Friday, October 30, 2015

Markets fluctuate on earnings and consumer confidence data

Dow fell 92, advancers were slightly ahead of decliners & NAZ lost 20.  The MLP index went up 2+ to over 330 & the REIT index fell 2+ to the 323s.  Junk bond funds crawled higher & Treasuries  rose.  Oil went up to the 46s while gold fell back.

AMJ (Allerian MLP Index tracking fund)

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CLZ15.NYM....Crude Oil Dec 15....46.82 Up ...0.76 (1.7%)

Live 24 hours gold chart [Kitco Inc.]

Chevron, a Dow stock & Dividend Aristocrat, said it will cut 6-7K jobs & pare its capital spending by 25% next year, as profit tumbled in Q3.  Still, results fell less than expected.  As of  year-end 2014, CVX had about 65K employees.  The company expects capital spending of $25-28B in 2016, down 25% from this year's budget & it expects to cut spending further in 2017 & 2018, to around $20-24B.  For the qtr, EPS fell to 1.09, down from 2.95 a year earlier.  Revenue fell 37% to $34.3B.  Analysts expected 76¢ in EPS on $29.7B in revenue.  A 15% reduction in capital spending to $7.97B helped prop up earnings in the period.  Foreign currency effects also added $394M, up from $366M a year earlier.  The company eked out a $59M profit in its exploration & production segment, down from a profit of $4.65B a year earlier.  The US segment swung to a loss of $603M from a profit of $929M a year earlier.  Its average price for a barrel of crude oil & natural gas liquids was $42, down from $87 a year ago.  The average price for natural gas was $1.96 per thousand cubic feet, down from $3.46 in the prior-year.  Refining, marketing & chemical operations (downstream) earnings jumped 59% to $2.21B.  Higher margins on refined products helped drive growth.  CVX has profits that are better insulated than most oil producers because it also makes money from refining the fuel into gasoline & diesel.  The lower-cost crude has helped its refinery businesses improve profit margins.  The stock rose 99¢.  If you would like to learn more about CVX, click on this link:

Chevron to Cut Up to 7K Jobs

Chevron (CVX)

CVS Health reported better-than-expected quarterly net revenue, helped by strong demand for its pharmacy benefit management services & its acquisition of Omnicare.  Pharmacy same-store sales grew 4.6% in Q3.  The company processed 229M claims in its pharmacy benefits business, an increase of 9.3%.  The business was boosted by more specialty pharmacy claims.   CVS expanded its specialty pharmacy business, which provides drugs for expensive chronic conditions, with its $10B acquisition of Omnicare in Aug.  Omnicare also supplies prescription medicines to nursing & other healthcare facilities.  EPS rose to 1.11 from 81¢ last year.  Excluding items, EPS was 1.28.  Net revenue rose 10.3% to $38.6B.  Analysts on expected EPS of 1.29 on revenue of 37.89B.  The stock sank 5.02.  If you would like to learn more about CVS, click on this link:

CVS Health 3Q Revenue Beats Estimate

CVS Health (CVS)

Weyerhaeuser EPS fell to 35¢, from a year-earlier EPS of 2.15.  Q3 of 2014 included post-tax gains of $975M from discontinued operations & special items, primarily related to the divestiture of Weyerhaeuser Real Estate.  In the latest qtr, sales fell nearly 5% to $1.8B from $1.92B a year earlier.  Analysts expected EPS of 27¢ on sales of $1.833B.  WY also raised its quarterly div 7% to 31¢ & said it had completed a $700M share repurchase plan.  The company also authorized a new $500M share repurchase program.  Net sales for the timberlands segment were $326M, down $10M from the preceding qtr.  The company expects comparable earnings in Q4 from the segment.  WY expects lower earnings from its cellulose fibers segment in Q4 & also expects lower average pulp sales realizations, increased scheduled maintenance & seasonally higher fiber costs.  It also expects significantly lower earnings from its wood products segment in the fourth Q4.  The stock went up 17¢.  If you would like to learn more about WY, click on this link:

Weyerhaeuser 3Q Net Income Falls

Weyerhaeuser (WY)

Stocks bobbed around with little being decided.  The bulls are talking up a year-end rally which is far from clear given inconsistent economic data.  Oct was the best month for stocks in 4 years, not to mention one of the best in history.  Dow needs to go up another 160 to break into the black YTD & that may be difficult to achieve.

Dow Jones Industrials


Markets slide lower on weak economic data

Dow pulled back 6, decliners slightly ahead of advancers & NAZ was off all of 2.  The MLP index fell back fractionally in the 327s & the REIT index lost 2 to 324.  Junk bond funds were mixed & Treasuries rose higher.  Oil is down in the 45s & gold also saw selling.

