Friday, November 6, 2015

Markets retreat on fears of an increase in interest rates

Dow rose 46, decliners over advancers 2-1 & NAZ added 19.  The MLP index sank 5+ to the 323s & the REIT index plunged 9+ to the 316s.  Junk bond funds sold off  & Treasuries pulled, sending yields to the highest levels in more than a year.  Oil dropped to levels not seen in more than 2 months & gold is well below the important support level of 1100.

AMJ (Alerian MLP Index tracking fund)

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CLZ15.NYM....Crude Oil Dec 15....44.38 Down ...0.82  (1.8%)

Live 24 hours gold chart [Kitco Inc.]

Obama has rejected Canadian energy giant TransCanada's application to build the Keystone XL pipeline, saying that the pipeline was not in the US national interest.  "The State Department has decided the Keystone XL pipeline would not serve the interests of the United States. I agree with that decision," Obama said.  It comes just days after the State Dept refused to agree to TransCanada’s request to suspend the review process on the controversial project, which has seen enormous opposition from environmental groups.  Keystone would snake from Canada's tar sands thru Montana, South Dakota & Nebraska, then connect with existing pipelines to carry more than 800K barrels of crude oil a day to specialized refineries along the Texas Gulf Coast.  Dems & environmental groups latched onto Keystone as emblematic of the type of dirty fossil fuels that must be phased out.  Reps, Canadian politicians & the energy industry touted what they said were profound economic benefits, thousands of construction jobs & $B injected into the economy. They argued transporting crude by pipeline would be safer than alternatives like rail, & charged Obama with hypocrisy for complaining about the lack of investment in US infrastructure while obstructing an $8B project. 

Obama Rejects Keystone XL Pipeline Bid

Walt Disney, a Dow stock, profit rose 7.3% in the latest qtr, helped by stronger revenue in its media networks & resorts businesses.  Adjusted profit easily beat expectations, while revenue came in just below consensus.  Operating earnings at the cable networks, its largest business, grew 30% to $1.66B, which DIS attributed to an increase at ESPN &, to a lesser extent, A&E Television Networks & the Disney Channels.  Revenue rose 12% $4.25B.  Broadcasting operating income rose 0.6% to $164M, while revenue increased 9.7% to $1.58B.  EPS was 95¢, up from 86¢ a year earlier.  Excluding a tax asset write-off & other items, EPS rose to $1.20 from 89¢.  Revenue increased 9.1% to $13.51B.  Analysts had forecast EPS of $1.14 & revenue of $13.57B.  The film studio, which gets a cut of revenue from products based on its movies, posted revenue edged up to $1.783B from $1.778B.  Operating earnings more than doubled to $530M.  In the latest period, consumer products revenue grew 11% to $1.19B, while operating profit improved 10% to $416M.  At the parks & resorts segment, profits rose 7.4% to $738M.  In recent qtrs, results have been buoyed by sales of merchandise tied in with its hit movie "Frozen," which was released in late 2013.  The stock rose 2.67.  If you would like to learn more about DIS, click on this link:

Disney Shares Drop After Mixed Fiscal 4Q Results

Walt Disney (DIS)

Cigna logged better-than-expected earnings in Q3 amid favorable medical & operating costs in the global healthcare segment & customer growth.  Revenue, however, missed expectations.  In response to the latest results, the company raised the low end of its annual forecast for adjusted EPS from operations to $8.40-8.60 from a previous range of $8.30-8.60.  The insurer had 14.85M total medical customers at the end of Q3, compared with 14.35M a year earlier & 14.77M in Q2.  Global health-care business, premiums & fees revenue grew 8.3% to $6.62B, driven by customer growth in its commercial and government businesses & rate actions.  Overall, EPS was $2.10, up from $2.01 a year earlier.  Excluding certain items, EPS from operations grew to an adjusted $2.28 from $2.06 a year ago.  Revenue rose 7.2% to $9.4B.  Analysts had forecast EPS of $2.20 on $9.517B revenue.  In Jul, Anthem (ANTM) agreed to buy CI for $48B.  The deal combines the 2nd & 5th largest health insurers & would create a company with a huge footprint in commercial insurance, the type of coverage provided to employers & consumers.The biggest companies are seeking more cost efficiency & scale as the health-care landscape changes because of Obamacare & other factors.  The stock went up 41¢.  If you would like to learn more about CI, click on this link:

Cigna Profit Grows, Though Top Line Misses

Cigna (CI)

The threat of the first interest rate hike by the Fed sent interest sensitive stocks down sharply.  MLPs were also hurt by rejection of the Keystone oil pipeline.  The REIT index had one of its biggest declines in history on worries about how higher interest rates will hurt their businesses where interest is typically the largest expense.  However traders are not worried.  Dow rose 250 last week & is up marginally YTD.  Not bad given all the bad news out there.

Dow Jones Industrials


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