Monday, June 8, 2015

Dow slip back into the red YTD on Greek debt worries

Dow fell 82 (finishing at the lows), decliners over advancers 2-1 & NAZ was off 46.  The MLP index lost 3 to the 418s (inches above its 2½ low set just 3 months ago) & the REIT index was off pocket change to just above 310.  Junk bond funds drifted lower & Treasuries rose as stocks were sold.  Oil is down to 58 again & gold crawled higher.

AMJ (Alerian MLP Index tracking fund)

CLN15.NYM....Crude Oil Jul 15....58.18 Down ...0.95  (1.6%)

Live 24 hours gold chart [Kitco Inc.]

Pres Obama said EU govs are committed to extending sanctions on Russia & keeping them in place until pres Putin’s gov backs off destabilizing actions in Ukraine.  The US & allies will continue providing economic support & other assistance to Ukraine as it fights off separatists backed by Russia, Obama said at the G-7 summit in southern Germany.  “Sanctions on Russia will remain in place,” Obama said.  “Russian forces continue to operate in eastern Ukraine, violating Ukraine’s sovereignty.”  He added there was a strong consensus among the G-7 leaders on keeping sanctions in place & the leaders discussed what additional measures could be taken if Russia “doubles down” on its interference in Ukraine.  He didn’t specify what those might be, saying they were being discussed by lower-level officials.  Penalties, which target Russia’s financial services, energy, metals & mining, defense, & engineering sectors, were imposed over Russia’s annexation of Crimea & support for separatist rebels operating within Ukraine.  More than 6K have died in the fighting, & a fragile ceasefire agreement appears in peril amid an outbreak of fighting in eastern Ukraine.  EU sanctions are set be reauthorized later this month at a meeting of the European Council.  But European countries are facing increased domestic pressure to loosen the penalties against Russia.  In Germany, the Committee on Eastern Economic Relations, a consortium of around 200 of the country’s leading companies, called this week for Russia to be readmitted to the G-7.  Southern European countries including Spain, Greece & Cyprus have complained about the sanctions’ impact on their agriculture & tourism industries.

Obama Says Allies Committed to Extending Sanctions on Russia

Consumer expectations for inflation rebounded in May, according to a Federal Reserve Bank of New York survey, as officials planning to raise interest rates this year look for evidence that price pressures are firming.  Prices are likely to rise 3% in the year thru next May, according to a survey released today, up from 2.7% in Apr, which was the lowest reading since the bank began collecting data for the survey in Jun 2013.  Expected inflation 3 years ahead was unchanged at 3%.  Policy makers are watching inflation expectations for clues as to the direction of consumer prices.  Officials say they will probably raise rates this year for the first time since 2006, as long as the job market continues to improve & they are “reasonably confident” inflation will rise toward the 2% target.  The Fed’s preferred measure, the price index of personal consumption expenditures, increased only 0.1% from a year earlier in May, & it has been below the target rate since May 2012.  New York Fed pres William C. Dudley said he had become a little more confident on the outlook for higher inflation.  “The firming of inflation that I anticipate reflects my expectation that resource utilization will increase and the fact that some of the factors that have pulled down inflation, such as lower oil and gas prices and a firmer dollar, have already stabilized or partially reversed,” Dudley said.  The survey also showed a slight increase in expectations for household income growth one year ahead to 2.9%, matching the highest reading since the survey began.

Consumer Outlook for Inflation Rebounds, New York Fed Says

Sears Holdings reported a smaller Q1 loss as it cut advertising & other costs, but sales continued to tumble, underscoring the need for a big cash injection that the struggling retailer said would materialize next month.  The company expects its plan to spin off 235 Sears & Kmart stores into a REIT to be approved by the SEC this week, paving the way for a rights offering to sell shares in the REIT to existing shareholders on Fri.  The retailer, which has lost $7B over the past 4 years, expects to receive about $2.6B in proceeds from the sale early in Jul.  That deal, if accomplished, should buy the company time to pursue a revival strategy that involves a loyalty program and shrinking its presence to its best-performing stores.  Still, that strategy has yet to produce profitable results for the retailer, which reported its 12th straight quarterly loss.  For fiscal Q1, net loss attributable to shareholders per share was $2.85, following a loss of $3.79 a year earlier.  Revenue slumped 25% to $5.88B, reflecting the sale of most of its stake in its Canadian operations, the spinoff of the Lands' End clothing chain & the closure of stores.  It reported a sharp drop of 10.9% at comparable stores open at least year.  Sales at Kmart fell 7%, while Sears' sales slid 14.5%, hit by falls in key categories like appliances, apparel & auto centers.  Some of the decline was expected as it shrinks operations.  Apparel was also hurt by supply disruptions due to a slowdown at ports in the West Coast.  SHLD said it was in talks with lenders to extend a revolving credit facility, due to expire in Apr 2016, to 2020.  It has already reached agreement with three lenders representing $1.175B in commitments.  The size of the facility would likely decrease to about $2B from $3.275B.  SHLD was seeking a smaller lending framework because it has fewer stores, a larger online presence, & less need for financing due to decreased inventory levels, CFO Rob Schriesheim said.  The stock dropped 1.73.  If you would like to learn more about SHLD, click on this link:

Sears reports smaller first-quarter loss but sales keep slidingReuters

Sears Holdings (SHLD)

This has not been a good year for stocks, a sign of a very tired bull market rally.  The chart below shows the Dow is back to where it was in the middle of Nov (down 46 YTD).  Yield stocks have been it very hard with selling as investors are looking at traditional yield plays (bonds) with more interest.  MLPs & REITs are off their highs & even junk bonds (stocks with high yields) have seen selling.  As bad as things are, the Greek debt mess will lumber on thru the end of Jun, at a minimum, indicating more selling lies ahead.

Dow Jones Industrials

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