Wednesday, May 13, 2015

Markets edge higher despite disappointing retail sales

Dow gained 42, advancers over decliners 2-1 & NAZ went up 25 (back over 5K).  The MLP index rose 5 to the 443s & the REIT index climbed 2+ to 322.  Junk bond funds inched higher & Treasuries gained ground.  Oil is back over 61 & gold pushed above 1200.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM...Crude Oil Jun 15...61.26 Up .....0.51 (0.8%)

GCK15.CMX...Gold May 15....1,205.90 Up ...13.30 (1.1%)

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Sales at US retailers were little changed in Apr, starting Q2 on a weak note as Americans remained reluctant to splurge.  The reading followed a revised 1.1% gain in Mar that was the biggest in a year & larger than previously estimated, according to the Commerce Dept.  The forecast called for a 0.2% gain.  Consumers have been using the windfall from cheap gasoline to boost savings as wages have been slow to pick up, which may temper the projected rebound in US growth this qtr.  At the same time, steady hiring & low borrowing costs will help underpin household spending.  7 of 13 major categories showed gains, led by restaurants & bars & also online merchants.  A tiny advance among miscellaneous stores tipped the balance in favor of gainers.  The dour tone of the report was reinforced by declines among discretionary items such as automobiles, furniture & electronics.  Demand at grocery stores, service stations & general merchandise retailers also declined.  The latter category includes department stores, which saw their biggest drop in purchases since Jan 2014, when snow blanketed much of the US.  Sales declined 0.4% at automobile dealers, after jumping 2.9% the previous month.  Retail sales excluding autos increased 0.1% & were projected to rise 0.5%.  It followed a 0.7% advance in Mar that was larger than previously estimated.  The figures used to calculate GDP, which exclude categories such as food services, auto dealers, home-improvement stores & service stations, was little changed after a 0.5% increase in the previous month that was larger than previously estimated.  The upward revisions to most categories for Mar were a saving grace for the otherwise disappointing figures for Apr, & indicate consumer spending in Q2 will be stronger than previously estimated.

U.S. Retail Sales Disappoint Again

Macy’s, the largest US department-store chain, reported Q1 earnings that trailed estimates as bad weather in Northeastern states & product delays at the West Coast ports hurt sales.  EPS fell to 56¢ from 60¢ a year earlier.  Analysts projected 62¢.  Unseasonably cold weather late into the spring in the Northeastern states kept shoppers out of stores.  “Delayed merchandise shipments from the West Coast port slowdown and severe winter weather early in the quarter restrained business levels,” CEO Terry Lundgren said.  Lundgren also said sales were hurt by lower spending by intl tourists at flagship Macy’s & Bloomingdale’s stores.  Sales fell 0.7% to $6.23B, missing the $6.31B estimate.  Same-store sales declined 0.7% compared with an estimate for a gain of 1.3%.  Macy’s also raised its quarterly div 15% to 36¢ & added $1.5B to its share repurchase program.  The company has been trying to revive sales and broaden its customer base by adding new brands & experimenting with lower-priced outlets.  Macy’s also has been focused on cutting costs & reinvesting in its web capabilities, such as allowing customers to buy items online & pick them up in a store.  The stock dropped 1.12.  If you would like to learn more about Macy's, click on this link:

Macy’s Profit Trails Estimates as Weather, Ports Hurt Sales

Macy's (M)

Greece’s economy fell back into recession in Q1, raising pressure on the gov to reach an agreement with creditors over the next bailout payment.  GDP contracted 0.2% after shrinking 0.4% in the previous period, the EU statistics office said.  The estimate was for a 0.5% drop.  The contracting economy increases the measures Prime Minister Tsipras needs to take to meet conditions set by euro-region governments & the IMF.  Greece’s gov will have to raise at least €3B ($3.4B) to meet the minimum budget targets acceptable by creditors, according to a leaker.  Greece has enough cash to make it through “a couple of weeks,” Finance Minister Varoufakis said after a meeting of euro-area finance ministers this week.  The nation paid back about €750M to the IMF by drawing on a holding account at the fund.  The gov has also raided municipal coffers to pay salaries and pensions.  Greece is asking for an additional Eurogroup meeting by the end of May to disburse funds because of the cash crunch.  Reaching an accord will take time because of the need to find a balance with the Greek gov plans.  The ECB’s exposure to Greece through liquidity support to the country’s banks now stands at about €115B.  Budget cuts aren’t the only thorny issue in the negotiations over the disbursement of the next emergency loans tranche for the cash-strapped economy.  Differences of opinion remain on several major reforms that are really needed to get Greece back on track.  The retirement age, pension cuts, privatizations & the gov's intention to reinstate collective bargaining restrictions in the labor market are all areas where Greece & its creditors remain far apart.

Greece Back in Recession as Bailout Impasse Drains Economy

Stocks are rising, but cautiously.  Deals are flying around.  However retail sales data was not impressive, another reminder than consumer spending has not been growing consistently.  More glum earnings reports from retailers can be expected.  Then there is the Greek debt mess which has shown no sign of improvement for months, even years.  The AM stock rally looks suspicious.

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