Tuesday, November 4, 2014

Markets fall as oil sinks to new mutli year lows

Dow lost 70, decliners over advancers more than 2-1 & NAZ fell 36.  The MLP index dropped a huge 13+ to the 491s & the REIT index fell 1+ to the 319s.  Junk bond funds were lower & Treasuries rose.  Oil dropped to a 3-year low as Saudi Arabia cut prices for exports to US customers amid speculation stockpiles increased last week.  Gold edged lower in a weak stock market.

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM...Crude Oil Dec 14...77.26 Down ...1.52  (1.9%)

GCX14.CMX..Gold Nov 14.....1,167.50 Down ...1.90  (0.2%)

The US trade deficit widened in Sep as exports cooled from a record, highlighting how weakening global growth affects the economy.  The gap grew 7.6% to $43B, the largest since May, from $40B in Aug, according to the Commerce Dept,  The forecast called for a deficit of $40.2B.  Exports decreased by the most since Feb, reflecting slowing demand from Europe, Latin America & Japan.  This is the first sign that American companies’ intl sales will suffer as economies from Europe to emerging markets struggle, indicating trade will provide less support to the expansion.  In addition, cheaper oil & gains in crude production cut the value of US purchases of foreign petroleum to a 5-year low, offsetting record imports of consumer goods such as the latest iPhone.  For Sep, exports decreased 1.5% to $195.6B, the least since Apr, from a record $198.6B the prior month.  The decrease was widespread, including industrial supplies, capital equipment, cars & consumer goods.  Only sales of foods saw a jump, paced by a surge in demand for soybeans.  Imports totaled $238.6B, the same as in Aug.  Purchases of foreign-made mobile phones climbed by $1.9B, making up for a drop in demand for capital equipment, autos & fuel.  Apple (AAPL) is among companies contributing to higher shipments of electronics products from abroad.  The report showed the trade gap with China, where some of AAPL products are assembled, climbed to a record $35.6B, reflecting a 12.7% jump in imports from the Asian nation.  Sliding oil costs will probably help to depress the import bill, countering increases in spending by American consumer & companies.  Excluding petroleum, the trade shortfall climbed to $29B from $26.9B in Aug.  After eliminating the influence of prices, which renders the numbers used to calculate GDP, the trade deficit widened to $50.8B from $48.2B.  

Trade Deficit Widens to Four-Month High as U.S. Exports Drop

The European Commission cut its growth forecasts for the euro area as the bloc’s largest economies struggle to put the ravages of the debt crisis behind them after 2 recessions in 6 years.  GDP in the 18-nation region will rise by 0.8% this year & 1.1% in 2015, down from projections for 1.2% & 1.7% in May, the commission said.  It lowered its projections for Germany, Europe’s largest economy, & said inflation in the euro area will be even weaker than the ECB predicts.  The bleaker outlook highlights the fledgling nature of the euro area’s recovery & the deflation threat that has compelled the ECB to take unprecedented stimulus measures.  While unemployment is beginning to decline from a record high, core economies such as Germany & France are facing some of the growth challenges that afflicted the periphery at the start of the debt crisis. The report forecasts inflation at 0.8% in 2015, less than half the ECB goal of just under 2%.  That’s more pessimistic than the central bank’s own projection of 1.1%.  The commission sees inflation quickening to 1.5% in 2016, compared with the ECB outlook for 1.4%.

EU Cuts Growth Outlook as Inflation Seen Below ECB Forecast

Burger King Worldwide quarterly sales in the US & Canada topped analysts’ estimates as new burgers & chicken fries lured diners.  Same-store sales gained 3.6% in the 2 countries.  Analysts estimated a 2.5% increase, on average, according to Consensus Metrix.  BKW has been advertising value deals, including a 10-pack of chicken nuggets for $1.49, to lure American diners who are restraining spending amid the choppy economic recovery.  The company recently added new burgers to its menu & brought back chicken fries to help boost sales.  The company posted a Q3 net loss per share of 7¢, compared with EPS 19¢  a year earlier.  Excluding certain items, profit was 27¢, matching the estimate.  Global comparable-store sales increased 2.4%, matching the projection of analysts.  Sales on that basis in Latin America & the Caribbean slid 3%, trailing projections for a 1% gain.  The decline in the region was driven by macroeconomic weakness in Mexico & Puerto Rico.  So far, Q4 same-store sales in the US 7 Canada are “consistent” with the Q3 the company said.  The company’s China business has been under pressure after supplier OSI Group was investigated for changing the sell-by dates on food.  Q3 revenue rose 1.4% to $278.9M, a little under the $280M estimate.  The stock hardly budged.  If you would like to learn more about BKW, click on this link:

Burger King U.S. Growth Tops Estimates After Adding Foods

Burger King Worldwide (BKW)

Stocks are having a tough day or maybe traders have taken time off to vote.  Today's decline is little more than profit taking which is to be expected.  But the plunge in the MLP index is one of its worst in history.  Earnings reports are coming & some are not so pretty.  Lower priced oil is difficult to cope with.  On the consumer side, it is welcomed but companies have a variety of attitudes, from love to hate.

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