Wednesday, June 17, 2015

Markets rise cautiously ahead of FOMC announcement

Dow rose 38, advancers just ahead of decliners & NAZ gained 16.  The MLP index was flat in the 421s & the REIT index fell a fraction in the 312s.  Junk bond funds slid lower & Treasuries retreated, bringing higher yields ahead of the FOMC meeting announcement.  Oil climbed to 61 & gold pulled back.

AMJ (Alerian MLP Index tracking fund)

CLN15.NYM...Crude Oil Jul 15...60.94 Up ...0.97 (1.6%)

GCN15.CMX...Gold Jul 15.....1,177.50 Down ...3.00  (0.3%)

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The stand-off between Greece & its creditors continued, but both sides are sounding even more ominous than yesterday.  Greek Prime Minister Tsipras warned that he would “say the big no” to any agreement that continued “catastrophic policies” dictated by the country’s bailout.  European Commission pres Jean-Claude Juncker accused Tsipras of misrepresenting the creditors’ policy proposals to Greeks.  The finance ministers of the Czech Republic & Slovakia, who will be involved in yet another attempt to resolve the crisis at tomorrow's meeting of euro-area finance ministers in Luxembourg, said a Greek default was now a realistic scenario.  German Finance Minister Wolfgang Schaeuble told a parliamentary hearing in Berlin that the gov was working on a contingency plan in case no deal with Greece is reached.  Greek central bank governor Yannis Stournaras warned that the crisis could become “uncontrollable,” potentially leading to a Greek exit from the EU, not just the euro area.  Taken at face value, the apocalyptic pronouncements would suggest that no deal will be reached by the  end of the month, when Greece will need to pay the IMF more than €1½B.  On the other hand, the gloom & doom is perhaps a little too theatrical to lose hope.

Gloom and Doom Theater

FedEx posted a Q4 profit that trailed estimates, crimped by currency fluctuations & lower fuel surcharges.  Directors raised the mandatory retirement age for board members to 75 from 72, a step that would allow CEO Fred Smith to stay on longer if he chooses.  Smith, FedEx’s founder, turns 71 in Aug.  EPS excluding one-time items was $2.66, short of the $2.69 estimate.  Sales of $12.1B also missed the $12.3B expected.  FDX is winding down a $1.7B cost-cutting program begun in 2012 primarily aimed at the airline business, FedEx Express, as customers shift to ground, freight & even ocean shipping over more-expensive overnight air deliveries.  The plan included voluntary employee buyouts, job cuts & replacing older aircraft & vehicles with more fuel-efficient models.  “With the profit improvement initiative continuing to gain traction, we project much stronger profit growth in the second half” of fiscal 2016, CFO Alan Graf said.  EPS excluding some one-time items will be $10.60-$11.10 in fiscal year ending May 31, FDX said.  The range includes the projection of $10.93 by analysts.  Capital spending will be $4.6B.  FedEx said fiscal Q1 profit won’t meet current consensus estimates because of “significantly higher” accruals for incentive compensation & that’s factored into the 2016 outlook given today.  The 2016 outlook assumes continued moderate economic growth & doesn’t include its pending purchase of Netherlands-based  TNT Express.  The projection is based on continued operational improvements during the final year of its $1.7B plan to boost profits & expansion of the FedEx Ground network.  Fiscal Q4 results excluded non-cash charges of $4.88 a share related to a change in pension accounting, 62¢ for aircraft & engine retirements, 47¢ for a legal reserve increase & 15¢ for changes in how it reports segment results.  Including the pension charges, FedEx reported a net loss in Q4 of $895M.  The stock dropped 5.01.  If you would like to learn more about FDX,click on this link:

FedEx Falls With Quarterly Profit, Sales Trailing Estimates

FedEx (FDX)

Talks about the Greek debt mess continue to go nowhere fast.  Nothing dramatic is expected to happen before the last minute & the lenders may hang in tough this time.  Then there is Janet who will give a summery of the FOMC meeting shortly.  All eyes are watching to see what she has to say about the future of interest rates.

Dow Jones Industrials

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