Friday, May 15, 2015

Markets creep higher after disappointing economic data

Dow inched up 20, advancers over decliners 4-3 & NAZ lost 2.  The MLP index slipped fractionally lower to the 445s & the REIT index went up 2+ to the 235s.  Junk bond funds crawled higher & Treasuries had a major rally, bringing the yield on the 10 year Treasury down 10 basis points to 2.14%.  Oil & gold fell chump change.

AMJ (Alerian MLP Index tracking fund)

3 Stocks You Should Own Right Now - Click Here!

CL.NYM....Crude Oil Jun 15....59.50 Down ...0.38  (0.6%)

Live 24 hours gold chart [Kitco Inc.]

Forecasters have sharply lowered their outlook for US economic growth after a raft of weak data, according to a survey from the Federal Reserve Bank of Philadelphia.  The Philly Fed's Q2 poll showed economists now see GDP expanding just 2.4% this year, down from a 3.2% estimate in the Q1 survey.  That growth rate falls short of 3%, considered a level strong enough to get the labor market back to fuller health, for the foreseeable future.  Forecasters see real GDP growth of 2.8% in 2016 & 2017 respectively, with the rate then easing to 2.5% in 2018.  Respondents reduced their forecasts for nonfarm payroll employment gains in 2015 & 2016.  However, economists were slightly more optimistic about the unemployment rate.  They see an annual average jobless rate of 5.4% in 2015, 5.0% in 2016, & 4.8% in 2017 & 2018 respectively.  "The projections for 2016, 2017, and 2018 are slightly below those of the last survey," the Philly Fed said.  On the inflation front, forecasters expect the overall consumer price index to average 1.9% in Q2, above the prior survey's 1.6% estimate.  For the year as a whole, however, inflation looks set to remain very weak, & far below the central bank's 2% target, which is measured against a somewhat different inflation indicator known as the personal consumption expenditures index.  Respondents see inflation averaging just 0.7% in Q4 compared with the same period in 2014, down from 1.1% in the Q1.  For the Fed's preferred PCE measure, that figure is 0.8%, down from 1.1% also.

Economists Slash U.S. Growth Estimates for Next Three Years

Russia’s economy fared better than forecast, a sign the world’s biggest energy exporter will suffer a milder recession than 6 years ago as the ruble’s rebound & monetary easing shore up domestic demand.  GDP contracted 1.9% in Q1 from a year earlier after a 0.4% gain in prior qtr, the Federal Statistics Service said.  That was better than every forecast whose estimate was for a 2.6% slump.  The Economy Ministry had projected that output shrank 2.2% in the period.  The economy is adjusting after a plunge in oil prices & sanctions imposed over Ukraine ignited the ruble’s worst crisis since a 1998 default.  Authorities have responded with a stimulus package & 3 decreases in interest rates this year as reeling consumption pinched sales at companies.  GDP shrank 7.8% in 2009 after oil prices plunged & the collapse of Lehman triggered the biggest credit squeeze in decades.  The gov has grown more confident about the outlook after warning of a hard landing for the economy in Jan following a crash in crude prices & mounting clashes in Ukraine.  As Russia’s economy is regaining its footing, Ukraine’s GDP sank 17.6% in Q1 from a year earlier, compared with a 14.8% drop in previous qtr, the statistics office in Kiev said.  That’s the 5th straight qtr of contraction in Ukraine & compares with an estimate of 13.5%.  The downturn marks what the gov predicts will be a 3 qtr slump after growth stalled last year amid the standoff with the US & the EU over Ukraine.  Consumer prices grew 16.4% from a year earlier in Apr after accelerating to 16.9% in Mar.  While officials are raising expectations for a quick turnaround in Q4, choking consumer demand is putting pressure on corp revenues.  Quarterly reports show the lowest average EPS for Russian companies since the beginning of 2009.

Russian Economy Contracts First Time Since 2009

Netflix soared to an all-time high on reports the streaming giant is poised to enter the huge Chinese online video market.  NFLX is reportedly seeking to enter China’s vast consumer market thru a partnership with a Chinese video company closely associated with Alibaba (BABA) founder Jack Ma.  The company has held discussions with Wasu Media, among other enterprises, about forming a partnership.  NFLX Chief Content Officer Ted Sarandos said today. “There are a lot of operating constraints in China that are different to anywhere else. We don’t have any operating partners anywhere else in the world, so that would be a new skill for us too.”  Last month NFLX announced it will maintain its advertisement-free model in China.  Then CEO Reed Hastings said the company will continue to pursue its subscription video on demand service without ads for the Chinese market.  Audiences in China are used to watching videos & shows free of charge, & NFLX had earlier contemplated whether it should try out an ad-based model this time around in China.  But the company decided against that strategy & is now looking to form a partnership to further expand its presence in China via a company intimately familiar with that country’s business practices & culture.  Last month, NFLX reported strong Q1 numbers, including a 24% increase in revenue from a year earlier, & nearly 5M new subscribers, lifting its global subscriber base to 62.3M.  Today the stock soared 26+ to a new record at 613 (one analyst has a target price of 2K).  If  you would like to learn more about NFLX, click on this link:

Netflix Shares at Record High on China Talks

Netflix (NFLX)

The economic news was very disturbing but that had little influence on the stock market.  Maybe the excitement over NFLX kept some buyers nibbling, good enough for the averages to about break even.  There has been a fair amount of news lately about sluggish economic growth in the US & that is worrisome when the stock market ignores it.  The averages remain essentially at record highs.  Dow was in the red (barely) for most of the day, but a little buying in the last ½ hour brought it into the black.

Dow Jones Industrials


No comments: