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Friday, January 22, 2016
Higher markets take the Dow back over 16,000
Dow added 210, advancers over decliners 6-1 & NAZ rose 119. The MLP index jumped up 17+ to the 241s & the REIT index rose 8+ to the 309s. Junk bond funds were up around 2% & Treasuries sold off. Oil had a huge gain to almost 32 while the gold price did little.
American Express, a Dow stock, Q4 profit declined 38%, driven by a drop in revenue & higher expenses.
“Let
me acknowledge that the performance we’re discussing today is not what
we or you or I are accustomed to seeing from American Express,"
CEO Chenault said. “We recognize that we are operating in a
new reality." He outlined a plan to
cut costs by $1B by the end of 2017, including further
restructuring. The company took a $335M charge tied to its
enterprise growth unit in Q4 & has already shuffled
management & revamped businesses. AXP will continue to make
investments to attract customers. Revenue fell 7.6% to $8.39B,
matching the estimate.
Worldwide billed business, a measure of customer spending, rose 2% to $273.2B. The average discount rate, or the fees AXP
charges merchants, fell to 2.42% as revenue from that source
slipped 1%. Last
year, AXP said it was ending its US partnership with
Costco (COST), accounted for 20% of AXP worldwide
loans & 8 percent of customer spending. AXP expects to book a $1B gain on the sale of its
COST portfolio, which will probably be completed by mid-year. Its outlook for 2016 EPS is $5.40-5.70 & the company expects EPS of at least $5.60 in
2017. The stock fell 7.58. If you would like to learn more about AXP, click on this link: lub.ino.com/trend/analysis/stock/AXP?a_aid=CD3289&a_bid=6ae5b6f7
IBM, Dow stock, tumbled to its lowest in more than 5 years this week after a disappointing EPS forecast. The shares dropped to $121.86, around the same level
as when previous CEO Sam Palmisano forecast EPS of $20 by 2015. That target, buoyed by stock
repurchases, was never reached.
From
2010-2014, IBM spent almost $70B on share repurchases to boost EPS. Last year, the company
moved away from the buyback strategy after CEO Ginni Rometty abandoned
the share target in 2014. CFO Officer Martin Schroeter said that IBM spent $4.6B on share repurchases in 2015,
compared with $13.7B the previous year, the lowest amount
in more than a decade. The stock lost 41¢. If you would like to learn more about IBM, click on this link: lub.ino.com/trend/analysis/stock/IBM?a_aid=CD3289&a_bid=6ae5b6f7
General Electric, a Dow stock, reported growth in its core earnings &
revenue for Q4, though profit in its industrials
business slid. "GE executed well in a slow-growth
environment," said CEO Jeff Immelt. He noted that the first few weeks of the year have been "especially
volatile." GE is in the midst of a yearslong transformation to
refocus the conglomerate on its core industrial businesses like
aviation & power. In Q4, GE closed on its acquisition
of Alstom's energy assets, bulking up its core power equipment
business. GE also split out its renewable energy businesses, including
new acquisitions from Alstom, into a stand-alone business unit.
Meanwhile, GE continues to wind down its lending business that has long
been a distraction for investors who believed it dragged on the
company share price. GE has said it has sale agreements for $157B of roughly $200B in finance assets up for sale. Overall in Q4 EPS was 64¢, compared with 51¢ a year earlier. Profit in the qtr
included the $175M breakup fee it won after its deal to sell its
appliance unit to Sweden's Electrolux collapsed in Dec. Earlier
this month, GE struck a new deal to to sell that business to Chinese
manufacturer Haier Group for $5.4B. Overall revenue edged up 1.4% to $33.9B.
Excluding the finance businesses being wound down, EPS was 52¢, while revenue came in its $33.8B. Analysts had forecast EPS of 49¢ & revenue of $35.96B excluding those businesses. The industrial operating profit fell 6% to $5.1B, excluding restructuring charges & orders were up 1% on an
organic basis. The stock lost 35¢. If you would like to learn more about GE, click on this link: lub.ino.com/trend/analysis/stock/GE?a_aid=CD3289&a_bid=6ae5b6f7
This was a relief rally & the oversold high sector had an unusually good day. Traders were relieved the stock markets could find some buyers. But all is not well. The volatility index had been settling in the low teens during the good times last year. Now the index is about 23 (roughly double). 3 Dow stocks just reported disappointing earnings. Next week will tell us if the mini rally this week has legs. Dow will have to go up a staggering 1.4K then to break into the black for Jan. Short of that, the Jan signal for the rest of the year will be negative.
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.3101373507538334)
...2.42 
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