Thursday, April 30, 2015

Markets tumble on earnings and economic data

Dow sank 195 finishing not far from the lows, decliners over advancers better than 3-1 & NAZ fell 82.  The MLP index climbed 3 to the 452s & the REIT index lost 4+ to the 319s.  Junk bond funds drifted lower & Treasuries saw selling, although finished off the session lows.  Oil went up again, with its eyes on 60, & gold dropped (but closed above the lows).

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM....Crude Oil Jun 15....59.76 Up ...1.18 (2.0%)

Live 24 hours gold chart [Kitco Inc.]

The American job market shows signs of entering a new stage that will bolster households as employers fight to retain & attract workers by paying them more.  Wages for private-sector employees climbed 0.7% in Q1 & were up 2.8% in the 12 months thru Mar, the biggest gain in more than 6 years, according to the Labor Dept.  The agency also said the number of claims for jobless benefits declined last week to the lowest level since 2000.  6 years after the recession ended, unemployment may now be low enough to start prompting companies to compete against each other for staff.  Bigger paychecks, a missing piece of the expansion, would make it more likely that the slowdown in economic growth last qtr will be fleeting, bearing out Federal Reserve policy makers’ assessment.  The Labor Dept's total employment cost index, which includes wages & benefits, also climbed 0.7% in Q1 from the prior qtr.  It was up 2.6% from the same time in 2014, the biggest year-to-year advance since the end of 2008.  In Q1, the 12-month gain was 1.8%, & the 0.8 point pickup since then marks the biggest acceleration since records began in 2001.  Increased employer costs would be a sign that businesses might be starting to feel the effects of a dwindling pool of workers, who are able to demand bigger paychecks.  The number of unfilled positions at US employers climbed to 5.13M in Feb, the most since Jan 2001.  There are about 1.7 unemployed Americans per opening, matching the lowest level since Nov 2007 (one reason layoffs have abated).

Wages in U.S. Show Signs of Picking Up as Job Market Improves

An economic yardstick for the manufacturing-heavy Midwest rose to its highest level since Jan, pointing to expansion.  The Chicago Business Barometer, commonly known as the Chicago PMI climbed by 6.0 points in Apr to 52.3 from 46.3 in Mar.  By moving above the 50-point threshold, the index once again indicates economic growth above historic trends, & distances itself further from a 5½-year low in Feb.  4 of the 5 subcatetgories in the index moved higher, including a double-digit gain in new orders.  Only the prices-paid subindex declined, a category hurt by the continuing effects of the winter's harsh weather & labor troubles at West Coast ports.  "The bounce back in activity at the start of second quarter is consistent with a resumption of normal activity following the poor weather and port strikes earlier in the year," said Philip Uglow, chief economist of MNI Indicators.

Chicago PMI Swings Back to Growth Mode

Time Warner Cable reported disappointing profit & revenue for Q1, though the company reported strong subscriber growth.  The report comes just a week after its $45B deal to be bought by Comcast (CMCSA) fell apart amid increasing pressure from regulators.  CEO Rob Marcus said that the qtr was among the company's best ever in terms of subscribers.  "We are a far stronger company than we were just five short quarters ago, " he said.  TWC added a net 205K residential customer relationships, its best qtr ever.  High-speed data customers grew by a net 315K, while voice customers increased by 320K.  Video customers grew 30K, its first positive quarterly net additions since 2009.  Triple Play customers grew by a net 298K.  Overall, EPS was $1.59, down from $1.70 in the prior-year period.  Expenses were higher as programming & content costs grew 8.4% & customer care costs grew 10%.  The qtr also included $26M in merger & restructuring costs.  Excluding certain items, EPS was $1.65.  Revenue grew 3.5% to $5.78B.  Analysts had projected EPS of $1.87 & $5.83B in revenue.  Business services revenue grew 16.9%, while residential services revenue grew 2.1%.  The stock fell 2.34.  If you would like to learn more about TWC, click on this link

TWC Results Disappoint, Subscribers Increase

Time Warner (TWC)

Stocks had a reality check today & did not like what they saw.  Earnings continue to be varied & economic data is inconsistent.  There is growing awareness that the first interest rate hike is coming, that is enough to shake even the heartiest bulls.  And the Greek debt mess is not going away anytime soon.  Dow inched up 50 in Apr & is barely in the black YTD.

Dow Jones Industrials

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Lower markets on sluggish consumer spending in March

Dow dropped 112, decliners over advancers almost 4-1 & NAZ fell 49.  The MLP index was of pennies & the REIT index fell 4+ to 320.  Junk bond funds were mixed & Treasuries sold off again, taking the yiled on the 10 year Treasury up to 2.1%.  Oil climbed higher, pushing towards 59, & gold plunged.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM...Crude Oil Jun 15...58.62 Up ....0.04 (0.1%)

GCK15.CMX...Gold May 15...1,179.30 Down ...30.50  (2.5%)

3 Stocks You Should Own Right Now - Click Here!

Consumer spending climbed in Mar, capping a lackluster Q1 performance that was enough to keep the US economy from shrinking.  Purchases rose 0.4%, the biggest increase since Nov, after a 0.2% Feb gain that was larger than previously estimated, according to the Commerce Dept.  The forecast called for a 0.5% increase.  Incomes were little changed reflecting a drop in div payments.  Economists are counting on household spending to do the heavy lifting in reviving growth after slumps in business investment & exports caused the economy to stagger at the start of 2015.  An improving job market & nascent acceleration in wage increases are among reasons such a rebound is probably in the works.  A survey called for incomes to rise 0.2%.  The report represents the monthly breakdown of data that showed consumption climbed at a better-than-expected 1.9% in Q1.  Still, that was less than ½ the pace of the prior 3 months, when spending climbed at the fastest rate since 2006.  The price index tied to consumer spending increased 0.2%, the same as in the prior month.  From a year earlier, the gauge was up 0.3%.  This inflation measure is preferred by Fed policy makers & last met their target in Apr 2012.  Stripping out the volatile food & energy components, the price measure climbed 0.1% from the month before & 1.3% in the 12 months ended Mar.  After adjusting for inflation, which generates the figures used to calculate GDP, purchases increased 0.3% last month after being little change in Feb.  The gain last month was propelled by a 2% inflation-adjusted increase in durable goods that reflected a rebound in demand for automobiles.  Cheaper gasoline prices have kept some extra money in consumers’ pockets over the past few months.  Disposable income, or money left over after taxes, fell 0.2% in Mar from the prior month after adjusting for inflation, the weakest performance since Dec 2013.  It was up 3.3% over the past year.  The saving rate decreased to 5.3% from 5.7% in Feb.

Consumer Spending Ends Sluggish U.S. Quarter on Better Note

Applications for US jobless benefits declined last week to the lowest level in 15 years, showing employers view a Q1 slowdown in the economy is temporary.  First-time layoffs for unemployment insurance fell by 34K to 262K, the lowest since 2000, according to the Labor Dept.  The figure was smaller than the lowest projection.  With job openings at a 14-year high & prospects for stronger growth after the Q1 setback, companies are intent on maintaining headcounts.  The level of layoffs is consistent the Federal Reserve view of sustained progress in the job market.  The 4-week average of claims, a less-volatile measure than the weekly figure, declined to 283K from 285K in the prior week.  The number continuing to receive jobless benefits dropped 74K to 2.25M, again the lowest level since 2000.  The unemployment rate among people eligible for benefits held at 1.7%.  Claims since the beginning of Mar have held below the 300K level that is consistent with an improving labor market.

Job market strengthens

Exxon Mobil,  Dow stock & Dividend Aristocrat, posted a 46% drop in Q1 profit, hurt by the sharp slump in oil prices, though results still topped expectations.  XOM has moved to conserve cash in a sign that it doesn't expect a quick rebound in crude prices.  The company has announced it would slash its capital spending by 12% this year to $34B & reduce its stock buybacks in the near term, though it raised its quarterly div to 73¢ from 69¢ yesterday.  Earnings in the exploration & production business dropped to $2.9B.  Meanwhile, refining & marketing earnings rose to $1.7B.  Results have been buoyed by strength in its oil refining business, which benefits from cheaper crude.  Earnings in the chemical segment dropped to $982M.  The slumping production in part reflects a willingness to give up some less-profitable barrels, such as at a concession in Abu Dhabi that has expired.  CEO Rex Tillerson has made improving profitability one of the company's highest priorities.  EPS fell to $1.17 from $2.10 a year earlier.  Revenue dropped to $67.6B from $106.3B.  Analysts expected EPS of 83¢ on revenue of $56.4B.  The stock inched up pennies.  If you would like to learn more about XOM, click on this link:

Exxon 1Q Profit Drops, Results Beat the Street

Exxon Mobil (XOM)

Consumer spending keeps disappointing with inconsistent data.  There has been a long recovery from the recession lows, but much of that has not reached many consumers. Even with stronger growth in Q2, consumer spending can not be counted on to contribute a lot.  Gas prices at the pumps ticking higher will be a negative for consumer spending.  Dow is back to where it was 5 months ago, because the economy is growing, but at meager rates.  With higher interest rates coming in the next few months, it's hard to be overly optimistic about the stock market.

Dow Jones Industrials