Wednesday, May 27, 2015

Markets rebound on hopes low interest rates will be extended

Dow gained 84, advancers over decliners 3-2 & NAZ went up 35.  The MLP index was fractionally higher in the 439s & the REIT index went up a fraction to go above 320.  Junk bond funds inched higher & Treasuries pulled back.  Oil extended recent weakness & gold was flattish

AMJ (Alerian MLP Index tracking)

CL.NYM..........Crude Oil Jul 15....57.49 Down ...0.54  (0.9%)

GCK15.CMX...Gold May 15...1,187.40 Up ...0.20 (0.0%)

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What a surprise!!!  Greece will likely miss a deadline for a deal with creditors by the end of the week as the 2 sides make little progress in their talks, according to 4 leakers.  Greece is nowhere close to an agreement with the European Commission & IMF, missing a target for a deal by the end of May set last week by Chancellor Merkel & French pres Hollande.  Underscoring how far apart they remain, creditors don’t believe the Greek budget numbers add up.  Greek Finance Minister Varoufakis said Tues that he’s now aiming for a deal by Jun 5, when the first of almost €1.6B in IMF payments due next month must be made. Treasury Secretary Lew said he’ll push for movement in the standoff at a G-7 gathering for finance ministers in Germany.  The ECB left the level of emergency cash available to Greek banks unchanged from a week ago at €80.2B ($87.6B).  Greek lenders still have a liquidity buffer of about €3B.  As the negotiations drag on, Greece has seen liquidity evaporate, pushing the economy back into recession.  Record deposit withdrawals & the state’s increasing difficulty in meeting debt payments have renewed doubts about the country’s ability to stay in the euro.  Key sticking points in the talks remain in areas such as budget targets, sales-tax rates, pension & labor market rules, the gov spokesman said.

Greece Likely to Miss May Deal Deadline

Toll Brothers posted stronger-than-expected profit growth in its Apr qtr, boosted by a lower tax provision & strength in the luxury home builder's California business.  But revenue came in below expectations.  TOL has expected to benefit from recent improvements to job & wage growth, which it says drive stronger housing demand.  Home prices have picked up in recent months, reflecting a mix of thin supply & strong demand that points to heated competition for home buyers.  "It appears the housing market is on firm footing and heading in the right direction," said Executive Chairman Robert Toll.  "As pent-up demand is released, we envision a gradual and elongated recovery for housing."  The company said its customers benefit from higher home prices, as many of its customers are selling their homes & upgrading.  In the latest qtr, signed contracts rose 25% in value from a year earlier to $1.6B, with an average price of $826K, up 13% from a year earlier & California communities accounted for about 30% of the total value of signed contracts.  Overall, EPS was 37¢, compared with 35¢ a year earlier.  The results included an $18.6M income tax provision, down from $28.3M a year earlier.  Revenue inched down about 1% to $852.6M.  Analysts had expected EPS of 35¢ on revenue of $861.2M.  Gross margin widened to 25.3% from 23.7% a year earlier, excluding interest & write-downs.  The company delivered 1195 units, down 2% from the year-ago & the average price of homes delivered was $713K, compared with $706K a year ago.  For its fiscal year ending in October, the company narrowed its delivery guidance to between 5.3K- 5.9K homes, compared with its previous guidance of 5.2K-6.0K homes.  The company also lifted the lower end of its average price forecast by $5K, now calling for $730K-760K.  The stock fell 89¢.  If you would like to learn more about TOL, click on this link:

Toll Brothers Profit Rises on California Strength

Toll Brothers (TOL)

Tiffany soared after the jewelry retailer reported stronger-than expected Q1 financial results & maintained its upbeat earnings guidance for H2.  EPS fell to 81¢, down from 97¢ for the same period last year.  Despite the declines, which the company said were smaller than expected, results topped the 70¢ forecast.  The decline reflected the negative impact of a stronger US dollar versus foreign currencies & a difficult year-over-year sales comparison in Japan, which faces difficult economic conditions.  Worldwide net sales of $962M were down 5% from last year.  However, on a constant-exchange rate basis excluding the effect of converting foreign-currency-denominated sales into US dollars, worldwide sales rose 1% due to growth in all regions except Japan, beating the forecast of $918.7M.  Company management continued to forecast minimal growth in net diluted EPS from the $4.20 earned in fiscal year 2014, excluding charges.  However, the financial guidance predicted a more moderate net earnings decline for Q2, followed by "expected double-digit percentage net earnings growth" for H2.  "We stated the year facing well-known challenges from both global economic uncertainties and the effect of a strong U.S. dollar on the translation of foreign-denominated sales into dollars and on foreign tourist spending in the U.S., as well as a difficult sales comparison in Japan," CEO Frederic Cumenal said.  "Despite those factors, our first quarter results for net sales, as well as for gross margin and net earnings, were somewhat better than expected," he added.  The stock shot up 9.84 (12%).  If you would like to learn more about TIF, click on this link:

Tiffany shares soar on better-than-forecast resultsat USA TODAY


While stocks recovered lost ground, the rally is hardly impressive.  Hopes are high that low interest rates will last forever.  Earnings have been a mixed bag & retail earnings were hurt by uneven consumer spending & the strong dollar.  The Greek debt mess is going nowhere fast as the final days of talks are here.  So far, the bulls have not been bothered.

Dow Jones Industrials


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