Thursday, December 4, 2014

Markets retreat on ECB stimulus bets

Dow lost 12, decliners over advancers 2-1 & NAZ fell 6.  The MLP index rose 1 to the 487s & the REIT index was up fractionally to the 325s, barely good enough for a new yearly high.  Junk bond funds were mixed & Treasuries retreated.  Oil pulled back into the 66s & gold hardly budged.

AMJ (Alerian MLP Index trackig fund)

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CLF15.NYM...Crude Oil Jan 15....67.01 Down ...0.37  (0.6%)

Live 24 hours gold chart [Kitco Inc.]

Photo:    Bloomberg

The ECB Governing Council expects to consider a package of broad-based asset purchases including sovereign debt next month, according to 2 leakers familiar with the deliberations.  While the proposal is envisaged to include various types of bonds, it won’t encompass equities.  They said no decision on implementing quantitative easing has been taken yet, & the composition of the program may be influenced by incoming data.  ECB pres Mario Draghi said today that policy makers “won’t tolerate” a prolonged period of low inflation, & that officials discussed “all assets but gold” as potential targets for purchases.  The council asked internal committees last month to design new unconventional stimulus measures to help fuel growth & inflation.  The ECB will be able to measure progress on its objective of boosting its balance sheet by as much as €1T ($1.24T) when it allots another round of long-term loans on Dec 11.  The ECB holds its next monetary-policy meeting on Jan 22.  The European Court of Justice will deliver a non-binding ruling on Jan 14 about the legality of the ECB’s OMT program, which was credited with stopping a rout in European gov bonds in 2012 by pledging to buy debt of countries signing up to reforms.  A negative judgment by the court could ultimately impinge on the ECB’s freedom to intervene in sovereign-debt markets.

ECB Said to Prepare Broad-Based QE Plan for January Meeting

US retailers posted Nov same-store sales that exceeded estimates as early discounts prompted consumers to start spending for the holiday season.  Same-store sales for retailers tracked by Retail Metrics rose 4.3% last month, excluding results from drugstores.  Analysts’ had estimated a 3% gain.  Retailers began offering holiday deals earlier than ever this year, while lower gas prices, declining unemployment & consumer confidence at the highest level since the recession helped drive shoppers to spend more.  The discounts early in the month may explain why sales in the days following Thanksgiving were weaker than had been estimated.  Most chains tally same-store sales using locations open at least a year, making the figure a closely watched gauge of a retailer’s health because it tracks only established stores.

U.S. Retailers’ November Sales Top Estimates on Early Discounts

Kroger posted Q3 profit that topped estimates & boosted its earnings forecast for the year.  Kroger has increased sales with its purchase of the Harris Teeter Grocery chain earlier this year & by selling more organic & natural food under its Simple Truth label.  Falling gasoline prices also have left more money in consumers’ pockets.  EPS rose to 73¢.  Excluding some items, EPS was 69¢ versus the 61¢ estimate.  Revenue climbed 11% to about $25B.  Kroger said EPS in the current year will be $3.32-$3.36, up from an earlier forecast of $3.22-$3.28.  Analysts estimated $3.29.  The stock rose 2.10.  If you would like to learn more about KR, click on this link:

Kroger Rises After Profit Tops Estimates

Kroger (KR)

Stocks did a lot of nothing today.  The ECB meeting gave traders nothing to cheer about, so there was a small decline.  But little changed.  Tomorrow before the markets open, the Nov jobs report will be released & it's expected to show more than 200K new jobs in the US were created.  The economy is doing fairly well, despite mixed messages about holiday retail sales.  But good is short of robust & overseas business is not strong.  Dow has risen almost 2K, straight up, since mid Oct.  That overbought market is difficult to comprehend.

Dow Jones Industrials

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