Friday, August 21, 2015

Markets collapse on global economic woes

Dow sank 529 (closing at the lows), decliners over advancers more than 4-1 & NAZ dropped 171.  The MLP index sank 7+ to the 544s & the REIT index went down 4+ to 316.  Junk bond funds sold off & Treasuries rose as stocks were being sold.  Oil is flirting with the important support level of 40 & gold crawled higher in the mid 1100s.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15....40.02 Down ...1.30  (3.2%)

Live 24 hours gold chart [Kitco Inc.]

A word of good news on the euro front.  German manufacturing growth unexpectedly accelerated to the fastest pace in more than a year, pointing to building momentum in the euro-area’s largest economy.  The Markit Economics factory Purchasing Managers’ Index advanced to 53.2 in Aug from 51.8 in Jul.  That’s the highest since Apr 2014 & above the 50 mark that divides expansion from contraction.  It also beat the of 51.6.  A services gauge slipped, though a composite measure of both industries rose to a 4-month high.  The economy expanded 0.4% in Q2, & the Bundesbank said Germany is poised for “solid” expansion that’s supported by external & domestic demand.  Markit said the PMI indicate growth in Q3 will be similar to the rate Q2.  The improvement in Germany is in contrast to France, where the economy stagnated in Q2.  Markit’s latest numbers show French manufacturing shrank for a 2nd month in Aug & services growth weakened.  That left the composite business index at a 4-month low.  ECB policy makers have expressed disappointment about the pace of the euro area’s recovery.  Further headwinds include China’s currency devaluation, which has sparked volatility in emerging markets, as well as looming interest-rate increases from the Federal Reserve & Bank of England.  A euro-area manufacturing index probably slipped to 52.2 in Aug from 52.4 in Jul, according to a recent estimate.

German Manufacturing Strengthens as Economy Shifts Up a Gear

Back to reality, growth in the US manufacturing sector slowed to its weakest pace in almost  2 years in Aug, according to an industry report.  Markit said its preliminary US Manufacturing Purchasing Managers' Index fell to 52.9 in Aug, its lowest in 2 years, from a final Jul reading of 53.8.  Economists had forecast the Aug figure would be 54.0.  Job creation also slowed, with the index at 52.2, its weakest since Jul 2014, down from a final Jul reading of 53.8.  "August’s survey highlights a lack of growth momentum and continued weak price pressures across the U.S. manufacturing sector, which adds some fuel to the dovish argument as policymakers weigh up tightening policy in September," said Markit.  "According to survey respondents, the strong dollar continued to put pressure on export sales and competitiveness, while heightened global economic uncertainty appeared to have dampened client spending both at home and abroad."  The index's output component fell to 53.7, its lowest since Jan 2014, from the Jul final reading of 55.3.  The manufacturing sector Purchasing Managers' Index is compiled by information services company Markit.

Factory Activity Slows in August

Hewlett-Packard sales & profit fell in Q2 & the computer-maker issued a forecast for the Oct qtr that was lower than expected.  HPQ is still struggling with a host of challenges as it prepares to split into 2 companies later this year.  Net income $854M was down 13% from a year earlier, as sales fell 8% to $25.35B.  The company has seen year-over-year revenue declines in all but one qtr for the last 4 years.  EPS was slightly better than the estimate at 47¢ per diluted share, or 88¢ per diluted share after adjusting for one-time gains & costs.  The estimate was for adjusted EPS of 85¢.  Revenue fell short of expectations of $25.64B.  HPQ is one of the world's leading sellers of PCs, printers, commercial data center hardware and tech services.  But after several years of weak performance, the company is spending billions of dollars on restructuring as it prepares to split into 2 separate corps, one focused on PCs & printers, and the other selling commercial tech products.  CEO Meg Whitman contends the split will leave each spinoff in better position to compete in their respective markets.  The company issued its forecast for adjusted EPS for Q3 of 92-98¢.  Analysts were expecting adjusted EPS of $1.  The stock rose 12¢ in a down market.  If you would like to learn more about HPQ, click on this link:

HP revenue and profit slide, stock falls on weak forecast

Hewlett-Packard (HPQ)

Stocks had a terrible week.  Worse, the selling shows no sign of ending.  Dow fell below 17,477 at the close, a 10% fall from its record peak 3 months ago, signaling a bear market.  The China market does not look pretty, Greece is subject to more unrest as it readies for an election next month & the US economy is facing an increase in the Fed's prime interest rate.  Dow plunged 900 this week & the chart looks terrible.  More selling lies ahead, led by the Fab 5 sexy, tech stocks which have been leading the markets to record levels this year.

Dow Jones Industrials

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