Dow gave up 13, advancers over decliners 3-2 & NAZ fell 24. The MLP index lost a fraction in the 339s & the REIT index added 4+ to the 326s. Junk bond funds were mixed to higher & Treasuries saw selling. Oil inched higher & gold had a small advance.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.19930941953663228)
Research from Deutsche Bank shows that many lower-income Americans are very optimistic about their economic future, a factor that runs contrary to the widespread narrative that the US economy isn’t ready for a rate hike. “In my view, there is a big disconnect between the current narrative in both equity and rates markets and the actual economic data,” said Torsten Slok, chief intl economist at Deutsche Bank. Slok said the high level of optimism among lower-income Americans bodes well for the US labor market. While many economists, including at the Fed, are focusing on the glaringly low labor force participation rate & stubbornly weak wage growth in recent months, Slok said the US economy is likely to reach “full capacity” in the next 12 months. He noted that an influential group of Fed members that includes Chair Janet Yellen, Vice Chair Stanley Fischer & New York Fed Chair William Dudley essentially agree with this view, maintaining their positions that a strengthening jobs market will lift wages & eventually push inflation upwards toward the Fed’s 2% target. “This economy is stronger than its reputation and for some reason many investors want to hold onto the 2009 story of ‘the economy is not good,’” Slok said.
Verizon Communications, a Dow stock, posted Q3 profit that exceeded estimates after sales promotions & tablet deals helped lure more subscribers even as smaller rivals cut prices. EPS excluding some items was 1.04, above the 1.02 estimate. VZ added 1.3M new monthly subscribers, compared with 1.5M a year earlier, topping the 1.1M projection. The reliance on promotions underscores the challenges of attracting new users in a mature market amid data giveaways and from the competition. The company introduced a free mobile-video service last month to help it expand beyond the traditional phone business. Last month, in a bid to find new growth businesses, VZ started go90, a free mobile video service with shows aimed at teens. CEO Fran Shammo, in an interview, declined to say how many subscribers the service has but said it was “north” of the initial 25K the company had said it signed on in the first week. The go90 service is intended to be advertising-supported & use ad-insertion technology acquired with the $4B purchase of AOL. Sales increased 5% to $33.2B, topping the $32.9B estimate. The carrier has moved away from heavy phone discounts & 2-year contracts in favor of phone financing that spreads the full price of a new phone over 2 years of monthly payments. In the wake of the change, service revenue fell 4.1% to $17.6B from a year earlier due to price cuts, while phone revenue jumped 72% to $4.3B. The average wireless monthly phone bill fell 5% to $152.38 from $161.24 a year earlier as more customers switch from combined phone & service contracts to separate handset financing plans & monthly service payments. Analysts predicted $152.57. The company is relying heavily on tablets to add new subscribers. Last qtr, it gained 818K tablet customers, compared with 430K phone customers. Analysts expected additions of 813K & 317K, respectively. Landline revenue, which accounts for about 1/3 of annual sales, declined 2.3% to $9.4B, continuing a long trend of declines. Wired home & business lines represent about a 1/3 of the company’s total sales. It adjusted its financial forecast twice this year. Last month, CEO Lowell McAdam said profit could plateau next year at 2015 levels, & that sales growth would restart in 2017. In Jul, VZ cut its full-year revenue outlook to at least 3% from a previous forecast of at least 4%. The stock rose 54¢. If you would like to learn more about VZ, click on this link:
club.ino.com/trend/analysis/stock/VZ?a_aid=CD3289&a_bid=6ae5b6f7
Harley-Davidson will lay off employees & damped its shipment guidance for the year as Q3 earnings dropped more than expected on slower retail sales. The motorcycle maker now expects to ship 265-270K motorcycles to dealers & distributors world-wide in 2015, which is about flat to down 2% from 2014. The company had previously expected shipments of 276-281K. In Q4, the company expects to ship 47-52K motorcycles, compared with 47,157 motorcycles shipped in the year-ago period. "The third quarter did not unfold as we expected," said CEO Matt Levatich. The company expects expenses of about $30-35M in Q4 to account for layoffs & related costs (but didn't outline how many jobs it planned to cut). For the qtr, HOG reported a profit of $140M, down from $150M, as EPS were unchanged from a year earlier at 69¢, helped by a lower share count. Revenue edged up 1% to $1.14B. Analysts had forecast earnings of 78¢ on $1.2B in revenue. In the US, Q3 retail sales of Harley motorcycles were down 2.5%. Retail sales outside the US, where it hopes to get much of its long-term growth, fell 1%. Q3 retail sales of Harley motorcycles rose 2.4% in the Europe, Middle East & Africa region & gained 5% in Asia, but declined 11% in Latin America. The stock tumbled 7.80 (14%). If you would like to learn more about HOG, click on this link:
club.ino.com/trend/analysis/stock/HOG?a_aid=CD3289&a_bid=6ae5b6f7
Biotechs were a drag for the NAZ & IBM's (IBM) weak earnings report weighed heavily on the markets. Expectations for corp earnings were not optimistic & there have been very few pleasant surprises so far. Next week the FOMC has its big meeting which will be followed by the first estimate for GDP growth for Q3. In the meantime, nervousness will limit major moves in the stock market.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CLX15.NYM | ....Crude Oil Nov 15 | ....45.62 |  ...0.27 | (0.6%) |
Research from Deutsche Bank shows that many lower-income Americans are very optimistic about their economic future, a factor that runs contrary to the widespread narrative that the US economy isn’t ready for a rate hike. “In my view, there is a big disconnect between the current narrative in both equity and rates markets and the actual economic data,” said Torsten Slok, chief intl economist at Deutsche Bank. Slok said the high level of optimism among lower-income Americans bodes well for the US labor market. While many economists, including at the Fed, are focusing on the glaringly low labor force participation rate & stubbornly weak wage growth in recent months, Slok said the US economy is likely to reach “full capacity” in the next 12 months. He noted that an influential group of Fed members that includes Chair Janet Yellen, Vice Chair Stanley Fischer & New York Fed Chair William Dudley essentially agree with this view, maintaining their positions that a strengthening jobs market will lift wages & eventually push inflation upwards toward the Fed’s 2% target. “This economy is stronger than its reputation and for some reason many investors want to hold onto the 2009 story of ‘the economy is not good,’” Slok said.
