Thursday, April 23, 2015

Higher markets as oil prices rise

Dow gained 20, advancers over decliners 2-1 & NAZ gained 20.  The MLP index went up 6 to 446 (near the highs for 2015) & the REIT index added a fraction to the 331s (about where it started the year).  Junk bond funds rose with the stock market & Treasuries also gained ground.  Oil jumped to a 2015 high on concerns over fighting in Yemen & gold remains near or under 1200.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM....Crude Oil Jun 15....57.74 Up ...1.58 (2.8%)

Live 24 hours gold chart [Kitco Inc.]

New US single-family home sales in Mar recorded their biggest drop in more than 1½ years, snapping 3 straight months of hefty gains, in a temporary setback for the housing market.  The Commerce Dept said sales declined 11.4% to a seasonally adjusted annual rate of 481K units, the biggest percent drop since Jul 2013.  The sales pace in Feb was revised up to 543K units, the highest level in 7 years, from the previously reported 539K units.  The forecast for new home sales, which account for 8.5% of the market, was for a 513K unit pace.  Data yesterday showed that sales of previously owned homes hit an 18-month high in Mar.  New homes sales tumbled 33.3% in the Northeast & 3.4% in the West.  Sales in the South dropped 15.8%, the biggest decline since Jul 2013, & they rose 5.9% in the Midwest.  The stock of new houses available on the market rose 1.9% last month to 213K.  Supply still remains less than half of what it was at the height of the housing boom, good news for home builders who will need to ramp up construction.  At the Mar sales pace it would take 5.3 months to clear the supply of houses on the market, up from 4.6 months in Feb.

New Home Sales Tumble After Months of Strong Gains

US manufacturer 3M, a Dow stock & Dividend Aristocrat, posted a 0.7% decline in quarterly net income & cut its full-year profit forecast as the strong dollar bites into sales more than it previously projected.  The company reported a 6.5% reduction from the stronger dollar, a sharper Q1 hit than reported by other industrials.  MMM, which receives more than 60% of sales from outside the US, sales fell 3.2% to $7.58B, below the $7.84B expected.  Excluding currency effects, sales rose 3.3%, which trailed some projections.  The company now expects currency swings to reduce sales by 6-7%, against a previously expected decline of 4-5%.  It cut its 2015 profit view to $7.80-$8.10, compared to its prior range of $8-$8.30.  The projection is 2.5% lower, when comparing the mid-points of each range.  Excluding currency effects, 3M backed its previous expectation that sales will rise 3-6% this year.  "The stronger U.S. dollar negatively impacted sales and earnings in the first quarter, and global economic growth was mixed,"  CEO Inge Thulin said.  Q1 net income slipped to $1.2B from $1.21B a year ago.  EPS rose to $1.85 from $1.79 a year ago on reduced shares outstanding.  Currency hurt quarterly EPS by 10¢.  Analysts were looking for $1.92.  The stock dropped 5.01.  If you would like to learn more about MMM, click on this link:

3M Reveals First-Quarter Miss

3M Company (MMM)

General Motors posted a smaller-than-expected quarterly profit as weakness in South America & Russia hurt demand & the company's tax rate was higher than expected.  "Clearly the macro environment in South America, and it's primarily Brazil, deteriorated versus even where we thought it was going to be," CFO Chuck Stevens said.  He expects the region to be "reasonably challenged" thru H1, but said GM is targeting H2 profits similar to the same period last year.  Stevens said the #1 US automaker has cut jobs & will reduce production shifts at plants in Brazil.  He said the actions will generate about $200M in annual savings.  GM lost $214M in South America in Q1.  He affirmed the company's overall 2015 outlook for improved profit & said it remained on track in 2016 to hit 10% profit margins in North America & return to profitability in Europe.  EPS rose to 56¢ from 6¢ a year earlier.  Last year's results included charges related to recalls including those from a defective ignition switch.  Excluding one-time items related to ending manufacturing in Russia & a compensation program related to the faulty switch, GM earned 86¢, below the estimate of 97¢.  Revenue fell 4.5% to $35.7B, below the forecast of $37.6B.  Sales were hurt by lower volume in Brazil & Russia as well as the impact of weakening currencies in South America due to the strong US dollar.  GM said last month it would shut a Russian factory & wind down its Opel brand there due to slumping demand.  South America accounted for about 6¢ of the EPS shortfall while another 4-5¢ came from the higher-than-expected tax rate.  Thru Q1, Stevens said GM bought back about $400M in shares, with the total rising to more than $700M thru yesterday.  Between share buybacks & divs, GM returned about $800M to shareholders.  In Mar, GM said it would launch a $5B share buyback in an effort to avert a proxy war with dissident investors.  The stock lost 1.24.  If you would like to learn more about GM, click on this link:

GM 1Q Profit Disapponts on S. American Weakness

General Motors (GM)

Stocks had another good day although earnings were more of mixed than better.  Not only is the strong dollar hurting profits, but making it difficult for companies to increase exports.  The housing market continues to slug it out in the trenches.  That market continues to find it difficult to put together a string of monthly gains.  Instead, more of an up & down recovery.  But the Dow & NAZ have their eyes on setting new record highs despite these problems.

Dow Jones Industrials

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