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Wednesday, September 16, 2015
Markets advance cautiously ahead of FOMC announcement
Dow added 34, advancers ahead of decliners better than 2-1 & NAZ was up 1. The MLP index rose 3+ to the 335s & the REIT index was fractionally higher, going over 300. Junk bond funds pulled back & Treasuries were strong. Oil had a solid gain to the 45s & gold also went higher following recent selling.
Prices paid by American households declined in Aug as cheaper
gasoline helped keep inflation below the objective of Federal Reserve
policy makers. The CPI fell 0.1%, the first decrease since
Jan, after a 0.1% gain in Jul, according to the Labor Dept. The so-measure, which strips out
often-volatile fuel & food costs, rose 0.1% for a 2nd month.
Goods prices declined, while services barely rose. A 15% plunge in energy costs over the past 12 months & a
rising dollar are acting as a brake on inflation that the Fed views as
temporary. The drop in the the CPI matched the estimate. The decline in the cost of living allowed
Americans’ paychecks to stretch further. The consumer price gauge increased 0.2% in the 12 months ended in Aug, the same as in Jul. The core CPI measure, which excludes volatile food & fuel costs,
rose 1.8% from Aug 2014, matching the prior month’s
gain. Energy costs decreased 2% from a month earlier, the biggest
decline since Jan. Food prices climbed 0.2% for a 2nd month. Inflation was
held back in Aug by a 4th straight decline in the cost of used
motor vehicles & a 3.1% decrease in air fares, while shelter
costs cooled. Medical care costs were stagnant. The Fed’s preferred gauge of inflation, linked to consumer spending,
hasn’t been above the central bank’s 2% goal since Mar 2012. It
climbed by 0.3% in Jul from a year earlier.
China’s stocks surged after the Shanghai Composite Index slid below
the key 3K level, with gains coming in the last hour of trading in a
pattern that’s become associated with state support. A gauge of
small-company shares rose by a record.
The
Shanghai Composite Index jumped 4.9% to 3152,
halting a 2-day, 6.1% loss. Only 12 stocks out of the more than
1100 fell as trading volumes slumped 28%
below the 30-day average. Technology stocks, the worst performers in the
past 3 months, rallied 9.4% for the biggest advance among
industry groups. Afternoons
in the stock market have turned into a waiting game with
rallies driven by gov-backed funds buying shares to stabilize the
market. The gov has spent 1.5T yuan ($246B)
purchasing equities since the rout began 3 months ago. The
Shanghai gauge has tumbled 39% from its Jun high as leveraged
investors fled amid concerns valuations weren’t justified given the
weakening economy. Data over the weekend showed industrial output missed
forecasts, while investment in the first 8 months
increased at the slowest pace since 2000.
Hewlett-Packard
expects to cut about 33K jobs over 3 years as it adjusts to falling demand. The latest cuts, on top of 55K layoffs previously announced under
CEO Meg Whitman, will mostly be in the faster-growing
corp hardware & services operations, to be spun off as Hewlett
Packard Enterprise (HPE), on Nov 1. The latest cuts indicate a reduction of the company's total workforce
by at least 10%. Up to 30K of the layoffs will be in the enterprise business & up
to 3.300 in HP Inc (the company that will continue to make PCs & printers. The restructuring will result in pretax charges of about $2.7B
at HPE & $300M at HP Inc, which has been hit hard by a
relentless decline in sales of PCs. The charges will be taken thru fiscal 2018. "We've done a significant amount of work over the past few years to
take costs out and simplify processes and these final actions will
eliminate the need for any future corporate restructuring," Whitman said. In its fiscal Q3, revenue from the PC & printer business, its largest, fell 11.5%. HPE, which will be run by Whitman, will have revenue of more than $50B, & is expected to report an adjusted profit of $1.85-$1.95
per share in 2016. HP said it expected the market for PCs & printers to remain tough
for "several quarters" & forecast 2016 earnings for HP Inc of $1.67-$1.77, excluding items. The stock rose 96¢. If you would like to learn more about HPQ, click on this link: club.ino.com/trend/analysis/stock/HPQ?a_aid=CD3289&a_bid=6ae5b6f7
Not a lot is happening in the stock market as experts try to guess what the Fed will do tomorrow. Chances are there will be a 25 basis point rate hike with words of encouragement that the next rate hike will not come for awhile. Meanwhile China is trying to figure out how to jump-start the economy & the euro zone is getting bogged down with the enormous refugee crisis. As usual, no shortage of problems.
...1.04 
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