Wednesday, August 5, 2015

Markets slide lower despite gains in tech stocks

Dow fell 10, decliners just ahead of advancers & NAZ advanced 34.  The MLP index plunged an enormous 19+ to the 346s & the REIT index lost 1+ to the 316s.  Junk bond funds were mixed & Treasuries dropped.  Oil is back in the 45s & gold is at its lowest level in more than 5 year.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15....45.43 Down ...0.70  (1.5%)

Live 24 hours gold chart [Kitco Inc.]

The pace of growth in the US service sector surged in Jul to its best level in a decade, led by sharp increases in business activity, employment & new orders.  The Institute for Supply Management services sector index rose to 60.3, its highest reading since Aug 2005, a sign of confidence that the non-manufacturing sector, which accounts for more than 2/3 of the economic activity, was growing swiftly.  Expectations were for a reading of 56.2.  A reading above 50 indicates expansion in the service sector.  The data stands as another point in favor of the Federal Reserve raising rates from its zero-bound level at its next meeting in Sep.  Economic figures have been mixed of late, with strong employment data offset by middling housing, manufacturing & inflation reports.  The business activity subindex rose to 64.9, compared with expectations for a reading of 61, the best reading for that index in almost 11 years.  The employment index rose to 59.6, its strongest since August 2005.

Service-Sector Activity Jumps to 10-Year High

Apple was downgraded to neutral from buy at Bank of America (BAC) on the belief that there are few catalysts to trigger big share-price increases in the near term.  The analyst predicted continued near-term pressures on shares as iPhone growth starts to slow & other new initiatives, such as Apple Watch, Apple Pay & Apple Music, take time to ramp up.  He said the stock price is correlated to gross profit dollar growth, which is expected to "decelerate significantly" over the next few years despite strong demand for iPhones.  "Share gains will be more difficult to come by," he said.  He also believes that while the iPhone 6S, expected to be unveiled in Sep, will likely drive some upgrade among the existing iPhone-user installed base, it won't be "compelling enough" to drive a significant change in the pace of share gains.  After recent weakness, the stock rose 76¢.  If you would like to learn more about AAPL, click on this link:

Apple Stock Downgraded At Bank Of America

Apple (AAPL)

Time Warner's Q2 earnings jumped 14% thanks to higher revenue from video games & TV licensing.  However, the stock sold off on poor revenue numbers.  The company said its Warner Bros. business was the top video game publisher for H1 from releases of "Batman: Arkham Knight" & "Mortal Kombat X."  Turner Broadcasting, which includes TNT & TBS, also boosted results as the 2 channels ranked #1 & #2 ad-supported cable networks on prime time among adults 18-49.  TWX reaffirmed its 2015 guidance.  It expects adjusted EPS from continuing operations of $4.60-$4.70.  Analysts are expecting $4.65.  EPS was $1.16 & EPS, adjusted for non-recurring costs, was $1.25, which came in above the $1.03 analysts were expecting & better than 94¢ from a year earlier.  The owner of TV channels such as HBO & TBS as well as Warner Bros. studios posted revenue of $7.35B, up 8% from $6.79B & above the forecasts.  The analysts expected $6.87B.  The stock sank 8.50 (10%).  If you would like to learn more about TWX, click on this link:

Time Warner 2Q buoyed by video games, TV licensingAP

Time Warner (TWX)

Even though NAZ had it good advance taking it within 2% of last month's record, other sectors were weak.  There is worry that "good" economic data (such as service sector data) will give the Fed courage to raise interest rates in Sep.  If there is an increase, chances are there will not be one at the following meeting when they will look at more data to give forward guidance.  The drop in the MLP was astounding.  The index has been characterized by a low beta (daily price moves).  In recent years with rising in MLP prices, volatility has increased.  However, this swing of 5% rates as eye popping.  The MLP sector is in a new era.

Dow Jones Industrials

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