Lower-Income Consumers Optimistic for Future
Verizon Communications, a Dow stock, posted Q3 profit that exceeded estimates after sales promotions & tablet deals helped lure more subscribers even as smaller rivals cut prices. EPS excluding some items was 1.04, above the 1.02 estimate. VZ added 1.3M new monthly subscribers, compared with 1.5M a year earlier, topping the 1.1M projection. The reliance on promotions underscores the challenges of attracting new users in a mature market amid data giveaways and from the competition. The company introduced a free mobile-video service last month to help it expand beyond the traditional phone business. Last month, in a bid to find new growth businesses, VZ started go90, a free mobile video service with shows aimed at teens. CEO Fran Shammo, in an interview, declined to say how many subscribers the service has but said it was “north” of the initial 25K the company had said it signed on in the first week. The go90 service is intended to be advertising-supported & use ad-insertion technology acquired with the $4B purchase of AOL. Sales increased 5% to $33.2B, topping the $32.9B estimate. The carrier has moved away from heavy phone discounts & 2-year contracts in favor of phone financing that spreads the full price of a new phone over 2 years of monthly payments. In the wake of the change, service revenue fell 4.1% to $17.6B from a year earlier due to price cuts, while phone revenue jumped 72% to $4.3B. The average wireless monthly phone bill fell 5% to $152.38 from $161.24 a year earlier as more customers switch from combined phone & service contracts to separate handset financing plans & monthly service payments. Analysts predicted $152.57. The company is relying heavily on tablets to add new subscribers. Last qtr, it gained 818K tablet customers, compared with 430K phone customers. Analysts expected additions of 813K & 317K, respectively. Landline revenue, which accounts for about 1/3 of annual sales, declined 2.3% to $9.4B, continuing a long trend of declines. Wired home & business lines represent about a 1/3 of the company’s total sales. It adjusted its financial forecast twice this year. Last month, CEO Lowell McAdam said profit could plateau next year at 2015 levels, & that sales growth would restart in 2017. In Jul, VZ cut its full-year revenue outlook to at least 3% from a previous forecast of at least 4%. The stock rose 54¢. If you would like to learn more about VZ, click on this link:
club.ino.com/trend/analysis/stock/VZ?a_aid=CD3289&a_bid=6ae5b6f7
Verizon Tops Profit Estimates With Solid Subscriber Gains
Verizon (VZ)
Harley-Davidson will lay off employees & damped its shipment guidance for the year as Q3 earnings dropped more than expected on slower retail sales. The motorcycle maker now expects to ship 265-270K motorcycles to dealers & distributors world-wide in 2015, which is about flat to down 2% from 2014. The company had previously expected shipments of 276-281K. In Q4, the company expects to ship 47-52K motorcycles, compared with 47,157 motorcycles shipped in the year-ago period. "The third quarter did not unfold as we expected," said CEO Matt Levatich. The company expects expenses of about $30-35M in Q4 to account for layoffs & related costs (but didn't outline how many jobs it planned to cut). For the qtr, HOG reported a profit of $140M, down from $150M, as EPS were unchanged from a year earlier at 69¢, helped by a lower share count. Revenue edged up 1% to $1.14B. Analysts had forecast earnings of 78¢ on $1.2B in revenue. In the US, Q3 retail sales of Harley motorcycles were down 2.5%. Retail sales outside the US, where it hopes to get much of its long-term growth, fell 1%. Q3 retail sales of Harley motorcycles rose 2.4% in the Europe, Middle East & Africa region & gained 5% in Asia, but declined 11% in Latin America. The stock tumbled 7.80 (14%). If you would like to learn more about HOG, click on this link:
club.ino.com/trend/analysis/stock/HOG?a_aid=CD3289&a_bid=6ae5b6f7
Harley-Davidson to Cut Jobs as 3Q Profit Falls
Harley-Davidson (HOG)
Biotechs were a drag for the NAZ & IBM's (IBM) weak earnings report weighed heavily on the markets. Expectations for corp earnings were not optimistic & there have been very few pleasant surprises so far. Next week the FOMC has its big meeting which will be followed by the first estimate for GDP growth for Q3. In the meantime, nervousness will limit major moves in the stock market.
Dow Jones Industrials
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