Monday, January 12, 2015

Lower markets on earnings warnings and oil at $46

Dow dropped 114, declines over advancers almost 3-1 & NAZ was off 41.  The MLP index sank 13 to the 431 (where it was in early 2013) & the REIT index climbed 1 to the 343s.  Junk bond funds lost ground & Treasuries rose taking the yield on the 10 year Treasury to 1.94%.  Oil is down again while gold managed a modest gain.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...46.75 Down ...1.61  (3.3%)

GCF15.CMX...Gold Jan 15.......1,222.20 Up ...6.20 (0.5%)

3 Stocks You Should Own Right Now - Click Here!

The public debate ove ECB buying gov bonds is reaching a climax.  After weeks of argument about quantitative easing in speeches & interviews, officials have just a few days left before a conventional quiet period starts ahead of their Jan 22 policy meeting.  Adding to the intensity, a European court opinion is due that could color any program.  ECB pres Draghi's drive to win over critics of his policies in Germany, the region’s biggest economy, will take him to Berlin on Wed, a day before QE-opponent Jens Weidmann speaks.  They & other officials should then stay out of the limelight before the Governing Council meets next week to decide how best to stave off a deflationary spiral in the euro area.  Draghi’s appearance, while closed to the media, continues his wooing of a nation concerned he’s taking unwarranted risks & penalizing savers with ultra-low interest rates.  Draghi has argued his measures are essential to help the euro-area economy return to health.  On the same day as the conference, the European Court (ECJ) will issue an opinion on an earlier bond-purchase program known as Outright Monetary Transactions.  The case was referred by Germany’s Constitutional Court after it said OMT, though never used, probably overstepped the ECB’s authority.  The ECJ’s non-binding opinion, which will be followed by a ruling 4-6 months later, may influence any QE design.  The German court said OMT would likely violate EU rules that forbid the ECB from pursuing economic rather than monetary policy, though it could be legal if limited & placed under certain conditions.  Should the ECJ spell out those limits, they could be applied to QE.

ECB’s Debate on Stimulus Intensifies

Tiffany reported a 1% decline in holiday sales & lowered its annual forecast, hurt by a slump in Japan, currency fluctuations & a slowdown in its home market.  Sales in Nov-Dec fell to $1.02B worldwide.  That was below the 4% gain in the period a year earlier.  TIF had been counting on the Americas to help offset sluggish results overseas, especially in Japan.  That approach faltered over the holidays, when sales in its home region fell 1% to $544M, compared with an increase of 6% a year earlier.  A stronger dollar, meanwhile, ate into intl sales, turning 9% growth in Europe into a 1% gain.  “Clearly, sales for the holiday period were disappointing, with significant variability in performance by region and by product category,” CEO Michael Kowalski said . “Sales in the Americas declined slightly after a very strong start to the year.”  Currency challenges will continue to weigh on the company’s results.  The retailer now expects EPS for the year to be $4.15-$4.20, compared with a prior forecast of $4.20-$4.30.  “While we are still in our planning process, we believe these factors will likely result in our planning low- to mid-single-digit sales and earnings growth in 2015,” Kowalski said.  The stock plunged 12.05 (12%).  If you would like to learn more about TIF, click on this link:

Tiffany Lowers Annual Forecast After Holiday Sales Decline

Tiffany (TIF)

American Airlines Group shares fell after it said Q4 revenue will be less than an already lowered forecast as traffic declined in some intl markets.  The carrier also narrowed its expectation for pretax margin, excluding special items, to 10-11%, from an earlier projection of as much as 12%.  Traffic, miles flown by paying passengers, slipped 7.4% across the Atlantic & 6.2% on routes to Latin America in Dec.  Revenue from each seat flown a mile, an indicator of traffic & fares, will be unchanged to down 2%.  The carrier last month lowered its unit revenue outlook to a range of down 1% to up 1%.  In Oct, AAL expected the measure to be flat to up 2%.  The stock fell 1.76 (3%).  If you would like to learn more about AAL, click on this link:

American Airlines Falls After Lowering 4th-Quarter Revenue Gauge

American Airlines Group (AAL)

With Alcoa (AA) reporting earnings tonight, the market is starting earnings season on the wrong foot.  2 earnings warnings don't look good.  If that wasn't bad enough, oil sinking to the 46s brought on more selling in MLPs along with stocks in general.  In this financial confusion, REITs are one of the few groups in demand.  The record high for the index was over 350 (8 years ago) & new highs could be reached shortly.

Dow Jones Industrials

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