Wednesday, January 28, 2015

Markets climb cautiously ahead of FOMC announcement

Dow went up 39, decliners modestly ahead of advancers & NAZ aded 22.  The MLP index sank 5 to the 445s & the REIT index rose 1+ to the 357s.  Junk bond funds did little & Treasuries rose.  Oil slumped to 45 & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

CLH15.NYM...Crude Oil Mar 15...45.19 Down ...1.04  (2.3%)

GCF15.CMX...Gold Jan 15.......1,285.90 Down ...5.80  (0.5%)

3 Stocks You Should Own Right Now - Click Here!

Greek Prime Minister Alexis Tsipras
Photo:   Bloomberg

Greek Prime Minister Alexis Tsipras & his finance chief pledged to avoid a standoff with creditors as stock & bond markets tumbled on the prospect of a prolonged fight with fellow European govs.  “There will neither be a catastrophic clash, nor will continued kowtowing be accepted,” Tsipras said in comments broadcast live.  The new Greek leadership “will not be forgiven” if it betrays its pre-election pledges to renegotiate the terms of the country’s bailout, he added.  The new premier convened his cabinet that includes a foreign minister who raised questions over EU sanctions against Russia & a finance minister who has called Greece’s bailout a trap.  Germany warned the country against abandoning prior agreements on aid, after analysts said that setting Greece on a collision course with its European peers might lead to its exit from the euro region.  The new gov came to power on a platform of writing down Greek public debt, raising wages & halting spending cuts while remaining in the euro.  “Talks won’t be easy, they never are in Europe,” Finance Minister Yanis Varoufakis said as he took over from his predecessor.  “There will be no duel, no threats, or an issue of who blinks first.”  Greek stocks & bonds slumped for a 3rd day, after new ministers said they will cease the sale of some state assets & increase the minimum wage.  Yields on 3-year bonds rose 2.80 percentage points to almost 17% & the benchmark Athens General Index decreased 7.3% to its lowest level since 2012, led by banks.  Yields on 10-year bonds rose back above 10% after being as low as 5.7% in Sep.  In mid 2012, they exceeded 30%, the highest since the country’s debt restructuring, the largest in history.

Greece Seeks to Avert Standoff With Creditors as Markets Plummet

Russia will raise budget spending on social support & agriculture, & exempt defense outlays from reductions as part of a 2.3T ($35B) stimulus program that will see most other expenditures cut 10% in 2015.  Spending will decline at least 5% annually in real terms for 3 years, with authorities seeking a balanced budget by 2017 “based on the most likely price level for the main export goods,” according to the plan dated yesterday.  The ministries of finance & economy were instructed to prepare a proposal by the end of this month on creating a bad bank that will be used to acquire “problem” assets.  “There won’t be a fast recovery in oil prices like there was in 2008-2009,” Finance Minister Anton Siluanov told parliament.  “This will be a long-term situation.”  The world’s biggest energy exporter is on the brink of a recession after oil prices fell to the lowest since 2009 & the US & its allies imposed sanctions over Putin’s actions in Ukraine.  Russia is in an “extremely difficult” economic situation and faces a worse crisis than in 2008-2009, First Deputy Prime Minister Igor Shuvalov said. 

Russia Spares Defense Spending as Most 2015 Outlays Cut 10%

Apple shares soared after posting the biggest sales increase in 3 years last qtr on an array of new products & a forecast of further growth.  The company posted a 30% jump in fiscal Q1 revenue to $74.6b, as net income rose 38% to a record $18B.  CEO Tim Cook said the strong performance would continue, projecting revenue will rise by at least 14% in the Mar qtr.  He also said AAPL would ship the Apple Watch, its first new gadget category since debuting the iPad in 2010, starting in Apr.  The results, combined with the Watch introduction date, underscored how Cook still has levers left to pull for growth.  Even with AAPL producing more than $182B in annual revenue, it still has the ability to expand faster than other technology companies, many of which have seen their growth rates decline to the low single digits.  But AAPL still faces challenges to growth, including the strengthening US dollar.  CFO Luca Maestri cautioned that the company’s forecasted revenue growth would’ve been 5 points higher if currency stayed constant.  In addition, iPad sales declined for the 4th consecutive qtr as some consumers gravitate to bigger-screened smartphones instead of tablets.  Results were boosted by the bigger-screen iPhone 6 & 6 Plus, with sales rising 46% to 74.5M units, topping the estimate for 64.9M.  That exceeded the full-year iPhone sales of 72M that AAPL made in all of fiscal 2011.  “We had the highest number of customers new to iPhone last quarter than in any prior launch,” Cook said.  The iPhones helped boost margins to 39.9%, topping its forecast in Oct of 37.5-38.5% & exceeded the prediction of analysts for 38.5%.  Sales were particularly robust in China, where revenue rose 70% as the company works to expand in the country.  Cook has said AAPL will open 25 new stores in the country within 2 years.  In the Americas, sales rose 23%, while revenue from Europe increased 20%.  With China celebrating Chinese New Year in Feb, the holiday may provide another boost for sales.  The strength of the dollar challenged AAPL in places such as Russia, where the company briefly halted online sales during the qtr  “Our results would’ve been even stronger absent fierce foreign-exchange volatility,” Cook said.  IPad unit sales fell 18% to 21.4M units, while Mac sales rose 14% to 5.5M units.  Its new digital payment service, Apple Pay, also showed promise after its rollout in Oct.  Apple Pay already accounts for more than $2 out of $3 of purchases using contactless mobile-phone payments across the 3 major credit-card networks.  The stock jumped jumped 8+.  If you would like to learn more about AAPL,click on this link:

Apple Shares Climb as New Products Drive Revenue Growth

Apple (AAPL)

Stocks are a little higher but the breadth is negative.  REITs remain hot with the index at a new record.  While AAPL results were impressive, its fans may be losing sight that it is increasingly becoming a 1 product company (iPhone) with the China market playing an increasing role in its fortunes.  That spells added risk.  Attention by traders today is mainly on what Janet has to say shortly.  The rates will not change for the short term, but words about increasing interest rates will move stocks.

Dow Jones Industrials

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