Friday, November 7, 2014

Markets fluctuate after a mediocre jobs report

Dow crawled up 19, advancers ahead of decliners 3-2 & NAZ slid back 5.  The MLP index jumped 9+ to the 504s as volatility has been heightened for MLPs in recent weeks & the REIT index lost pennies in the 318s.  Junk bond funds were mixed to lower & Treasuries rose.  Oil increased after US employment gains exceeded 200K for a 9th month & the jobless rate dropped to a 6-year low, bolstering the fuel demand outlook & today was also a rebound day for gold.

AMJ (Alerian MLP Index tracking fund)

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CLZ14.NYM....Crude Oil Dec 14....78.58 Up ...0.67 (0.9%)

Live 24 hours gold chart [Kitco Inc.]

Consumer borrowing increased at a faster rate in Sep as American households took out loans for cars & education.  The $15.9B increase in credit followed a revised $14B advance in Aug, according to  the Federal Reserve.  Non-revolving loans, including borrowing for motor vehicles & college tuition, rose $14.5B in Sep.  Gains in the labor market & stock portfolios, the lowest gasoline prices in 4 years & cheap borrowing costs are giving Americans the confidence to borrow.  Faster wage growth would provide a bigger boost for households wary of taking on more debt.  The Sep gain in consumer borrowing was in line with the $16B forecast.  The report doesn’t track mortgages, home-equity lines of credit & other debt secured by real estate.  Revolving credit, which includes credit-card balances, climbed $1.4B after a $201M decline in Aug.  The Sep gain in non-revolving credit followed a $14.2B increase in the prior month.  Student loans in Q3 increased to $1.3T from $1.27T in the prior 3 months.  Borrowing for the purchase of motor vehicles climbed to $940B last qtr from $918B in Q2.  Auto sales cooled in Sep to a 16.3M annualized rate, capping the best qtr for the industry in more than 8 years, according to Ward’s Automotive Group.

Consumer Credit in U.S. Climbs on Demand for Car, Student Loans

Wal Disney, a Dow stock reported a drop in Q4 profit at ESPN driven by increased costs for sports programming.  But EPS narrowly beat estimates, lifted by soaring film earnings.  The studio’s Aug release “Guardians of the Galaxy,” based on a largely unknown set of Marvel superheroes, became the top-grossing movie in the US this year, with $329M in ticket sales.  At ESPN, multiyear contracts for sports such as professional baseball & football increased costs.  “These decisions are not made for a quarter or for a fiscal year,” CEO Bob Iger said.  “ESPN’s trajectory is healthy.”  EPS excluding some items rose to 89¢, beating the 88¢ estimate.  Sales grew 7.1% to $12.4B in the period ended Sep 27, meeting projections.  TV networks, the largest division, posted slightly lower profit of $1.4B, reduced by the higher costs at ESPN & marketing expenses at the Disney Channel overseas.  Profit rose at the company’s ABC broadcast unit due to higher sales of network-produced shows & fees from affiliates.  Total revenue at the TV division grew 5.4% to $5.2B.  The company last month renewed a deal to carry National Basketball Association games through 2025 at almost triple the old price.  Income at theme parks grew 20% to $687M, from higher attendance & guest spending at the US resorts.  The film studio more than doubled profit to $254M, buoyed by “Guardians of the Galaxy,” which features a machine-gun toting raccoon.  The year-earlier slate included “The Lone Ranger,” which lost as much as $190M.  DIS also said it completed principal photography & had an official title for its first “Star Wars” movie since the $4B acquisition of Lucasfilm 2 years ago.  “Star Wars: The Force Awakens” features many players from the original 1977 picture, as well as a cast of younger actors & is scheduled for release in Dec 2015.  “If the bundle were to break up, which we don’t foresee happening anytime soon, we are very well positioned to move very quickly to take advantage of a broadband-only universe or a la carte universe because of the strength of our brands and the programming rights we bought,” Iger said.  The stock fell 2.00.  If you would like to learn more about DIS, click on this link:

Disney Profit Rises as ‘Guardians of Galaxy’ Gain Counters ESPN’s Decline

Walt Disney (DIS)

Abercrombie & Firch stock, struggling to win back once-loyal teen shoppers, fell after weak store traffic took a toll Q3 earnings.  Excluding some items, EPS was guided to be 40-42¢, down from 52¢ a year earlier.  Analysts projected 68¢.  On Dec 3, ANF will report official numbers, which ended Nov 1.  Declining store traffic, particularly in Europe, weighed on sales, CEO Mike Jeffries said.  The company also is reducing its logo-adorned products because they no longer suit customers’ tastes.  And the beach-inspired Hollister chain is underperforming the retailer’s flagship brand.  “In the short term, we are reviewing measures to drive improvement in our results in the critical fourth quarter,” Jeffries said.  “Longer term, we continue to believe we are taking the right steps strategically to position the company for future improvements in our performance.”  Jeffries is trying to compete with fast-fashion companies which use quick reaction to trends & low prices to win over teens.  Heavy reliance on discounts across the industry & declining traffic in malls also have hurt retailers this year.  The stock plunged 5.88.  If you would like to learn more about ANF, click on this link:

Abercrombie Drops as Declining Store Traffic Hurts Clothing Chain’s Sales

Abercrombie & Fitch (ANF)

A so-so jobs report did not bring out buyers today.  While the markets are largely drifting, with an upward bias to set new records by the Dow, MLPs have seen high volatility which is not typical for the industry.  Fracking is important to the industry & it involves high costs.  Crude oil under $80 raises questions about how badly these companies will be affected.  This lower level for oil prices could be around for some time.

Dow Jones Industrials

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