Thursday, October 15, 2015

Markets surge on hopes for a delay in raising interest rates

Dow jumped up 217 closing at the highs, advancers over decliners almost 4-1 & NAZ added 87.  The MLP index rose 5+ to the 342s (but still down more than 200 from last year's record) & the REIT index gained 4+ to the 319s.  Junk bond funds were mixed to lower & Treasuries pulled back as stocks rose.  Oil finished slightly higher & gold went up to where it was 4 months ago.

AMJ (Alerian MLP Index tracking fund)

CLX15.NYM....Crude Oil Nov 15....46.41 Down ...0.23  (0.5%)

Live 24 hours gold chart [Kitco Inc.]

Citigroup boosted profit more than estimated after a drop in legal costs helped it cut expenses faster than revenue fell.  Q3 EPS rose to 1.35 from 88¢ a year earlier.  EPS was $1.31 excluding accounting adjustments, beating the $1.27 average estimate.  CEO Michael Corbat, striving to meet financial goals by the end of this year, has sold assets & closed branches to shave costs & focus on affluent consumers & multinational corps, helping the firm weather the Q3 global market turmoil, which hurt revenue & profits at its peers.  Expenses fell 18% to $10.7B from a year earlier, while revenue slid 7.8% to $18.5B, excluding accounting adjustments.  That’s a bit less than the estimate of $18B.  Trading revenue declined 10% on a slump in earnings from fixed-income products, worse than the roughly 5% drop signaled last month.  That total excludes a valuation adjustment in the equities business that was booked during Q3.  “The quarter had more than its fair share of volatility and our results speak to the resilience of our franchise globally,” CFO Corbat said.  Trading activity has picked up in Oct compared with the last few weeks of Q3 but it’s too soon to develop an outlook for the rest of the year.  Legal expenses dropped 76% to $376M from a year earlier, while repositioning charges plummeted even faster.  The stock went up 2.25.  If you would like to learn more about Citi, click on this link:

Citigroup Beats Estimates as Cost Cuts Outpace Revenue Drop

Citigroup (C)

New York Federal Reserve pres William Dudley reiterated his view that interest rates could move higher before the end of the year even as the economy appears to be slowing.  Dudley said the Fed could move on interest rates if the economy performs as he has forecasted.  In other words, if the labor market continues to strengthen & inflation starts moving higher toward the Fed’s 2% target rate.  Dudley & a handful of very influential Fed policy makers including Chair Janet Yellen & Vice Chair Stanley Fischer have refused to rule out a 2015 liftoff despite a rash of less-than-stellar economic reports in recent weeks.  Meanwhile, other members of the policy-setting FOMC, including Chicago Fed pres Charles Evans, have spoken publicly in favor of delaying a rate hike until 2016.  Evans has said twice this month that he’s not convinced inflation will move higher as quickly as some of his colleagues have forecast.  The Fed seemed all set to raise rates at its Sep meeting until concerns for a slowdown in Chinese economic growth threw off those plans.  A Dec liftoff was then forecast, but now that’s been thrown into doubt based on a handful of weak domestic reports, not least an extremely disappointing Sep jobs report.

Fed's Dudley: Rate Hike Could Come This Year

Nike, a Dow stock, sprinted to a record high following the sportswear giant’s declaration that annual revenue will hit $50B by fiscal-year 2020.  The company’s guidance would reflect a 63% increase over the last fiscal year, meaning NKE expects stronger sales growth over the next 5 years compared to the previous 5 years.  Its women’s business will drive that growth by nearly doubling in size & CEO Mark Parker cited the expansion of the brand, while e-commerce is on pace to book sales of $7B in 5 years, up from $1B this year.  NKE & its competitors have capitalized on a growing market for athletic apparel & gear.  The stock shot up 2.95.  If you would like to learn more about NKE, click on this link:

Nike Shares Sprint to Record High

Nike (NKE)

With today's gain, Dow is back in the black for this week & extended its winning ways from last week.  Earnings expectations for stocks are not high, giving an edge on beating expectations.  However many times the beats have more to do with accounting adjustments & other factors, not tied to rising revenue.  For the time being, the bulls have taken control of the stock market.  The gov shutdown is haunting the market & some Reps are ready & willing to make it happen when the deadline arrives in a couple of weeks.  These are tense times for stocks.

Dow Jones Industrials

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