doesn’t rule out a technical recession, or 2 qtrs of contraction, & both he & the Economy Minister called for more investment.  That might aid the ECB in its battle to revive the recovery in the euro area.  German GDP shrank in Q2 & factory orders, industrial output & exports plunged in Aug by the most since Jan 2009.  The IMF last week cut its growth forecasts for the euro’s largest economy, & French Finance Minister Sapin said the signs of weakness show “no country is immune.”  Wolfgang Schaeuble, his German counterpart, blamed at least part of the slowdown on global crises such as the Ukraine conflict & the effect of sanctions against Russia.  At the annual meeting of the IMF & World Bank he said “we don’t have a recession in Germany.”

Germany Cuts Growth Outlook as Recession Peril Mounts

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon

J P Morgan Chase (JPM)

Citigroup Q3 profit beat estimates as bond-trading revenue climbed & lending improved.  EPS rose to $1.07 from $1 a year earlier.  Excluding special items, EPS was $1.15, beating the $1.12 estimate.  The firm also announced plans to exit consumer banking in 11 markets.  CEO Michael Corbat is seeking to refocus Citi on the business of banking & narrow its scope as new regulations encourage simpler business models.  Commercial loans rose 2.8% for the largest US banks, while revolving debt like credit cards advanced 1.1%, according to Federal Reserve data.  “Our consumer bank and institutional business each had solid performance during the quarter,” Corbat said.  “The revenue improvement was evident across regions and products.”  Revenue from fixed-income markets rose 5% from a year earlier to $2.98B.  Trading & market volatility picked up in the final weeks of Q3, sparked by a stronger US$, concern that Scotland would secede from the UK & Bill Gross's departure from Pacific Investment Management.  Volatility leads to increased trading as clients make bets against further moves.  Separately, the bank said an independent investigation found a $15M fraud at a Mexican unit that provided personal security services for its Banamex division.  Trading in equities generated $763B in revenue during Q3, a 14 % increase from a year earlier.  Total trading revenue rose 6.7%, better than the guidance provided last month.  Total revenue excluding accounting charges for the institutional clients group rose 14% to $8.37B.  Global consumer banking posted a revenue gain of 4.4% from a year earlier to $9.64B.  The largest increase was in North Amercia, the biggest of the 4 regions, which brought in $4.99B.  Citi Holdings, the bank’s unwanted assets tagged for sale, earned $238M on revenue of $1.59B.  Assets fell 16% to $103B & the lender reported legal & related expenses of $951.  The stock rose 64¢.  If you would like to learn more about C, click on this link:

Citigroup Profit Climbs 6.6% as Bond Trading Improves

Citigroup (C)

The Dow had lost almost 1K this month.  It's entitled to a recovery as bargain hunters take advantage of lower prices.  Initial earnings were unspectacular, more are coming.  Dow still has a substantial sell-off in Nov & more may lie ahead with the looming recession in the euro area & increased fighting in the Syria-Iraq area which is going from bad to worse.  Dropping a few bombs here & there is not stopping ISIL from making advances.  However, even with the threat of oil disruptions from the area, oil keeps selling off as global demand is not supporting higher prices.  MLPs are a major US energy business that is suffering the most.

Dow Jones Industrials

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