Friday, November 14, 2014

Markets struggle to crawl higher on economic data

Dow fell 17 in listless trading, advancers slightly ahead of decliners & NAZ gained 8.  The MLP index rebounded 6 to the 501s & the REIT index fell 2+ to the 315s.  Junk bond funds slid lower & Treasuries had a strong rally.  Oil bounced back on hopes for reduced shipments from OPEC & gold also had a rebound.  

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM....Crude Oil Dec 14....75.65 Up ...1.44 (1.9%)

Live 24 hours gold chart [Kitco Inc.]

The euro-area economy grew faster than forecast in Q3 quarter as Germany & France rebounded & Greece showed some signs of revival.  GDP increased 0.2% from the previous period, when it rose 0.1%, Eurostat, the EU’s statistics office said.  That’s more than the estimates for 0.1%.  The euro area’s recovery has been in peril since economic malaise transferred from once crisis-stricken nations such as Spain & Ireland to countries in the region’s core.  With inflation close to the lowest level in 5 years, the ECB is preparing to add to unprecedented stimulus & urged govs to invest & deliver structural reforms to support growth.  Germany & France, the 2 largest economies returned to growth in Q3, with expansions of 0.1% & 0.3%, respectively.  Italy remained a weak spot, shrinking for a 2nd qtr.  Cyprus was the only other member of the currency bloc to register a quarterly contraction.  Greece, where a 6-year recession wiped 25% off GDP & protests against austerity measures jeopardized the country’s membership of the currency bloc, recorded quarterly growth of 0.7% in Q3, the 3rd consecutive increase in output.  The data may help Prime Minister Samaras as he pushes Greece to follow Ireland, Portugal & Spain out of its rescue program.  The ECB has already unleashed a barrage of unconventional measures, including a negative deposit rate, long-term loans & asset purchases, to boost growth & inflation.  Pres Draghi said last week that policy makers commissioned proposals for fresh stimulus, stoking speculation the central bank is moving closer to sovereign quantitative easing.  The ECB, which forecasts growth of 0.9% this year & 1.6% in 2015, last week endorsed weaker projections such as those by the European Commission that foresee expansions of 0.8% & 1.1%, respectively.

German-French Rebound Helps Euro-Area Keep Expanding: Economy

UPS sees the boom in online retailing as an opportunity, not a threat, as the delivery company devises new tactics to make e-commerce more profitable, CEO David Abney said.  UPS is exploring methods such as consolidating packages from multiple retailers & delivering them to the same home at once, & dropping off goods at corner stores after a failed home attempt.  The company is bracing itself for e-commerce shipments that it projects will grow 4X faster than the US economy, CFO Kurt Kuehn said.  The company sees opportunity in e-commerce even though profit margins are lower for residential deliveries than for commercial drop-offs.  While business-to-business shipments once accounted for 75% of UPS’s volume, Abney said deliveries to homes will equal those to businesses by 2019.  “This past quarter, the great majority of our growth was driven by e-commerce, and our margins grew by 30 basis points,” Abney said.  To save costs, UPS is testing a program to consolidate shipments from multiple retailers & deliver them all at once to a home.  UPS will give retailers a price break if they agree to delay delivery for a day or 2 to catch up with all the orders.  Such a system probably will work better for products such as dog food & diapers than for high-tech gadgets, which are eagerly awaited by consumers, Kuehn said.  “The vast majority of our shipments aren’t all that urgent,” Kuehn said.  Other ideas include unstaffed delivery sites, as well as expanding its Access Point service, which drops packages at designated pickup points like UPS shops or a convenience store.  With the customer’s permission, Access Point also allows a driver to drop a package at the designated alternate location if a person isn’t home when a delivery is made, instead of having to return to the residence the next day.  UPS has been rejiggering its delivery methods as it heads into the crucial holiday season.  The company has said it plans to spend $175M improving its operations during the holiday rush, hoping to avoid the problems of last year when harsh weather & a crush of last-minute online orders left it unable to deliver some packages by Christmas.  It’s also budgeted $500M to prepare the network for peak & future volume growth.  UPS forecasts it will deliver more than 585M packages in Dec, up 11% over last year.  To deal with the challenge, it plans to hire 95K seasonal workers, more than 80K are already on board, & is deploying groups of modular buildings for sorting packages.  The stock fell 96¢.  If you would like to learn more about UPS, click on this link:
UPS Drops as 2015 Profit Forecast Falls Short of Some Analysts’ Estimates

United Parcel Service (UPS)

TransCanada Corp. Hardisty Terminal 2
Photo:   Bloomberg

The House passed a bill to approve building the Keystone XL pipeline in defiance of pres Obama, who today challenged supporters’ arguments the pipeline will help the US economy.  The Rep-led House approved the measure 252-161 with 31 Dems in support.  The bill will be considered in the Senate Nov 18, where it faces a higher hurdle in the Dem-led chamber.  Obama could still veto a bill if it passes the Senate.  House Majority Leader Kevin McCarthy, a California Rep, said he thinks Keystone will ultimately be built.  “You just had an election where the people are asking Congress to find common ground,” McCarthy said, noting bipartisan support for the Keystone bill.  “And it provides jobs. So I’m feeling very positive about it.”  Before the House vote, Obama offered his most pointed comments yet on the pipeline, directly challenging Rep claims the project would create a significant number of jobs & would lower gasoline prices.  “Understand what this project is: It is providing the ability of Canada to pump their oil, send it through our land down to the Gulf where it will be sold everywhere else,” the pres said today during a visit to Myanmar.  “It doesn’t have an impact on U.S. gas prices.”  House Speaker John Boehner said that the bill would “lower energy costs and create more jobs.”

House Passes Bill to Approve Keystone Over Obama Objections

As has been the case all week, little was done in lethargic trading.  The news has been fairly good, but short of dramatic.  Much of the data has already been baked into the markets.  In the US, the consumer data is most telling & the long but mediocre recovery by the economy is not bringing more exciting times for retailers.  You know they are pressing hard when many are opening at 6PM on Thanksgiving.  Meanwhile growth of overseas business is below prior standards.  ECB is pumping more money into the euro zone & China is adding stimulus in a fairly cautious way.  As a result, Dow only gained 60 this week.  Or maybe the 1½K rally since mid Oct is tired.

Dow Jones Industrials

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