Wednesday, July 22, 2015

Lower markets as tech stocks are sold

Dow fell 10, decliners just ahead of advancers & NAZ dropped 23 (see below).  The MLP index dropped another 4+ to the 374s & the REIT index climbed 1+ to the 317s.  Junk bond funds slid lower & Treasuries rose.  Oil is below 50 & gold is well under 1200, new lows.

AMJ (Alerian MLP Index tracking fund)

CLU15.NYM...Crude Oil Sep 15...50.20 Down ...0.66  (1.3%)

GCN15.CMX...Gold Jul 15...1,089.60 Down ...13.80  (1.3%)

The biggest technology rally since Oct was knocked cold, as disappointing earnings reports punished Microsoft (MSFT) & left Apple (AAPL),  Dow stocks, in danger of its worst-ever loss of market value.  5 days after Google (GOOG) earnings spurred the largest one-day wealth creation by any US stock, computer & software shares are tumbling.  AAPL, MSFT & Yahoo! (YHOO) are retreating on disappointing results. Hopes were high for the industry as earnings season began, with technology shares leading a rebound in US equities after overseas tensions eased.  The Nasdaq Composite Index rallied to an all-time high on Jul 17 after GOOG surged 16%, adding $65B to its market capitalization.  Cracks in the facade appeared before Tues.  Intel (INTC), another Dow stock, kicked off earnings by the largest tech company last week, said it expects the PC market to fall further than expected, spotlighting the challenges for chipmakers.  International Business Machines (IBM), another Dow stock. dropped 5.9% yesterday after sales fell for a 13th quarter.  AAPL sold off after iPhone shipments for the fiscal Q3 & the company’s revenue forecast for the current period missed projections, raising questions over whether demand for the device has peaked.   Today's declines:

AAPL     -6.96
MSFT    -0.51
YHOO   -0.70
QCOM  -0.54

US home prices rose in May as a limited supply of properties for sale failed to meet demand from first-time buyers.  Prices climbed 0.4% on a seasonally adjusted basis from Apr, according to the Federal Housing Finance Agency (FHFA), matching the estimate.  More young people have been striking out on their own, creating a bigger pool of potential buyers who have helped push up prices by competing for a tight inventory of listings.  First-time buyers accounted for 32% of existing-home purchases in May, up from 27% a year earlier, according to the National Association of Realtors.  The FHFA’s report showed home prices rose 5.7% in May from a year earlier.  The measure is 1.8% below its March 2007 peak & about the same as the Apr 2006 level.  Prices rose from a year earlier in all regions.  The biggest gain was in the Pacific area, including Washington, Oregon & California, at 8.4%.  The index measures transactions for single-family properties financed with mortgages owned or securitized by Fannie Mae & Freddie Mac.  The median price for a home in May was $228K, according to the Realtors group.

U.S. Home Prices Climbed in May as Supply Fell Short of Demand

Coca-Cola, a Dow stock, Q2 earnings that beat estimates after increasing drink prices & cutting expenses.  Excluding some items, EPS amounted to 63¢, topping the 60¢ estimate.  Higher product prices have helped it weather stagnant sales overseas & changing consumer tastes in the US, where soda sales have declined over the past decade.  CEO Muhtar Kent has called 2015 a “transition year” as he waits for cost cuts & new marketing to bear fruit.  Charging more for beverages has shored up revenue as the company rides out the turbulence.  “While there is more work to do, we remain confident that we have the right plans in place,” Kent said.  Though sales declined in Q2 compared with a year earlier, the revenue was better than predicted.  Sales were $12.2B, compared with an estimate of $12.1.  In developed markets, such as the US & Europe, KO has focused on selling smaller packages at higher prices per ounce.  KO has rolled out a marketing program called “Share a Coke” that puts names & messages on its bottles & cans.  In emerging markets such as Africa, KO continues to focus on boosting sales volume.  Globally, volume grew 2% & EPS was 71¢, up from 58¢ a year earlier.  The stock rose 27¢.  If you would like to learn more about KO, click on this link:

Coca-Cola Beats Profit Estimates After Boosting Drink Prices

Coca-Cola (KO)

Given the dreary news from the tech sector & falling oil prices, stocks are holding up fairly well.  Tech stocks have been leaders this year with NAZ setting new records.  A continuation of selling could bleed thru to the rest of the stock market.  Earnings reports from tech companies are not the only ones to disappoint.  MLPs are still looking for friends but REIT stocks are holding their own.  The MLP index could easily see 300, before 400 with investors demanding higher yields on what they see as riskier securities.  Besides lower oil prices, a threat to the special tax treatment of distributions is troubling.

Dow Jones Industrials

stock chart 

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