Thursday, July 30, 2015

Markets slide lower after GDP report & earnings

Dow dropped 56, decliners over advancers 4-3 & NAZ lost 20.  The MLP index fell 4+ to the 387s & the REIT index was down 1 to the 316s.  Junk bond funds drifted lower & Treasuries were flattish.  Oil & gold were little changed at their depressed levels.

AMJ (Alerian MLP Index tracking fund)

CLU15.NYM...Crude Oil Sep 15...48.71 Down ...0.08  (0.2%)

GCU15.CMX...Gold Sep 15.....1,090.20 Down ...2.60  (0.2%)

The US economy expanded at a faster pace in Q2 & managed to eke out a gain at the start of the year, painting a picture of incremental progress consistent with the Federal Reserve’s view.  GDP rose at a 2.3% annualized rate, & a revised 0.6% advance in Q1 wiped out a previously reported contraction, according to the Commerce Dept.  The forecast called for a 2.5% gain.  Consumer spending grew more than projected, & price increases accelerated.  The economy has moved beyond some of the early 2015 constraints including weather & port delays, while cooling global markets, a strong dollar & insufficient wage gains may continue to limit growth.  Fed officials, considering when to begin raising rates this year, concluded yesterday that the US is making progress.  The Commerce Dept also issued its annual revisions, updating the data back thru 2012.  The economic expansion over the past 3 years was weaker than initially projected, with the biggest revision coming in 2013.  From the end of 2011 to the end of 2014, the economy expanded at a 2.1% annualized rate, compared to the 2.4% pace reported before. GDP grew 1.5% in 2013, the weakest since the throes of recession in 2009, compared with a previously reported 2.2% gain.  Business spending remained a sore spot, with investment excluding housing falling at a 0.6% rate, the worst performance since the Q3-2012.  Gov outlays were another source of weakness, rising just 0.8% after dropping 0.1% in Q1.  A 2% gain among state local agencies was almost wiped out by a 1.1% drop at the federal level.  2 normally large swing factors, trade a& inventories, were fairly stable last qtr & had little influence on growth.  The GDP report also showed price pressures picked up.  A measure of inflation, which is tied to consumer spending & strips out food & energy costs, climbed at a 1.8% annualized pace compared with 1% gains in the prior 2 qtrs.

U.S. GDP Rises 2.3% in Second Quarter; First Quarter Revised Upward

Applications for US unemployment benefits rose last week after reaching a 4-decade low in the prior week, consistent with a stronger labor market.  Jobless claims increased 12K to 267K, from 255K the prior week (the lowest since 1973), according to the Labor Dept.  The forecast called for 270K.  The 4-week moving average, a less-volatile measure of job cuts, declined.  Dismissals holding below 300K & sustained hiring would help convince Federal Reserve policy makers that the economy can withstand an increase in the benchmark interest rate.  The 4-week average, a less volatile measure than the weekly numbers, decreased to 274K from 278K.  The number continuing to receive jobless benefits rose 46K to 2.26M & the unemployment rate among people eligible for benefits climbed to 1.7% from 1.6%.

Jobless Claims in U.S. Climbed Last Week From Four-Decade Low

Procter & Gamble, a Dow stock & Dividend Aristocrat, gave muted guidance for its new fiscal year, as sales fell 9.2% in the Jun qtr on volume decreases & the company booked a big charge related to an accounting change for its Venezuela operations.  For the year ending in 2016, the company expects EPS to be in a range of "slightly below" last year's $3.77 "to up mid-single digits."  It forecast organic sales that are in-line to up low-single digits.  Analysts had called for EPS of $4.18.  PG also said it sees foreign exchange cutting into overall sales by 4-5 percentage points.  The stock sank 3.08.  If you would like to learn more about PG, click on this link:

Procter & Gamble Gives a Muted Outlook

Procter & Gamble (PG)

Stocks are meandering again as they have been doing for all of 2015.  The GDP report was uninspiring, as expected, & earnings remain drab.  After strength in recent days, MLPs are seeing more selling.  Oil at these levels hurts them.  It's that simple.  Junk bond funds remain  under pressure with the threat of rising interest rates.  Dow is down YTD & on defense.

Dow Jones Industrials

stock chart 

3 Stocks You Should Own Right Now - Click Here!


No comments: