Monday, February 8, 2016

Market decline led by tech and oil falling below $30

Dow dropped 177 (but above the lows), decliners over advancers 4-1 & NAZ sank 79.  The MLP index tumbled 20+ to the 219s & the REIT index fell 8+ to the 296s.  Junk bond funds remained weak (typically falling over 1%) & Treasuries had a strong rally with the yield on the 10 year Treasury below 1.74%.  Oil fell back into the 29s & gold is pushing towards 1200 on strong buying.

AMJ (Alerian Index tracking fund)

CLH16.NYM....Crude Oil Mar 16....29.87 Down ...1.02  (3.3%)

Live 24 hours gold chart [Kitco Inc.]

US stocks tumbled, with the S&P 500 Index extending its 2-day drop past 4%, as waves of selling pushed bank shares to the lowest since 2013 & left the NAZ within spitting distance of a bear market.  With today's fall brings its slide from an all-time high in Jul to 19.2%.  The S&P 500 dropped 2.6%, heading toward its lowest level since Apr 2014.  West Texas Intermediate crude futures sank 3.9%, below $30 a barrel.  A rout in software & internet companies continued after NAZ on Fri suffered its biggest slump since 2011.   While the S&P valuation of 15.3X the forecast earnings of its members is in line with the average of the past 5 years, the measure has plunged 13% since the start of the year & is at the lowest level since Oct 2014. The Volatility Index (VIX) jumped 17% today to 27, rising toward a more than 2-week high. The measure of market turbulence known as the VIX is up about 35% so far in Feb, the most since Aug, after rising in Jan for a 3rd straight month.  Investors have been scrutinizing earnings & economic data, on guard for any signs of weakness spilling over from China.  Gauges this week on the strength of US growth include reports on business inventories, retail sales & consumer sentiment.  Amid financial market turbulence and tepid data, investors have cut the probability they see of further interest-rate increases, pricing almost a 0% chance of the Fed raising borrowing costs in March & 6% odds in Apr, down from 17% on Fri.  With growing concern over China, oil & interest rates, market watchers have been losing their resolve in keeping bullish stock calls.

Hasbro reported its biggest jump in quarterly revenue in nearly 5 years, beating estimates by a wide margin, driven by demand for toys based on the "Star Wars: The Force Awakens" & "Jurassic World" movies.  Revenue from toys targeted at boys, which include action figures based on the 2 blockbuster films released last year, surged 35% to $569.8M in Q4.  Industry-wide sales of Star Wars-licensed merchandise totaled about $700M in the US in 2015.  Revenue from its games category, which includes Monopoly board games, increased 11% after 2 straight qtrs of decline.  The revenue decline in the toys for girls category slowed to 17% from more than 20% in the prior 2 qtrs.  EPS rose 3.4% to $1.39.  Net revenue rose 12.8% to $1.47B & excluding the impact of a strong $, revenue surged 23%.  Analysts had expected EPS of $1.30 on revenue of $1.37.  The company also raised its quarterly div to 51¢ from 46¢.  The stock went up 1.01 in a down market.  If you would like to learn more about HAS, click on this link:

Hasbro posts strongest growth in nearly 5 years

Hasbro (HAS)

India sees its growth exceeding estimates to overtake a slowing China.  A pace Prime Minister Narendra Modi’s gov will be under pressure to sustain when it presents its budget on Feb 29.  GDP should expand 7.6% in the year thru Mar, compared with 7.2% a year earlier, the Statistics Ministry said.  The estimate was for a growth of 7.4%.  China grew 6.9% in 2015, while Russia contracted 3.7% & Brazil is forecast to shrink 3.7%.  India's expansion slowed to 7.3% in Oct-Dec from 7.4% the previous qtr.  Modi's caught between the urge to boost spending in an economy that’s showing mixed signs of strength, & the need to curb expenditure to meet budget deficit targets & win more rate cuts from the central bank.  Indian stocks, bonds & currency saw their worst Jan since 2011, partly weighed down by concerns about fiscal slippage.  History shows that higher fiscal spending in India is accompanied by stronger growth but also higher inflation.  While economists see Modi meeting his 3.9% of GDP budget deficit target for the current fiscal year, they estimate 3.6% in the next year instead of the 3.5% previously projected.  Meanwhile a deadlock in parliament has kept Modi’s administration from pushing thru key economic bills including a goods-and-services tax, known as GST.  The levy will replace more than a dozen taxes & boost revenue & growth through compliance, lawmakers have said.

India Sees Growth Overtaking China at 7.6% in Year Ending March

Bargain hunting late in the day limited damage.  But it was one brutal day & the bulls have not taken command of the stock market.  Dow is barley above 16k, an important level to hold or break thru, & remains down 1.4K YTD.  This is not turning out to be the kind of stock market the bulls had in mind on Jan 1.

Dow Jones Industrials

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