Wednesday, February 18, 2015

Markets drift lower, waiting for Greek debt extension

Dow fell 32, decliners just ahead of advancers & NAZ lost pocket change.  The MLP index dropped 2+ to just above 450 & the REIT index lost 2 to 339.  Junk bond funds inched higher & Treasuries climbed gained.  Oil fell after recent gains & gold kept sliding lower.

AMJ (Alerian MLP Index tracking fund)

CLH15.NYM...Crude Oil Mar 15...52.11 Down ...1.42  (2.7%)

GCG15.CMX...Gold Feb 15......1,205.80 Down ...2.30  (0.2%)

3 Stocks You Should Own Right Now - Click Here!

Greece will submit its request for a 6-month loan extension to the euro-area tomorrow, a day later than originally planned, according to a gov official.  Greece & euro-area members have been at odds over the formula needed to extend the country’s €240B ($274B) rescue beyond its end of Feb expiration.  Failure to strike a compromise would leave Europe’s most-indebted state without a financial backstop, & on course to default on some of its liabilities as early as next month.  “Markets should be reassured that there is agreement being prepared between Greece and the Eurogroup and other institutions involved in Greece’s bailout program,” Valdis Dombrovskis, European Commission VP for the euro, said.  The commission is “now working and looking if there is a possibility to find common ground toward this extension of the current program.”  The Greek request comes as the Finance Ministry released documents outlining the gov's stance during 2 closed-door meetings over the past week.  They show that Finance Minister Yanis Varoufakis said Greece wants to maintain a budget surplus before interest payments equal to 1.5% of GDP, less than half the target set in the country’s bailout program.  This request to radically alter the terms of the bailout agreement has so far met resistance from euro-area govs . The lenders want Varoufakis to request an extension to the current bailout deal, which is tied to economic reforms & fiscal prudence in return for aid.  Greece’s new gov is seeking an intermediary agreement, followed by a new accord that would allow it to disassociate from budgetary measures blamed for the country’s economic slump.  German Finance Minister Schaeuble signaled the Greek request may not be enough, drawing attention to an issue of semantics that also has legal & policy implications for Germany, the biggest contributor to aid & the chief proponent of economic & fiscal measures in return.  “It’s not about an extension of the loan program, it’s about whether this program is fulfilled, yes or no,” Schaeuble said.

Greece Seeks Concessions in Loan Extension Request

US housing starts fell in Jan as ground breaking for single-family projects slipped off a 6½-year peak, but stayed at levels consistent with a gradually improving housing market.  Groundbreaking declined 2% to a seasonally adjusted annual pace of 1.07M units, according to the Commerce Dept.  Dec starts were barely revised at a 1.09M-unit pace & the Jan reading was in line with expectations.  Starts have now been above the 1M-unit mark for 5 straight months.  Compared to Jan last year, groundbreaking was up 18.7%.  Sluggish wage growth & a shortage of homes on the market stymied housing last year, even as the broader economy was accelerating.  But a turnaround in housing is expected this year as a rapidly tightening labor market pushes up wages & encourages more young adults to move out of their parents' basements to set up their own homes.  Already in Q4, household formation was accelerating, breaking above the 1M mark that usually is associated with a fairly healthy housing market.  Although much of the gain in households went into rentals, that would still be a boost to housing starts this year.  Single-family homes groundbreaking, the largest part of the market, dropped 6.7% to a 678K-unit pace.  Starts in this segment had hit their highest level since early 2008 in Dec.  Projects in the Northeast, which was slammed by a storm during the month, dipped 3.5%, with all the drag coming from the multi-family segment.  Groundbreaking in the volatile multi-family homes segment rose 7.5% to a 360K-unit pace.  With the rental vacancies at their lowest level in more than 2 decades, multi-family starts are likely to push higher this year.  In Jan, permits for future home construction dipped 0.7% to a 1.05M-unit pace.  Permits have been above a 1M-unit pace since Jul.  Single-family permits fell 3.1%.  Multi-family permits rose 3.6% after tumbling 5.2% in Dec.

Housing Starts, Permits Fall in January

Hilton forecast profit below market estimates for Q1 as well as for the full year.  Travel to the US from other countries is widely expected to slow as the dollar keeps strengthening, making a US holiday or business trip more expensive for overseas visitors.  The company gets about ¾ of its revenue from the US.  HLT said it expects an adjusted EPS of 10-12¢ for Q1.  Analysts were expecting 15¢.  The company forecast adjusted EPS of 78-83¢ for the full year, below analysts' estimates of 85¢.  Revenue per available room (RevPAR) increased 6.8% at US hotels open for at least a year in Q4.  Worldwide comparable RevPAR rose 6.6%.  RevPAR, a metric of hotel health, is calculated by multiplying a hotel's average daily room rate by its occupancy rate.  Revenue rose to $2.83B from $2.64B a year earlier.  EPS attributable to shareholders rose to 16¢, from 3¢.  On an adjusted basis, HLT earned 17¢.  Analysts expected EPS of 18¢ on revenue of $2.72B.  The stock fell 53¢.  If you would like to learn more about HLT, click on this link:

Hilton Misses Profit Estimates as U.S. Travel Costs Rise

Hilton Worldwide Holdings (HLT)

Traders are back to twiddling their thumbs, waiting for developments on extending Greek debts.  Because the ECB has no backbone, it will cave in & give a 6 month extension.  That will not solve any problems, just postpone the day of reckoning.  Meanwhile fighting in Ukraine drones on & unrest in the MidEast is also on the rise.  For months, economic data in the US has been inconsistent, but the S&P 500 is at a new record & the other popular stock averages are near new records.  I don't know how long this difference will last.

Dow Jones Industrials

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