Wednesday, February 25, 2015

Markets fluctuate as Janet Yellin tetifies before congress

Dow slid 5, advancers over decliners almost 3-2 & NAZ fell pocket change.  The MLP index rebounded 4+ to 453 & the REIT index was up 1 to the 336s.  Junk bond funds inched higher & Treasuries rose.  Oil & gold were flattish.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM...Crude Oil Apr 15...49.57 Up ...0.29 (0.6%)

GCH15.CMX...Gold Mar 15...1,205.90 Up ...9.10 (0.8%)

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One phrase echoed from Europe to DC Greece’s creditors examined & then waved thru the country’s new economic policies: “starting point.”  While the month-old gov was praised for coming up with a workable package of measures including maintaining state-asset sales & collecting more tax, the European Commission, ECB & IMF all warned that action speaks louder than words.  The measures were a condition for extending the availability of bailout funds for another 4 months based on an initial agreement last week.  While their approval marked another compromise in Greece’s 5-year financial crisis for the euro region, the country finds itself in all too familiar territory: act or face insolvency.  The list is “not very specific” and doesn’t convey “clear assurances” that reforms will happen, IMF Managing Director Christine Lagarde wrote in a letter to the head of the euro region’s group of finance ministers.  Commission officials & ECB pres Draghi also said the key to Greece winning more funding were “commitments” on legislation.  German Chancellor Merkel said the “starting point” was welcome “if you look at the words being exchanged a few weeks ago.”  The current program, which has been keeping Europe’s most indebted state afloat since 2010, was scheduled to expire at the end of this month.  After almost 4 weeks of negotiations, all parties stepped back from the brink, with Prime Minister Tsipras declaring an end to austerity while creditors said previous agreements were upheld.  Now the gov doesn’t just need to offer more details on its plan, it has to follow thru, & fast.  Its cash-flow problem still needs to be resolved, a Greek Finance Ministry official said yesterday.  Greece has until Apr to refine the details & show the finance ministers how it will do it.  Greece can’t access more bailout funds, including the next tranche of about €7B ($7.9B), unless it passes the review.  The gov & creditors can now also begin talks on how to overcome the cash squeeze next month, with issuance of more Treasury bills one option to consider, the official said.

Greece Gets Warnings From Creditors: Now Comes Hard Part

New homes in the US sold at a faster pace than forecast in Jan, a sign of stabilization in the housing industry.  The 481K houses purchased last month at an annualized pace were little changed from a more than 6-year high of 482K in Dec, according to the Commerce Dept.  The forecast called for 470K.  Employment gains & rising household formation are underpinning demand for homes as rents rise.  Borrowing costs close to historically low levels & easing credit may help attract more first-time buyers, who have been relatively absent in the uneven real estate comeback.  The reading for December was the strongest since 2008 & was revised up from a previously reported 481K.  The report showed a disparity among regions which could reflect the influence of weather.  Sales in the Northeast plunged 51% to record-low 15K annual rate.  That was offset by a 2.2% gain in the South, the biggest region, which took purchases there to a more than 6-year high of 278.  The median sales price was $294K, a 9.1% advance from Jan 2014.  The supply of homes held at 5.4 months at the current sales pace.  There were 218K new houses on the market at the end of Jan, the most since Mar 2010.  New-home sales account for about 7% of the residential market & are tabulated when contracts are signed, making them a timelier barometer than purchases of previously owned dwellings. 
In 2014, builders sold 437K new houses, the most since 2008.  The market peaked at a record 1.28M in 2005 & slumped to 306K in 2011 after the housing bubble burst (the lowest going back to 1963.

New Homes in U.S. Sold at Faster Pace Than Forecast in January

Hewlett-Packard forecast full-year earnings well below expectations, citing the impact of a strong dollar.  The company also reported fiscal Q1 revenue below the analyst estimate.  "... we believe the impact on FY15 will be significantly greater than we anticipated in November," CEO Meg Whitman said.  HPQ earned about 2/3 of its revenue from outside the US in the year ended Oct 2014.  The dollar had risen 14.7% in the past 6 months.  The company expects adjusted EPS of $3.53-$3.73 for the full year ending Oct, missing the analysts' estimate of $3.95.  Revenue dropped 4.7% to $26.8B in Q1 (ended Jan 31).  Revenue from the enterprise services unit declined 11%.  EPS fell to 73¢ from 74¢ a year earlier.  Excluding items, the company earned 92¢.  Analysts expected EPS of 91¢ & revenue of $27.3B.  The stock slumped 3.56.  If you would like to learn more about HPQ, click on this link:

H-P Posts Mixed Fiscal First-Quarter Results

Hewlett-Packard (HPQ)

This is turning out to be another quiet day in the stock market.  As Janet speaks, traders' eyes are on her.  Meanwhile the Greek bailout looks a bit fuzzy while fighting continues in Ukraine.  Oil is sloshing around 50 & the stock market is adjusting to this lower level.  It should be considered disappointing that lower oil prices are not bringing more of a lift to the economy while is hovering near record highs.

Dow Jones Industrials

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