Thursday, April 9, 2015

Markets drift lower on worries about earnings

Dow dropped 40, decliners over advancers 3-2 & NAZ was off 11.  The MLP index lost chump change to the 437s & the REIT index fell 5+ to the 332s.  Junk bond funds crawled higher & Treasuries sold off.  Oil jumped up & gold is back below 1200.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...50.96 Up ...0.54 (1.1%)

GCJ15.CMX....Gold Apr 15......1,195.30 Down ...7.80  (0.7%)

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Fewer Americans applied for unemployment benefits over the past 4 weeks than at any time in almost 15 years, signaling underlying strength in the labor market even as hiring cooled last month.  From mid-Mar thru the last week, jobless claims averaged 282K a week, the lowest since Jun 2000, according to the Labor Dept.  Applications over the latest week climbed 14K to 281K.  The forecast called for 283K.  The level of dismissals is consistent with an improving labor market & indicates companies are optimistic demand will strengthen after a weaker Q1.  Figures earlier this week showing job openings at a 14-year high point to a pickup in the pace of hiring after a Mar slowdown.  The Labor Dept revised the prior week’s reading to 267K, matching the lowest since 2000, from an initially reported 268K.  The number continuing to receive jobless benefits declined 23K to 2.3M, the fewest since Dec 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, consistent with an improving labor market.  While companies are maintaining headcounts, job listings also have climbed.  Openings rose to 5.1M in Feb, the most since 2001.

Jobless Claims in U.S. Over Past Month Dropped to Lowest in Almost 15 Years

Consumer confidence increased last week to an almost 8-year high as Americans viewed the economy in a more favorable light & said it was better time to spend.  The Bloomberg Consumer Comfort Index climbed to 47.9 in the last week, the highest level since May 2007, from 46.2.  A measure of buying conditions was the strongest since Nov 2006, while attitudes about the economy were the brightest in 9 weeks.  The pickup in confidence could signal a rebound in demand, fueling an economy that softened in recent months under the strain of harsh winter weather, a strengthening dollar & tepid global growth.  Persistent job-market progress & faster wage gains will help to further boost sentiment & spending.  The increase in the comfort index from a week earlier was the biggest since the end of Jan & the gauge remains well above last year’s average of 36.7, which was the best since 2007.  The measure of Americans’ views on the current state of the economy climbed to 39.5 from 37.1 in the prior period.  The buying climate gauge, which measures whether now is a good time to purchase goods & services, advanced to 43.8 from 41.3.  The index of personal finances rose to 60.5, the 2nd-highest level since 2007, from 60.1.  A strong trend in job growth has probably helped lift sentiment.  Sentiment last week climbed in 6 of 7 income brackets led by households making $100K or more, whose confidence soared to the 2nd-highest level since Aug 2007.  Those making $25K to $40K were the only households to experience a drop in sentiment.

Consumer Comfort in U.S. Climbs to Highest Level Since May 2007

Walgreens Boots Alliance (formerly Walgreens, a Dividend Aristocrat) will close 200 of its over 8K US drugstores to reduce costs as its profits get squeezed by competition & by lower reimbursements from pharmaceutical insurers.  The company will also reorganize corporate & field operations & revamp its technology, which along with the store closings will help cut an additional $500M in costs by the end of fiscal 2017.  That would extend a $1B cost-cutting initiative announced in Aug.  Interim CEO Stefano Pessina is seeking to keep expenses in check as he works on a long-term plan to revamp the US drugstores, forging them in the mold of the more stylish Boots stores in Europe.  While WBA forecast profit for its current fiscal year that may trail estimates, it maintained its projection for fiscal 2016 earnings, indicating the results it expects its cost-cutting measures to yield.  Pessina has replaced executives & telegraphed his interest in US deals.  Excluding certain items, fiscal 2015 EPS should be $3.45-$3.65.  Analysts had estimated $3.60.  Adjusted EPS will rise to $4.25-$4.60 in fiscal 2016.  The cost-cutting plans will lead to charges of $1.6-$1.8B before taxes, to be recorded over time.  EPS was $1.18 in the latest qtr, ahead of the 95¢ estimate & revenue was $26.6B (below the $27.6B projection.  Same-store sales for the US retail pharmacy unit grew 6.9% from the retail pharmacy division, thanks in part to higher demand for prescriptions.  Retail sales, leaving out pharmacy revenue, rose 2.5%.  The stock rose 2.53.  If you would like to learn more about WBA, click on this link:

Walgreens to Close 200 U.S. Drugstores to Propel Profits

Walgreens Boots Alliance (WBA)

Alcoa (AA) earnings last night were good but earnings were light.  The stock fell 69¢, not a good start for earnings season.  Big bank earnings are coming next & they can be soggy.  The markets re nervous & buyers are staying away..  Dow is still below 18K, back to where it was in late Nov.  Not good!

Dow Jones Industrials

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