Friday, October 23, 2015

Markets extend weekly gains on Chinese rate cuts and tech earnings

Dow rose 157 (near the highs), advancers over decliners a mild 3-2 & NAZ shot up an astounding 111 to go back over 5K.  The MLP index fell 1+ to 324 & the REIT index lost 3+ to the 325s.  Junk bond funds climbed higher & Treasuries were sold as stocks rallied.  Oil pulled back to the 44s & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

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CLZ15.NYM....Crude Oil Dec 15....44.80 Down ...0.58  (1.3%)

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The House plans to consider legislation next week to raise the debt limit as Reps negotiate over the bill with Dems, who insist that it be free of unrelated policy provisions.  House Majority Leader Kevin McCarthy said the chamber is expected to address the borrowing limit next week.  Treasury Secretary Jack Lew has said Congress must raise the debt ceiling by Nov 3 or risk default.  “I want a debt limit that gets raised, but does something about the debt,” said McCarthy.  Rep John Fleming said he has been told that leaders are working on a clean plan to raise the limit.  Fleming, a member of the conservative House Freedom Caucus, said he & other Reps will vote against it, but that outgoing Speaker John Boehner & other party leaders are planning to rely on help from Dems to get the measure passed.  “They just are going to do a clean” bill & “pass it with a majority of Democrats,” Fleming said he was told.  He said he wasn’t told directly by Boehner or other leaders, but “that’s the word being passed around” the Rep caucus.  He said he doesn’t dispute that Nov 3 is a hard deadline.  Boehner hasn’t made a decision on whether to proceed with a clean debt limit bill.  Boehner said he wants to “clean the barn up” by passing some major measures before he leaves & the likely next speaker, Paul Ryan, takes over.  McCarthy, asked whether leaders are considering a clean bill, said, “My position is the same, you have to do something about the debt going forward and it has to be raised.”  “We are meeting in a bipartisan way to find a path forward,” McCarthy said.  Support from at least 30 Reps would be needed, if all 188 Democrats supported a debt-limit bill, in order for it to pass.  Earlier this week, House Reps scrapped a tentative plan to vote on legislation that would combine a debt-ceiling increase with $3.8T in spending cuts over the next decade.  Some have expressed doubts about whether the Nov represents a true deadline.  As usual, confusion reigns over this critical issue.

House to Weigh U.S. Debt Limit Increase as Deadline Nears

Kellogg is in late-stage talks to buy snack foods company Diamond Foods (DMND) for more than $1.5B, according to a leaker.  It has been reported that Kellogg could pay $35-$40 a share, implying a premium of up to 22%.  Kellogg has struggled to boost sales this year.  Revenue missed estimates in the last 4 qtrs & the company exited a low-margin nut products business this year.  It has been trying to expand its snack foods business thru acquisitions & increase its intl presence as sales of cereals decline in the US.  It bought Egyptian baker Bisco Misr in Jann & entered into a distribution deal to expand in Africa.  DMND declined to comment.  Kellogg stock lost 31¢ & DMND stock jumped up 2.16 (6%).  If you would like to learn more about Kellogg, click on this link:

Rpt: Kellogg in Talks to Buy Diamond Foods for $1.5

Kellogg (K)

Amazon CEO Jeff Bezos just did something that he hasn’t since 2010: he assured investors that his company would make a profit in its busy holiday shopping season.  AMZN has a history of wide-ranging forecasts, $1B wide, on earnings that straddle the line between making money & losing cash.  Investors cheer Bezos who tramples brick-and-mortar retailers by changing the way people shop.  They tend to punish the Bezos who risks their money on things like a smartphones.  Bezos made a commitment to make them richer, with the company forecasting Q4 operating income from $80M-$1.28B.  It's still a broad range, but the low & high-ends are on the right side of zero.  AMZN had a lot of upside.  Its first Prime Day sales promotion in Jul boosted its global revenue growth rate by 2%, CFO Brian Olsavsky said.  Its cloud computing division, Amazon Web Services, beat expectations with sales gaining 78%.  And importantly, revenue rose faster than expenses.  Beyond the numbers, there are signs that its profitability in the US will soon be mimicked overseas as it exports the same services that have wooed customers in America.  And the company emphasized innovation in an earnings call with investors.  While Bezos promised profits, he also pointed toward new devices, citing the low-cost Fire tablet.  "This is one more step in our mission to bring customers premium products at non-premium prices," Bezos said.  The high priced stock shot up 35, just of going over 600, for a new record.  If you would like to learn more about AMZN, click on this link:

Amazon CEO Jeff Bezos Promises Wall Street a Profit (AMZN)

Stocks continue to throw caution to the wind.  Tech earnings propelled NAZ to go over 5K again.  But the rate cut in China got more attention by traders.  Dow rose more than 400 this week & is only 1% below its starting point in 2015.   With discord in DC, the bulls may not be able to control the markets next week.

Dow Jones Industrials

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