Monday, April 18, 2016

Dow goes over 18,000 on hopes for earnings

Dow gained 106 (topping 18K - see below), advancers over decliners 5-2 & NAZ rose 21.  The MLP index jumped up 2+ to the 279s & the REIT index went up 1+ to the 341s.  Junk bond funds were higher & Treasuries retreated.  Oil reduced its losses, recovering to the 41s, & gold hardly budged in price.

AMJ (Alerian MLP Index tracking fund)

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CL.NYM....Crude Oil May 16....39.55 Down ...0.81  (2.0%)

Live 24 hours gold chart [Kitco Inc.]

Stocks advanced, pushing the Dow past 18K for the first time in 9 months, while Treasuries fell & erased losses amid falling output in Kuwait.  Crude pared losses sparked by the breakdown of talks aimed at capping output, as a strike reduced Kuwait's contribution.  Treasuries fell after a Federal Reserve pres said US economic news is “mostly favorable” & cited improvement in Europe's growth outlook.

While the failure of large oil producers to agree to a freeze in output initially sent crude lower, losses were limited amid the strike & on speculation China's slowdown is easing at the same time central banks remain ready to bolster growth.  The S&P 500 rose to the highest since Dec 2 & the Dow went over 18K, the highest level since Jul 21.  Energy producers surged, erasing a loss.  Corp earnings season is now picking up speed.

Dow Breaks 18,000 for First Time in Nine Months

US economic conditions are "mostly favorable" yet the Federal Reserve remains cautious in raising interest rates because threats loom, NY Fed pres William Dudley said.  Dudley, a permanent voter on rates & a close ally of Janet Yellen, repeated his views in a speech, saying "policy adjustments are likely to be gradual and cautious, as we continue to face significant uncertainties and the headwinds to growth from the financial crisis have not fully abated."  He repeated he was confident that too-low inflation would rise to a 2% goal over the next few years, & that "economic conditions have finally warranted the start of U.S. monetary policy normalization."

U.S. Economy Looks Good but Fed Still Cautious: Dudley

PepsiCo, a Dividend Aristocrat, reported a better-than-expected quarterly profit as the company trimmed costs & demand rose in North America for its snacks, including Cheetos & Lay's chips.  With sliding demand for fizzy sodas, its snacks business has offset much of the impact from a shift in consumer preference to drinks such as teas & fruit juices.  "We broadened our beverage portfolio to lessen our reliance on colas..."  PEP said, adding that just 12% of revenue now comes from colas, & less than 25% from fizzy drinks globally.  Sales in the North America snacks business, which accounts for more than ¼ of its total revenue, rose nearly 3% in Q1.  Cost of sales fell 6.4%, with the company benefiting from lower prices of raw materials, including sugar.  However, total sales fell 3% to $11.86B, the 6th straight qtr of decline, hurt by a strong $ & weakness in some markets including Latin America & Europe.  Sales slumped more than 26% in Latin America, partly due to the exclusion of its Venezuelan business.  Sales fell 9.1% in Europe & sub-Saharan Africa.  EPS declined to 64¢, mainly due to an impairment charge of $373M related to its interest in Tingyi-Asahi Beverages.  Excluding items, EPS was 89¢, beating the estimate of 81¢.  Excluding the impact of currency movements, acquisitions & divestitures, sales rose 3.5%.  The stock lost a nickel.  If you would like to learn more about PEP, click on this link:

PepsiCo Shares Rise After 1Q Results

Pepsico (PEP)

Stocks had another good day.  Dow is up an amazing 2K+ since the low in mid Feb with only a few minor pauses along the way.  Economic fundamentals have not supported this rise.  In fact it is difficult to find anything to support the advance.  The Fed continues its policy to find any excuse not to raise interest rates.  That's always a plus.  Oil has not been driving the advance for weeks as it is maxed out around 40.  Dow is feeling great, less than 300 from setting a new high.  The only thing to get in the way of even higher values in the overbought market is earnings.  Early results suggest that beating lowered estimates is "good enough" to keep this advance going.  Those thoughts may not last.

Dow Jones Industrials


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