AMJ (Alerian MLP Index tracking fund)

CLZ15.NYM....Crude Oil Dec 15...45.91 Down ...0.15  (0.3%)

GCX15.CMX...Gold Nov 15.....1,142.80 Down ...4.40  (0.4%)

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Household spending rose less than forecast in Sep, showing the biggest part of the US economy ended a strong qtr on a weak note.  Purchases increased 0.1%, the smallest gain since Jan, after rising 0.4% in Aug, according to the Commerce Dept.  The forecast called for a 0.2% advance.  The first drop in prices since Jan helped take some of the sting out of a smaller-than-projected advance in incomes.  Americans pulled back amid turmoil in financial markets caused by signs that global growth was weakening.  It will take a pickup in wage growth to ensure American households remain the linchpin of economic growth heading into the all-important holiday shopping season.  Wages were unchanged, the weakest reading in 6 months, after a 0.5% advance the prior month.  That meant total incomes rose just 0.1% after a 0.4% increase in Aug.  The survey called for incomes to rise 0.2%.  A lack of inflation is helping augment weak income gains.  The Commerce Dept report showed the price index tied to consumer purchases decreased 0.1% from the prior month, the first drop since Jan.  It rose 0.2% from the same time in 2014, compared with a 0.3% in the year ended Aug.  This inflation gauge is preferred by Federal Reserve policy makers & hasn’t met the 2% goal since Apr 2012.  Stripping out the volatile food & energy categories, the price measure climbed 0.1% from Aug & rose 1.3% in the 12 months ended in Sep.

U.S. Consumer Spending Rose Less Than Forecast in September

Consumer confidence rebounded less than expected in Oct as wealthier households worried about volatility in financial markets.  The University of Michigan final consumer sentiment index for Oct came in at 90, lower than the preliminary reading of 92.1.  The final Sep reading was 87.2.  The forecast had expected the final Oct index would edge up to 92.5.  The index climbed to 96.1 as recently as Jun, but signs of slower economic growth in the US & turmoil abroad had eroded confidence.  The Sep measure was the lowest in 11 months.  "The entire October rebound from September was due to gains in confidence among lower income households, while confidence among households with incomes in the top third of the income distribution retreated a bit due to concerns about financial markets," said Richard Curtin, the survey's chief economist.  But he added that the overall impact from market gyrations has been small.  "Indeed, the average level of the Sentiment Index thus far in 2015 (93.1) is higher than any other year since 2004," he said.  US household spending is a driving force in the economy.  Consumer spending increased at a 3.2% rate in Q3, only slightly slowdown from the 3.6% advance during the prior qtr.  That helped prop up overall growth, though GDP advanced a modest 1.5% during the period.

Consumer Sentiment Unexpectedly Declines

Exxon Mobil, a Dow stock & Dividend Aristocrat, revenue & profit slid in Q3 as commodity prices tumbled, but results came in above expectations as the largest US oil company cut back on spending.  The company reported EPS of 1.01, down from 1.89 a year earlier.  Revenue fell 37% to $67.34B.  Analysts expected EPS of 89¢ on revenue of $63.75B.  Profit in the exploration & production, upstream, business plunged 79% to $1.36B, as its US division swung to a loss of $422M.  But XOM was again helped by improved profit in its downstream & chemicals divisions, which are helped by low prices for oil & gas.  In Q3, refining & marketing earnings, downstream, essentially doubled to $2.03B on higher margins.  Chemical earnings edged up to $1.23B from $1.20B a year earlier, with growth moderated by foreign exchange impacts.  XOM cut its capital spending 22% from the prior year to $7.67B.  The company has moved to conserve cash in a sign that it doesn't expect a quick rebound in crude prices.  It announced it would slash its capital spending this year & reduce its stock buybacks in the near term.  XOM plans to spend about $500M on share buybacks in Q4, matching the reduced level it targeted in Q3.  Meanwhile, the company continues to grow its production.  On an oil-equivalent basis, upstream production grew 2.3% from the prior year.  The stock rose 46¢.  If you would like to learn more about XOM, click on this link:

Exxon Results Slide Less Than Expected

Exxon Mobil (XOM)

Stocks are not doing much today.  It is difficult to make sense when much of the action is based on fund managers adjusting their books.  But Oct is shaping up as the best month in 4 years & one of the best in history even though supporting economic data has not been pretty.

Dow Jones Industrials

stock chart