Wednesday, December 10, 2014

Markets tumble, led by selling in energy shares

Dow dropped 268 finishing near the lows, decliners over advancers more than 4-1 & NAZ was off 82.  The MLP index plunged a whopper 17+ to the 441s & the REIT index slid a fraction in the 326s (still near its multi year high).  Junk bond funds were lower & Treasuries advanced.  Oil fell below 61 as OPEC sees less demand.  Gold pulled back as a slump in oil prices boosted concern that inflation will stay low, limiting the metal’s appeal as a hedge.

Dow Jones Industrials

CLF15.NYM....Crude Oil Jan 15....60.82 Down ...3.00  (4.7%)

Live 24 hours gold chart [Kitco Inc.]

The US budget deficit narrowed more than projected in Nov from a year earlier, according to the Treasury Dept, as rising employment helped boost receipts & spending fell.  Outlays exceeded receipts by $56.8B last month, compared with a $135.2B shortfall a year earlier.  The estimate was for a $64B deficit.  Stronger hiring has helped to shrink the country’s annual deficit from a record $1.4T in 2009, the decline is expected to continue in the fiscal year that started Oct 1.  The Treasury in Oct said the shortfall in the 12 months ended Sep 30 was $483B, or 2.8% of GDP, & the Congressional Budget Office said in Aug that it expects the deficit to shrink to 2.6% of GDP this fiscal year.  Timing-related transactions affected the size of the deficit last month, including some benefit payments shifting into Oct, the Treasury said.  Revenue last month was $191B, 4.9% higher than a year earlier, while outlays dropped 21.9% to $248B, the report showed.  The deficit totaled $178.5B in the first 2 months of fiscal year 2015, compared with a $225.8B shortfall for Oct & Nov last year.  A Labor Dept report last week showed the economy added 321K jobs in Nov, marking 10 consecutive months in which the number has topped 200K.

Budget Deficit in U.S. Narrows as Employment Growth Accelerates

Costco quarterly profit topped estimates after sales outpaced those of discount rivals.  EPS rose to $1.12 from 96¢ a year earlier.  Analysts had projected $1.09 for fiscal Q1.  As it heads into the year-end holiday season, COST is outperforming other chains.  Sales at stores open a year or more increased 7%, excluding changes in gasoline prices & foreign-currency exchange rates.   Quarterly sales rose 7.4% to $26.9B, meeting the estimate.  Revenue from membership fees advanced 6% to $582M.  A stronger dollar took a toll on intl same-store sales, which grew just 1% when including the impact of currency fluctuations & gas-price deflation.  They rose 7% without those effects.  COST gets more than 70% of its sales from its home country.  The company has 671 warehouse stores, with 474 in the US & Puerto Rico.  But the stock lost 2.79.  If you would like to learn more about COST, click on this link:

Costco Profit Beats Estimates After Same-Store Sales Bounce

Costco (COST)

McDonald’s Will Trim Eight Menu Items
Photo:   Bloomberg

McDonald's, a Dow stock & Dividend Aristocrat, will cut 8 items & 5 extra value meals from its US menu to try to speed up service & reverse the worst domestic sales slump in more than a decade.  The new menu will be introduced in 2015, Mike Andres, group pres for MCD US unit, said.  While Andres said some items in the McWraps line may be cut, the company didn’t specify which menu items will be eliminated.  The world’s largest fast-food chain said earlier this week that US same-store sales fell 4.6% in Nov, the biggest drop since 2001.  It was also the 12th straight month without growth in the home market, where it has more than 14K restaurants.  The company is betting that the slimmer menu will improve service & re-establish it as a leader in burgers.  “We have to very careful with how we address the menu,” Andres said.  “Our destination is a modern, progressive burger and breakfast company.”  MCD also said it is examining ingredients & may eliminate preservatives.  More marketing efforts will emphasize the quality of its food.  The stock fell 1.36.  If you would like to learn more about COST, click on this link:

McDonald’s Will Trim Eight Menu Items to Speed Up Service

McDonald's (MCD)

The gloomy mood in the stock market continues.  The 2 Dow energy stocks, Exxon Mobil (XOM) & Chevron (CVX), fell more than $2 each.  However, they have not fallen very far from record highs reached at midyear.  MLPs have been hit harder with the index down more than 115 from the record high at the end of Sep.  Low priced oil should bring out stock buyers betting on more money being spent at retail stores.  So far that has not happened & prospects for holiday sales are generally good but short of great.  The stock market is on defense once again.

Dow Jones Industrials

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