Wednesday, January 14, 2015

Markets drop on holiday retail sales and earnings

Dow plunged 231, decliners over advancers almost 3-1 & NAZ lost 36.  The MLP index fell another 3+ to the 414s & the REIT index rose fractionally in the 422s.  Junk bond funds slid lower & Treasuries found buyers taking the yield on the 10 year Treasury to 1.81%.  Oil went up in the 46s & gold also gained.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...48.27 Up ...0.22 (0.5%)

GCF15.CMX...Gold Jan 15........1,241.00 Up ....6.70 (0.5%)

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US holiday sales rose 4% from a year earlier, marking the biggest increase since 2011, even amid signs of a consumer-spending slowdown in Dec, according to the National Retail Federation (NRF).  Holiday spending growth had been forecast to rise a slightly higher 4.1%, which spans Nov-Dec.  Still, the increase was well above the previous year’s 3.1% gain & the 10-year average of 2.9%.  While the gain was nearly in line with the estimate, Commerce Dept figures released today raised concerns that spending slowed in Dec.  Retailers spread out the holiday season this year, encouraging shoppers to make more purchases before Thanksgiving.  That may have robbed some sales from the weeks leading up to Christmas, even as lower unemployment & cheap fuel put more money in consumers’ pockets.  “While December’s figures are disappointing, holiday sales in 2014 are the best we’ve seen since 2011,” NRF Chief Economist Jack Kleinhenz said.  “We remain positive about the future and expect to see consumers continue to benefit from the extra income gained from an improved job market and the dramatic fall in gas prices.”  Total holiday spending rose to $616B, according to the NRF.  E-commerce sales outpaced broader spending, climbing 6.8% to $102B.  Over the holiday season, retailers relied less on major events such as Black Friday, opting instead for a steady stream of promotions.  A separate research firm, First Data, said retail sales increased 3.2% from Nov 1 - Jan 4, up from a 0.5% gain in the year-earlier period.  Sales climbed 5.3% from Thanksgiving thru Cyber Monday.  That also suggests spending slowed down in December.  ShopperTrak, meanwhile, had a more optimistic view.  It said holiday spending jumped 4.6% from a year earlier, the biggest rise since 2005 & exceeded the company’s forecast for a 3.8% gain.

U.S. Holiday Sales Rose 4%, Just Shy of Prediction, NRF Says

Another report says retail sale in the US slumped in Dec by the most in almost a year, reflecting a broad-based retreat that will probably prompt economists to cut growth forecasts.  The 0.9% drop, the biggest since Jan 2014, followed a 0.4% gain in Nov that was smaller than previously estimated, according to the Commerce Dept.  Last month’s decrease was almost twice as large as the most pessimistic estimate.  Electronics & clothing stores were among the 9 of 13 major categories that showed a drop in receipts last month as American consumers decided to save instead of spend the windfall from lower gasoline prices.  Continued improvement in the labor market and a pick-up in wage growth will be needed to support demand at retailers.  The forecast called for a 0.1% decline.  Nov retail sales were previously reported as a gain of 0.7%.  Oct data also were revised down to show a 0.3% increase from a previously reported 0.5% gain.  For all of 2014, purchases increased 4% after a 4.1% the previous year.  In addition to electronics & clothing, sales also fell at auto dealers, building material merchants, sporting goods & general merchandise stores.  The figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores & service stations, decreased 0.4%, the worst performance since snow covered much of the country in Jan 2014, after rising 0.6% in Nov.  Falling gas prices have hurt receipts at filling stations, as retail sales data aren’t adjusted for prices.  Purchases there plunged 6.5%, the most in 6 years.  Gas station receipts accounted for about 10% of total retail sales last year. 

U.S. Retail Sales Down Sharply, Likely Cuts to Growth Forecasts Ahead

JPMorgan, a Dow stock, Q4 profit fell 6.6% as fixed-income trading revenue dropped 23% & legal costs were about twice as high as estimated.  EPS was $1.19, down from $1.30 a year earlier.  Excluding almost $1B in legal expenses & other one-time items, EPS was  $1.33, topping the $1.32 estimate.  Wall Street firms contended with shrinking trading revenue in 2014 as 3 qtrs of muted volume was followed by surging volatility across asset classes in Q4.  Net income for the year was a record $21.8B, on revenue of $97.9B, as legal costs shrank $8.2B from 2013.  In Q4, revenue declined 2.3% to $23.6B.  Fixed-income trading revenue fell to $2.5B on the sale of a commodities unit & lower volume in credit & securitized products.  Excluding the sale, fixed-income markets fell 14%.  Equities-trading revenue rose 25% to $1.1B on gains in the derivatives & prime-brokerage business.  JPM warned last month that the bank would probably report a “high teens” percentage drop in trading revenue.  Most of the decline stems from the sale of a physical-commodities business & higher interest costs tied to preferred stock.  The “core performance” of the trading division probably dropped 4% from a year earlier.  Legal expense exceeded estimates.  CEO Jamie Dimon had to contend once again last year with allegations of misconduct by the bank, this time that currency dealers rigged foreign-exchange benchmarks.  The company agreed in Nov to pay about $1B to resolve the investigations.  The bank settled a related lawsuit this month, agreeing to pay institutional investors about $100M, & still faces a criminal probe from the Justice Dept.  In 2013, JPM agreed to $23B in accords to end US probes of mortgage-bond sales, energy trading & the oversight of services provided to Ponzi-scheme operator Madoff.  The stock sank 2.41.  If you would like to learn more about JPM click on this link:

JPMorgan Fourth-Quarter Profit Falls 6.6% on Drop in Fixed-Income Revenue

J P Morgan Chase (JPM)

This is another dreary day in the stock market.  The start of earnings season is not giving reasons to buy stocks, & holiday sales data was drab.  Lower gasoline prices are supposed to be boost for retailers, but that is not working out so far.  Oil has a tiny rebound.  Considering its enormous decline, it is difficult to consider this significant or the start of a recovery.  Dow is down about 450 in Jan & on defense. 

Dow Jones Industrials

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