Friday, June 19, 2015

Markets retreat on Greek debt worries

Dow dropped 88, decliners over advancers 3-2 & NAZ backed off 14.  The MLP index lost a very big 6+ to the 414s, near its multi year lows, & the REIT index was of 2+ to the 317s.  Junk bond funds were mixed to lower & Treasuries rallied with the yield on the 10 year Treasury falling 8 basis points to 2.27%.  Oil fell below 60 on fears of increased production after its recent rise rise & gold slid back but remains just above 1200.

AMJ (Alerian MLP Index tracking fund)

CLQ15.NYMCrude Oil Aug 1559.83 Down 0.99  (1.6%)

Live 24 hours gold chart [Kitco Inc.]

John Williams, pres of the Federal Reserve Bank (FED) of San Francisco, said the central bank is likely to raise interest rates this year as the economy reaches full employment, though he’s troubled by low inflation.  “I still believe this will be the year for liftoff,” Williams said in a speech.  Although he’s awaiting more evidence inflation is moving up toward the FED goal,  “I see a safer course in starting sooner and proceeding more gradually.”  Policy makers this week signaled a pickup in the economy is keeping the central bank on track to raise rates this year, though subsequent increases are likely to be more gradual than anticipated earlier.  While their projection for the main interest rate implied 2 moves this year, more officials now project either one rate increase or none in 2015.  He  said the US will probably hit his 5.2% estimate for the natural rate of unemployment later this year.  As of May, the jobless rate stood at 5.5%, down from 10% in 2009. “We’re making good progress across most measures of the labor market,” he said.  “Now that wage growth is starting to take off across multiple measures, it further confirms that the labor market is nearly healed.”  What’s more, Williams said economic growth in Q1 probably wasn’t as weak as official figures, which showed a 0.7% contraction, suggest.  “On closer inspection, the numbers weren’t nearly as bad as they appeared,” Williams said, citing San Francisco Fed research suggesting that the economy may have expanded at a 1.5% annual pace.  “More recent data on spending have been encouraging, indicating the economy is still on a solid trajectory with a good deal of forward momentum.”  Even so, Williams said price pressures are running below the committee’s 2% goal, in part because of transitory factors including a recent fall in energy prices & a strong dollar.  “We’re seeing oil edging higher and the dollar edging lower, so the downward pressure from those factors will recede,” Williams added.  “With the economy nearing full strength, we should start seeing signs that underlying inflation trends are coming back up.”  He sees “all the factors in place to meet our inflation goal by the end of next year.” Still, “I am wary of acting before gathering more evidence that inflation’s trajectory is on the desired path.”

Fed's Williams Sees Liftoff in 2015 as Job Market ‘Nearly Healed’

Hershey is expected to cut about 300 jobs by the end of the year as it looks to simplify its operations& the candy maker cut its revenue outlook for the year.  "Removing cost and complexity from our business will make us more flexible to quickly react to changing consumer and competitive marketplace trends," CEO John Bilbrey said. The chocolate & candy maker said that it will face an estimated $100-$120M in pretax charges related to the job cuts.  It anticipates $65-$75M in savings, mostly in 2016, & plans to reinvest part of the funds back into the business.  It also lowered full-year revenue outlook.  The company said that it now foresees revenue rising around 2.5-3.5%, down from a  previous prediction of 4.5%-5.5% increase.  Excluding foreign currency fluctuations, HSY anticipates full-year revenue climbing about 4-5%.  Its prior guidance was for a 6-7% rise.  Chocolate sales growth in China was below expectations in Apr & May.  In Q1, sales in China slid 47% excluding sales of Golden Monkey products, a Chinese food company that HSY bought a controlling stake in late last year.  It maintains that a slowdown in China's economy is keeping people from buying its goods.  HSY expects 2015 adjusted EPS of $4.10-$4.18, below the analysts prediction of $4.31.  The stock sank 3.22.  If you would like to learn more about HSY, click on this link:

Hershey to cut about 300 jobs, lowers 2015 revenue outlook

Hershey (HSY)

Office Depot (ODP) shareholders voted overwhelmingly in favor of the company's $6.3B acquisition by one-time rival Staples.  The deal is part of a rapid consolidation in the office supply sector that has been hammered by technological changes in the workplace & by competition from online retailers.  SPLS. has closed dozens of stores in preparation & by the end of the year expects to have shuttered up to 225.  ODP has said it expects to close up to 135 stores by the end of 2015.  99.5% of the votes cast were in favor of the deal, expected to close by the end of the year if approved by regulators.  Shareholders will receive $7.25 in cash & 0.2188 of a share in SPLS for each share of ODP.  The Federal Trade Commission is reviewing the proposed deal in a landscape that has changed vastly since it shot down an attempted merger between the 2 office suppliers almost a decade ago.  SPLS stock went up pennies.  If you would like to learn more about SPLS, click on this link:

Office Depot shareholders approve sale to Staples

Staples (SPLS)

There was not much going on in the PM.  Stocks were sold because traders did want to be long going into the weekend when anything could happen with the Greek debt mess.  So far there has been a lot of talk with little action.  Higher yielding sectors, such as MLPs & REITs, pulled back & have been under pressure all year.  But Dow & NAZ are hovering near their record highs.

Dow Jones Industrials

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