Wednesday, April 29, 2015

Lower markets after Janet Yellen speaks

Dow fell 74, decliners over advancers 2-1 & NAZ dropped lost 31.  The MLP index jumped 4 to the 449s & the REIT index sank 6+ to the 324s.  Junk bond funds were mixed to lower & Treasuries remained weaker as FOMC said economic weakness is temporary.  Oil jumped to a 4 month high on optimism about the global glut & gold eased back, but remains above 1200.

AMJ (Alerian MLP Index tracking fund)


CLM15.NYM....Crude Oil Jun 15....58.39 Up ...1.33 (2.3%)

Live 24 hours gold chart [Kitco Inc.]

Federal Reserve (FED) policy makers acknowledged economic growth slowed during the winter months, hinting interest-rate increases may not happen until later in the year.  The FED also said it expects growth to resume at a “moderate pace.”  The new statement comes after the central bank dropped the term “patient” from its previous policy statement in Mar.  The move effectively signaled the FED would hold off raising rates until its Jun meeting at the earliest.  Data released thru Q1, including weak employment & housing-market data, has played a part in pushing the FED timeline for its first rate-hike.  “Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate,” the FED statement read.  It also kept the range for its key short-term interest rate, the Federal Funds rate, at 0%-0.25%.  The statement came just hours after the latest read on US economic growth from Q1.  GDP increased a marginal 0.2%, down sharply when compared to the 2.2% growth rate in Q4, & below expectations for growth of 1%.  Exports have been hit by the strong dollar gains this year, which began to pull back in mid-Mar.  Oil prices have risen in the past month, but are still down significantly over the past year, a 50% discount to last summer’s prices.  That combination has been a mixed bag for the economy, & has weakened consumer spending in particular.  The FED has said it won’t raise interest rates until it meets its dual mandate of full employment & price stability, which it defines as an unemployment of 5.2%-5.6% & inflation at around 2%.  The FOMC policy action was unanimous among voting members.

Fed Reiterates Data Dependence on Rate Hikes 

Time Warner reported better-than-expected profit & revenue growth in its Q1, as March Madness programming helped drive audience growth in its Turner segment.  Turner's strength helped to offset declines at Warner Bros. & Home Box Office.  TWX has been working to fashion a business model as the internet remakes the television landscape, in part by targeting "cord-cutters," people without pay-TV subscriptions.  Earlier this month, the company began selling a broadband-only version of HBO, dubbed HBO Now, thru both digital distributors & its traditional partners.  EPS was $1.15, down from $1.42 a year earlier.  Excluding items, EPS was $1.19 & revenue grew 4.8% to $7.13B.  Analysts were expecting EPS of $1.09 a share on revenue of $7B.  Turner revenue grew 4.5% to $2.7B as advertising revenue grew 4% helped by the NCAA tournament & its news business.  Warner Bros., the largest top-line contributor, posted 4.3% growth in revenue to $3.2B, as television licensing revenue grew due to the subscription video-on-demand sale of "Friends."  HBO revenue edged up to $1.4B from $1.3B a year ago.  The stock rose 47¢.  If you would like to learn more about TWX, click on this link:

Time Warner Revenue Rises Nearly 5%

Time Warner (TWX)

MasterCard reported a 17% rise in quarterly profit as people spent more using its cards & the company paid lower taxes.  Income tax expense fell about 22% to $320M in Q1.  The decrease was primarily due to the recognition of a discrete US foreign tax credit benefit, a larger repatriation benefit & a more favorable mix of taxable earnings.  "We are managing well, despite a mixed economic environment and challenging currency situation," CEO Ajay Banga said.  Operating expenses fell about 1% to $879M.  Worldwide purchase volume increased 11.8% to $783B in local currency terms, while its cross-border volumes jumped 19%.  Net revenue rose 2.7% to $2.23B.  EPS rose to 89¢ from 73¢ a year earlier.  The stock was up pennies.  If you would like to learn more about MA, click on this link:

MasterCard Profit Rises on Lower Tax Expense

Mastercard (MA)

Janet spoke & the markets were not impressed.  They should wake up, there is just so long low interest rates will continue even while the economy grows at an unimpressive rate.  The jump in oil prices is eye-popping.  They bottomed around 45 a few months ago & now are pushing on 60.  That's still down substantially from 106 at midyear, but marginal energy companies, especially MLPs, look a lot better with oil up here.

Dow Jones Industrials

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