Monday, November 10, 2014

Markets waffle, looking for direction

Dow slid 4, advancers slightly ahead of decliners & NAZ rose 7.  The MLP index was off a fraction in the 504s & the REIT index rose a fraction to 319.  Junk bond funds were mixed & Treasuries retreated.  Oil rose for a 2nd day on speculation stronger economic growth in China will boost demand from this big oil consumer & gold eased back..

AMJ (Alerian MLP Index tracking fund)

CLZ14.NYM...Crude Oil Dec 14.............79.25 Up ...0.60 (0.8%)

ZGQ14.CBT....Gold 100 oz. Aug 14...1,319.40 Up ...2.30 (0.2%)

3 Stocks You Should Own Right Now - Click Here!

China Economy
Photo:    Bloomberg

China's economy is slowing.  Provincial indicators reveal that while that’s true nationally, some regions are doing increasingly better than others.  Of the 31 provinces & municipalities, 19 recorded a slowdown, 3 posted the same pace & nine saw a pickup in the Jan-Sep growth rate from the first half.  All are missing their own expansion targets.  Provincial outcomes are diverging as the economy heads for the slowest full-year expansion since 1990.  While the industrialized northeast is bearing the brunt of a real estate collapse, some inland provinces are still boasting the heady growth rates of old, boosted by infrastructure investment.  None of the 31 provinces & municipalities are matching growth goals set at the start of the year.  The biggest shortfall is in Shanxi province, where the Qatar-sized economy grew 5.6% in the first 9 months of 2014 from the same period a year earlier, compared with its annual target of 9%.  17 provinces may be falling short of their targets by at least one percentage point.  China’s provincial growth figures have historically been viewed as less trustworthy than the national figure, with the sum of regional output typically larger than the national GDP. This year, the gap has narrowed.  18 provinces reported a nominal growth rate lower than the price-adjusted level, signaling deflation.  China’s PPI is forecast to decline for a 32nd straight month in Oct.  While a property collapse hasn’t spread nationwide, a double digit drop in real estate development in the northeast is dragging growth in major provinces.  “The situation of the economy is severe and complicated, and the downward pressure has deteriorated,” said a province’s official Liaoning Daily.

China Regions Show Economies Differ as Slowdown Deepens

Boeing, a Dow stock, won an $8.5B order from Japanese lessor SMBC Aviation Capital as Asian aircraft-leasing companies bet on demand for new planes to serve the region’s travel growth.  The order is for 80 737 Max 8 models for delivery between 2018-2022.   The deal is the largest single order of 737 Maxs by a lessor.  Today’s agreement follows a Jul deal by SMBC to purchase $11.8B of aircraft from Airbus in the largest single-aisle plane order ever placed by a leasing company.  Asian lessors have placed $B in orders this year as economic growth in China, India & Southeast Asia stokes demand for more aircraft.  China is expected to overtake the US as the world’s largest plane market in 2 decades.  BA predicts the region will drive an increase in commercial aircraft sales to $5.2T over the next 20 years, as China overtakes the US as the world’s largest aviation market.  The stock fell 19¢.  If you would like to learn more about BA, click on this link:

Boeing Wins $8.5 Billion SMBC Aviation Order on Asian Air Traffic Growth

Boeing (BA)

McDonald’s October Sales Top Estimates
Photo:    Bloomberg

McDonald's, a Dow stock & Dividend Aristocrat, Oct same-store sales topped estimates, signaling that the company’s turnaround plan is gaining momentum.  Global sales at stores open at least 13 months fell 0.5%, better than the estimated 2.2% drop.  US same-store sales fell 1%, an improvement from a 4.1% decrease in Sep.  With 14K domestic locations, it is coping with heavy discounting & mounting competition from fast-casual chains.  To shake off its sales slump, MCD has been streamlining its menu, even as it offers more customized options.  The company also is reorganizing its US operations to be more effective.  “The U.S. is revamping its marketing approach, simplifying the menu and creating a new organizational structure,” the company said.  “Consumers increasingly prefer customizable food options, dining in a contemporary, inviting atmosphere and using more convenient ways to order and pay for their meals,” CEO Dow Thompson said.  The company has been experimenting with a build-your-burger concept in California, which allows customers to choose their own toppings on a touch screen.  It’s also adding new technology, such as mobile ordering & payments.  At the same time, MCD is trying to entice customers with old favorites.  Comparable-store sales fell 0.7% in Europe & 4.2% in the company’s Asia Pacific, Middle East & Africa region.  Analysts had estimated declines of 2% for Europe & 6.1% for Asia.  MCD gets about 40% of revenue from Europe.  Sales in the UK., where its restaurants have been advertising toffee lattes & chocolate doughnuts, were “solid” in the qtr.  Russia, meanwhile, is a growing challenge for the company.  The company has had to close locations in the country after consumer-safety regulators conducted inspections of the restaurants.  Russian courts temporarily shut 9 locations & sales have been “very weak” in the country.  The chain also is facing a consumer backlash in China & Japan after supplier OSI Group was investigated for altering the sell-by dates on certain foods.  Oct same-store sales fell 17% in Japan, & the food scandal will probably have a prolonged effect, the company said last week.  The stock went up a dime.  If you would like to learn more about MCD, click on this link:

McDonald’s October Sales Top Estimates as Declines Slow

McDonald's (MCD)

Obama is meeting with Asian leaders who were not impressed with a lack of voter confidence after last week's elections.  They're looking for a trade deal.  If one comes, few will really understand its implications.  Retail earnings will be coming & they could be soggy.  The forward guidance for the holiday season will be of interest for stock traders.

Dow Jones Industrials

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