Thursday, February 12, 2015

Markets rise on hopes for Greek bailout

Dow advanced 110, advancers over decliners 3-1 & NAZ gained 56.  The MLP index shot up 6 to the 447s & the REIT index added 3+ to the 343s.  Junk bond funds crawled higher & Treasuries were flattish.  Oil rose to over 51 & gold was margnally higher.

AMJ (Alerian MLP Index tracking fund)

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CLH15.NYM....Crude Oil Mar 15....51.10 Up ...2.26 (4.6%)

Live 24 hours gold chart [Kitco Inc.]

American Express, a Dow stock, announced that its relationship with Costco Wholesale (COST) in the US will end.  The lender’s co-brand & merchant agreements with COST stores in the US will end Mar 31 2016.  AXP, whose deal with COST in Canada ended last year, is under pressure as competition among banks & payment networks for co-brand agreements intensify & merchants seek better terms.  EPS in 2015 will probably be unchanged or down modestly compared with last year, CFO Jeff Campbell said.  Quarterly results will be uneven as marketing expenses increase, while EPS should return to a 12-15% growth rate in 2017, he said.  Ending the 16-year partnership with COST “is the right long-term outcome for American Express,” CEO Kenneth I. Chenault said.  “We were not able to agree on terms that made economic sense for us and our shareholders,” Chenault said.  “We will invest in other opportunities that we think can generate greater returns over time.”  The partnership accounts for about 10% of the company’s total cards, Campbell said.  That's about 11M of the 112M cards in circulation at year-end.  The portfolio accounts for about 8% of AXP global customer spending & 20% of worldwide loans.  Consumers spent $1.02T on AXP cards last year.  AXP will try to retain as many customers as possible & about 70% of cardholders’ purchases were outside of Costco.  “We cannot be sure what will happen to our Costco U.S. portfolio,” Campbell added.  “We will be working with Costco U.S. and the new issuer in the coming months to determine whether there will be a sale. The outcome of that process will clearly have an impact on our business actions during 2015 and 2016.”  AXP stock sank 5.53 & COST fell 30¢.  If you would like to learn more about AXP, click on this link:

AmEx Tumbles as Lender Ends Partnership With Costco in U.S.

American Express (AXP)

Costco (COST)

The number of Americans filing new claims for unemployment rose more than expected last week, but the underlying trend remained consistent with a strengthening labor market.  Initial claims for state unemployment benefits increased 25K to a seasonally adjusted 304K in the latest week, according to the Labor Dept.  The prior week's data was revised to show 1K more applications received than previously reported.  The forecast called for claims rising to 285K.  The 4-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 3K to 289K last week.  Difficulties adjusting the data for seasonal fluctuations caused volatility in claims towards the end of 2014 & early this year.  The economy has added more than 1M jobs over the past 3 months, an achievement last seen in 1997.  A key measure of labor market slack, the number of job seekers for every open position, hit its lowest level since 2007 in Dec.  The claims report showed the number still receiving benefits after an initial week of aid fell 51K to 2.35M.

Weekly Jobless Claims Unexpectedly Rise

Cisco, a Dow stock, profit & sales topped estimates after customers upgraded their networks, extending a recovery that began last year.  Fiscal Q2 sales rose 7% to $11.9B, & EPS excluding some items was 53¢, topping the projection for 51¢ on sales of $11.8B.  Revenue is also on track to match or exceed estimates in the period ending in Apr.  CEO John Chambers is rolling out machines that can handle skyrocketing internet traffic, software-based networking tools & security services, while relying less on sales of specialized routers & switching equipment.  “The momentum in the business feels extremely good” with improvement in all product categories across the globe, he said.  Net income for the period rose to $2.4B from $1.43B a year earlier.  Many of Cisco’s newer products are more profitable, & the 6K job cuts announced in Aug are starting to show up in the bottom line.  Gross margin was 62%, matching projections.  Chambers, who is aiming to restore the company to growth after revenue declined in 2014 for the first time in 5 years, said he’s optimistic about Cisco’s ability to capture future sales, given signs of improvement across the business.  Sales in emerging countries rose 1% after declines in recent qtrs.  Orders from telecommunications companies fell 1%.  While Chambers predicted that carriers’ spending on capital equipment would shrink in 2015, he hinted that CSCO had landed some large multiyear deals.  EPS for the fiscal Q3 will be 51-53¢.  Analysts are projecting 52¢.  The stock jumped 2.49 to the 29s (not seen for 7 years).  If you would like to learn more about CSCO, click on this link:

Cisco Revenue Tops Estimates as New Products Fuel RecoveryBloomberg

Cisco (CSCO)

Talks are going on in Europe to work out a bailout package for Greece.  Chances are nothing will be decided until the last minute next week.  Closer to home, retail sales are depressing.  There were hopes that money not being used to purchase gas would be redirected to buying elsewhere.  That is not happening.  Oil is bouncing back after selling earlier this week, a hopeful sign for what is becoming a troubled industry.  The bulls are trying to take command of the stock market.  Dow is up 150 YTD & wants to go over 18K again.

Dow Jones Industrials

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