Thursday, August 6, 2015

Markets retreat on weak commodity prices and earnings

Dow dropped 120, decliners over advancers 3-2 & NAZ tumbled 83.  The MLP index lost 2+ to the 343s & the REIT index was up a fraction in the 316s.  Junk bond funds were lower & Treasuries advanced.  Oil finished barely above 45, not much to brag about, & gold crawled a little higher.

AMJ (Alerian MLP Index tracking fund)

stock chart 

CLV15.NYM....Crude Oil Oct 15....44.79 Down ...0.76  (1.7%)

Live 24 hours gold chart [Kitco Inc.]

IBM, a Dow stock, will pay $1B to acquire medical imaging & software company Merge Healthcare, part of an effort to boost the health care capabilities of Watson, its cognitive computing system.  Merge's technology is used by 7500 hospitals & doctor's offices to sort medical images & scans, as well as researchers & pharmaceutical companies.  IBM hopes to combine the company's technology with its Watson system to help customers sort & analyze images, medical scans, lab results & other electronic health records.  The purchase is IBM's 3rd health-related acquisition since launching its Watson Health unit in Apr.  IBM has touted Watson's ability to absorb information, learning languages & competing on "Jeopardy."  The company is exploring the supercomputer's applications in a range of fields, from education to banking.  The stock fell 1.58.  If you would like to learn more about IBM, click on this link:

IBM makes $1B buy to boost Watson's health care capabilities

International Business Machines (IBM)

When Wal-Mart Stores, a Dow stock & Dividend Aristocrat, CEO Doug McMillon announced plans to boost store workers’ minimum wage earlier this year, he said the move was intended to improve morale & retain employees.  Yet for some of the hundreds of thousands of workers getting no raise, the policy is having the opposite effect.  Employees are calling the move unfair to senior workers who got no increase & now make the same or close to what newer, less experienced colleagues earn.  New workers started making a minimum of $9 an hour in Apr & will get at least $10 an hour in Feb.  Some workers also said they suspect their hours are being cut & annual raises reduced to cover the cost of the wage increase for newer workers.  WMT denies that & says it’s taking steps to ensure all employees have an opportunity to move into higher-paying jobs.  Along with bumping up the minimum wage, it increased the amount workers receive when promoted, boosted pay for some managers & raised the maximum pay for all hourly positions.  The stock lost 72¢.  If you would like to learn more about WMT, click on this link:

Unintended consequence of Wal-Mart's raise: unhappy workers

Wal-Mart (WMT)

Keurig Green Mountain plunged following disappointing quarterly sales that reflected a downturn in coffee machine sales & increased competition in the office market.  The maker of single-serve coffee brewing systems also said it would cut about 330 jobs, (5% of its 6.6K employees) to reduce costs.  The company makes the bulk of its profit from the sale of K-cups, which declined in conjunction with the coffee machines.  The pods faced competitive pressure after several patents expired in 2012 & unlicensed, cheaper versions hit the market.  In its most recent qtr overall product sales fell 5%.  Pods made up the overwhelming majority of sales, with $815M, marking a 1% drop.  "While we are not pleased with our revenue growth, we delivered earnings at the high end of our previous guidance," CEO Brian Kelley said.  "We are taking decisive actions to adapt and compete more effectively in today's rapidly-evolving, dynamic marketplace."  EPS beat expectations even though it fell 27% to 73¢.  But revenue results missed estimates.  The company also lowered EPS & revenue projections for the current fiscal year & said its adjusted EPS will shrink in fiscal Q1-2016 compared to the same qtr in fiscal 2015.  The company expects to take $30-$35M in pretax charges associated with the job cuts.  GMCR is also spending up to $100M on its cold-drink system, called Kold.  That will let people make sodas, sports drinks & other beverages with the touch of a button.  The stock sank over $22 (30%).  If you would like to learn more about GMCR, click on this link:

Keurig shares dive on downturn in sales

Keurig Green Mountain (GMCR)

Lately it has been difficult for stocks to find friends.  Nothing really major going on, just a lot of little to middle things with a significant cumulative effect.  Earnings have been soggy as media stocks found out the hard way.  Macro economic data has been just good enough to justify a rate increase in Feb.  The oil market looks to be in serious trouble.  The Greek debt mess is in limbo.  Puerto has to deal with its debt mess.  Euro economies are stumbling & China is still looking for ways to reignite its growth engine.  The chart below shows Dow is near its lows since last last Oct, not a pretty picture for investors.

Dow Jones Industrials

stock chart 

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