Wednesday, May 13, 2015

Markets fluctuate after mixed economic data

Dow fell 7, advancers over decliners almost 5-4 & NAZ gained 5.  The MLP index shot up 5+ to the 443s & the REIT index lost 3 to the 316s.  Junk bond funds were mixed & Treasuries saw more selling.  Oil slid back to slightly above 60 while gold remained well above 1200.

AMJ (Alerian MLP Index tracking fund)

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CLM15.NYM....Crude Oil Jun 15....60.59 Down ...0.16  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

US import prices fell for a 10th straight month in Apr, likely reflecting the impact of a strong dollar, a sign of benign inflation pressures that could encourage the Federal Reserve (FED) to delay raising interest rates.  The Labor Dept said import prices fell 0.3% last month after slipping 0.2% in Mar.  Economists had forecast import prices would rise 0.3%.  In the 12 months thru Apr prices fell 10.75%.  The dollar, which has gained about 11% against the currencies of US main trading partners since Jun, & lower crude oil prices are keeping a lid on price pressures.  That has left inflation running well below the FED 2% target.  Persistently low inflation gives central bank ample room to keep its ultra-low interest rate policy a while longer, while it looks for strong signals of the economy's recovery after it weakened sharply in Q1.  The FED has kept its key short-term interest rate near zero since Dec 2008.  Last month, imported petroleum prices rose 1.0% after increasing 1.6% in Mar.  Import prices excluding petroleum fell 0.4% in Apr after a similar decline in Mar.  Imported food prices slipped 0.9% after dropping 0.7% in Mar.  The report also showed export prices declined 0.7% last month after edging up 0.1% in Mar & export prices fell 6.3% in the 12 months thru Apr.

U.S. Import Prices Drop for Tenth-Straight Month

DuPont, a Dow stock, defeated Trian Fund Management's campaign to land seats on its board, dealing a landmark setback to one of the most influential activist investment firms.  Shareholders re-elected all sitting directors, rejecting the criticisms of Trian & its chief executive, Nelson Peltz, that the 212-year-old maker of Kevlar fibers & Pioneer corn seeds suffered from a bloated corp structure & sagging profits.  The vote, after 2 years of private & public jousting, is a victory not only for DD & its CEO, Ellen Kullman, but for others in corp America concerned that activist investors' influence has grown too strong & that companies have capitulated to their demands too readily.  Rather than accede to Mr. Peltz's push for membership in her 12-person board, Kullman risked an expensive fight on the principle that Trian's vision for the company was wrongheaded & that a board seat isn't something to be granted lightly & under pressure.  In the showdown, Kullman was forced to defend the company's integration of scientific research into products as diverse as pesticides & solar-panel components, & address Trian's attacks over vestiges of its long history such as a company-owned hotel, theater & country club.  Beating Trian clears the way for Kullman to continue her plan to steer DD toward higher-profit products where its scientific research can yield breakthroughs.  The company argued that its practice of cross-pollinating research functions across divisions helped bring products to market more quickly & enabled DD to be a nimbler supplier to big customers, like automobile makers.  DD bucked a trend of companies increasingly choosing to settle with activist investors rather than fight them to a shareholder vote.  The stock dropped 5.03 (7%).  If you would like to learn more about DD, click on this link:

DuPont Shares Sink After Proxy Battle Ends

E.I. du Pont de Nemours (DD)

German Finance Minister Wolfgang Schaeuble favors a Greek referendum on the country’s euro membership as a way to break the months-long stalemate with Prime Minister Tsipras’s gov.  “Greece can’t be thrown out of the euro,” a Schaeuble deputy, said.  “The only thing remaining in the end would be if Greece said itself that it wants to leave the euro voluntarily.”  The German Finance Ministry is supporting the idea of a vote by Greek citizens to either accept the economic reforms being sought by creditors to receive a payout from the country’s bailout program or ultimately opt to leave the euro.  A referendum could bring the conflict to a head after months of inconclusive talks between Greece & its creditors that have exasperated Germany & other euro-area countries.  Public support for economic reforms might lead Greece toward a deal, while rejection could set the country on a path to leaving the euro.  “If the Greek government thinks it should hold a referendum, it should hold a referendum,” Schaeuble said on Mon.  “Maybe it would even be the right measure to let the Greek people decide whether they’re ready to accept what needs to be done.”  Tsipras says he’s not considering leaving the currency bloc & is focused on getting the aid he needs to avoid a default, while Merkel says her “political goal” is to keep Greece in the euro.  His gov must still submit a comprehensive program of economic reforms, win approval from creditor institutions, secure the endorsement of euro-region finance ministers & then get past parliaments in Berlin & elsewhere before any payment will be made.  Tsipras has already passed an end-of-Apr deadline to submit his reform plan that was set in Feb when officials agreed to extend the €240B ($270B) bailout program.  While euro-area finance ministers welcomed the progress Greece has made toward qualifying for continued on Mon, policy makers are still concerned he may not be prepared to swallow the necessary concessions.

German Finance Minister Backs Greek Referendum to Break Bailout Impasse

As it has for months, the Greek debt crisis drones on, so more confusion about where it is going means little.  But disappointing retail sales represent a darker cloud for stocks to operate under.  Additionally, the sell-off in bonds around the globe this month is very disturbing.  As it has for months, Dow remains close to 18K unable to make a significant move upward.  Stocks are on defense.

Dow Jones Industrials

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