Wednesday, August 5, 2015

Oversold markets rise on earnings

Dow went up 82, advancers over decliners 5-2 & NAZ jumped 58.  The MLP index recovered 2+ to the 368s & the REIT index fluctuated in the 318s.  Junk bond funds were higher & Treasuries retreated.  Oil bounced back & gold continued weak.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15...46.69 Up ...0.56 (1.2%)

GCQ15.CMX...Gold Aug 15.....1,088.40 Down ...2.30  (0.2%)

The US trade deficit widened in Jun as the strong dollar lifted imports & hobbled exports, representing a hurdle for economic growth.  The gap grew 7.1% to $43.8B, the largest in 3 months, according to the Commerce Dept.  The forecast called for a widening to $43B.  A firm dollar, which makes American goods relatively more expensive, & weak demand overseas are weighing on manufacturers & preventing the economy from gaining momentum.  At the same time, rising orders from US customers, as evidenced by record imports from the EU, are helping keep some trading partners afloat.  The Commerce Dept revised the May gap down to $40.9B from an initially reported $41.9B, which means the economy probably grew at a slightly faster pace in Q2 than currently estimated.  Exports were little changed at $188.6B compared with $188.7B in May.  Growing foreign demand for jewelry & other consumer products was offset by a slump in sales of capital goods such as telecommunications & medical equipment.  Imports climbed 1.2% to $232.4B from $229.7B in the prior month as Americans bought more pharmaceuticals, oil, automobiles & cellular telephones.  Europe was among the beneficiaries of growing US demand as imports from the region grew to a record, swelling the trade gap between the 2 areas to the biggest in comparable data back to 1992.  After eliminating the influence of prices, which generates the numbers used to calculate GDP, the total trade deficit widened to $59.3B compared with $57.6B in May.  The gap between exports & imports has hurt GDP this year.  It had little influence Q2 & subtracted 1.9 percentage points from growth in Q1, the most since 1985.

Trade Deficit Widens, Showing Effect of Strong U.S. Dollar

US private employers hired 185K workers in Jul, which was the smallest increase since Apr & reduced expectations of a strong jobs reading in the gov payrolls report due Fri.  Economists had forecast the ADP National Employment Report would show a gain of 215K private jobs in Jul.  Private payroll gains in Jun were revised down to 229K from an originally reported 237K increase, which was the biggest rise since Dec.  The ADP figures come ahead of the Labor Dept's more comprehensive non-farm payrolls report on Fri, which includes both public & private-sector employment.  The forecast is for total employment to have grown 223K jobs in Jul, matching the Jun figure.  The unemployment rate is expected to hold for a 2nd month at 5.3%, the lowest since Apr 2008.

Private Sector Adds Fewer Jobs than Views

Walt Disney, a Dow stock, posted record profit in the Jun qtr, but its revenue missed expectations for the first time in 2 years.  Net income of $2.48Bwas up 11% from a year earlier & revenue of $13.1B, just shy of the $13.23B estimate.  The weaker € compared to a year earlier cut revenue at the Disneyland Paris theme park by about $100M.  Operating profit at the theme parks rose 9% to $922B as attendance & spending rose at US parks.  Operating income at the company's largest unit, media networks, rose 4% to $2.38B, as cable channels brought in higher fees from pay TV distributors.  The media networks segment includes sports channel ESPN, the Disney Channels & the ABC broadcast network.  ESPN has experienced "modest" subscriber losses as viewing habits have shifted to digital platforms, Disney CEO Bob Iger said.  However, Iger said he has "enormous confidence in ESPN's future no matter how technology disrupts the media business.  "Disney's movie studio business recorded a profit of $472 million, up from $411 million a year earlier, helped by the success of "Avengers: Age of Ultron."  Overall EPS climbed to $1.45 from $1.28 last year.  Revenue rose to $13.10B from $12.47B.  Analysts had expected EPS of $1.42 on revenue of $13.23B.  The stock slumped a very big 10.  If you would like to learn more about DIS, click on this link:

Disney Shares Plunge on Weak Fiscal 3Q Revenue

Walt Disney (DIS)

Even with the drag from DIS, Dow is rising & tech stocks are doing very well on NAZ.  Markets are oversold & bargain hunters are in there today.  The fundamentals of a drab recovery in the US & uncertain markets overseas remain in place.   Today's rise looks suspect.

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