Wednesday, March 23, 2016

Markets slide back on lower oil prices

Dow gave up 22, decliners over advancers 5-2 & NAZ was 23 lower.  The MLP index declined 1+ to the 266s & the REIT index was down 1 to the 331s.  Junk bond funds were a little lower & Treasuries edged higher.  Oil fell below 41 & gold tumbled.

AMJ (Alerian MLP Index tracking fund)

CL.NYM...Crude Oil May 16...40.95 Down .....0.50  (1.2%)
GC.CMX...Gold Apr 16......1,221.60 Down ...27.00  (2.2%)

Federal Reserve Bank of St. Louis pres James Bullard said a decline in joblessness below the natural rate may force policy makers to raise rates faster in the future.  “We’re in reasonably good shape” with regard to monetary policy but “the odds that we will fall somewhat behind the curve have increased modestly,” Bullard, said.  “We are going to get some overshooting here in the relatively near term” on the non-accelerating inflation rate of unemployment “that might cause the committee to have to raise rates more rapidly later on.”  Last week Fed officials halved projections for how many times it would hike this year from 4 times in Dec after volatility in financial markets & weakening global growth clouded the US economic outlook & they lowered the forecasts for longer-run unemployment to 4.8%.  Bullard sees joblessness falling to 4.5% this year.  The rate held at an 8-year low of 4.9% last month.  PCE inflation, the Fed preferred gauge, as well as core PCE, the rate that excludes volatile components such as food & energy, will be over 2% in 2017, he said.  Bullard said he’s getting “increasingly concerned” about giving forward guidance thru projections of how fast interest rates will rise, also referred to as the dot plot.  The forecasts probably contributed to the market sell-off at the start of the year, & “I’ve even thought about dropping out unilaterally from the whole exercise,” he added.  Negative interest rates are not a “very likely option” for the Fed in case more stimulus will be needed in the future, Bullard said.

Bullard Says Jobless Decline May Warrant Faster Rate Hikes Later

Nike, a Dow stock, fell after its annual forecast missed estimates, raising concerns about growth.  Sales will increase by a high-single-digit percentage during the next fiscal year, the company said.  Analysts had projected a rate of about 10%.  Earnings will rise in the low teens, NKE said, compared with an estimate for growth of about 15%.

Revenue missed estimates in fiscal Q3, hurt by currency headwinds.  Sales rose 7.7% to $8.03B & analysts estimated $8.2B. Excluding currency shifts, sales would have gained 14%.  Futures orders in emerging markets, an indicator of sales in those economies, were up 14%, excluding currency effects.  Analysts had estimated 16.1%.  Even as sales grew more slowly than predicted, profit beat estimates.  EPS climbed to 55¢, helped by a lower tax rate from more earnings coming outside the US, where levies are lower.  Analysts predicted 49¢.  The results marked the 15th straight qtr that NKE has beaten profit projections.  In North America, futures orders rose 10%, excluding currency effects & analysts estimated 11.6%.  The company said it's making "good progress" on reducing excess inventory in the region by selling items through its outlet stores & other discount chains.  They grew 17% worldwide by that measure, exceeding a projection of 16.1%.  The stock sank 2.77.  If you would like to learn more about NKE, click on this link:

Nike's Tepid Forecast Disappoints Investors

Nike (NKE)

Ford said it could still earn a profit even if industry sales plunged 30% in one year.  “We were in such bad shape back then,” CFO Bob Shanks said.  “We are a much different company now.”

Ford could now break even financially if annual US auto sales fell to 11M, a 37% decline from last year's record 17.5M cars & light trucks.  If sales didn't rebound the next year, profit would actually improve.  In such a market collapse, Ford could cut its costs $3B in the first year, with $1B coming from its manufacturing operations.  “We would adjust production to fit demand and do that very, very quickly,” Shanks said.  As evidence of how Ford is more nimble now, Shanks pointed to the moves the company has made to adjust factory output to a decline in demand for fuel-efficient small cars.  Ford plans to maintain its div, keep the investment-grade credit rating & continue to invest in new models in the next downturn.  The company was helped by recent credit upgrades, which “gives us a little bit of extra cushion,” Shanks said.  The stock slid back a dime.  If you would like to learn more about Ford, click on this link:

Ford Says It Could Make Money If U.S. Auto Sales Fell 30%

Ford (F)

Stocks are digesting the recent major advance.  The terrorist attack in Brussels is not bringing on selling.  In fact, gold fell sharply today.  Q1 is winding down with little excitement in the stock market.  Dow remains in the black YTD

Dow Jones Industrials

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