Friday, May 6, 2016

Markets advance on hopes the next interest rate hike will be delayed

Dow gained 79, advancers over decliners 3-2 & NAZ added 19.  The MLP index fell pennies in the 293s & the REIT index went up 2+ to the 347s.  Junk bond funds inched higher & Treasuries pulled back as stocks rose.  Oil climbed in the 44s & gold had a big advance (see below).

AMJ (Alerian MLP Index tracking fund)

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CLM16.NYM....Light Sweet Crude Oil Futures,J....44.70 Up ...0.38 (0.9%)

Live 24 hours gold chart [Kitco Inc.]

Household borrowing surged in Mar at the fastest pace since 2001 as financing for automobiles picked up outstanding credit-card debt soared.  The $29.7B increase (annualized 10%) exceeded the highest estimate & followed a revised $14.1B gain the prior month, according to the Federal Reserve.  Revolving credit, which includes credit-card spending, posted the biggest annualized advance in 16 years.  With employers still hiring at a decent clip, consumers may be growing more comfortable carrying bigger credit-card balances & taking out car loans.  The pickup in Mar helped drive up household borrowing in Q1 to a 6.4% annualized pace, compared with a 6.2% rate in Q4-2015.  Revolving debt jumped $11.1B (annualized 14.2%) after a $2.9B increase.  Non-revolving debt, which includes loans for education & automobile & mobile home purchases, increased $18.6B, the most since Sep.  In Q1, student loans outstanding climbed $31.7B & lending for auto purchases increased $13.5B.  The forecast called for a $16B rise in total consumer credit.

Consumer Borrowing in U.S. Increases at Fastest Pace Since 2001

Gold finished sharply higher after a weaker-than-expected jobs report heightened expectations that the Federal Reserve would keep interest rates lower for longer.  Jun gold gained $21.70 (1.7%), to settle at $1294, snapping a 3-session string of losses & registering a modest 0.3% weekly gain.  Lower interest rates are bullish for assets that don't offer a yield like gold.

Gold Soars After Jobs Report, Logs Weekly Gain

Oil extended gains after data from Baker Hughes showed that the number of active U.S. rigs drilling for crude fell for a 7th straight week.  The oil rig count was down by 4 to 328 & the total US rig count fell 5 to 415 rigs.

U.S. Weekly Oil-rig Count Falls a 7th Straight Week: Baker Hughes

The New York Times reported Q1.  It enjoyed solid growth in digital subscribers, but lower advertising sales weighed on the company's results.
Metric Q1 2016 Q1 2015 Growth (YOY)
Revenue $379.515 million $384.239 million (1.2%)
Net loss ($8.271 million) ($14.262 million) N/A
Net loss per share ($0.05) ($0.09) N/A

Total revenue fell 1.2% year over year to $379.5M, as a 6.8% decline in advertising revenue negated a 2.4% rise in circulation revenue.  Circulation revenue grew as digital subscription sales & a price increase for home delivery of The New York Times more than offset a decline in the number of print copies sold.  NYT added 87K paid subscribers to its digital-only subscription products.  Digital-only subscribers totaled 1357K at the end of Q1, a 23% increase from the prior-year period.  That helped to drive a 14.2% year-over-year rise in circulation revenue from digital-only subscription products to $54.2M.  "The rate at which we are adding digital subscriptions continues to accelerate," said CEO Mark Thompson.  Still, declining advertising sales remain challenge.  Print advertising revenue fell 9% to $97.9M.  Digital advertising revenue also weakened, declining 1.3% to $41.8M.  "We had a more challenging quarter in both print and digital advertising in large part due to conditions impacting the entire advertising marketplace," said Thompson.  In Q2, management expects total circulation revenue to increase, & total advertising revenue to decrease, at rates similar to that in Q1.  Additionally, operating costs are projected to increase in the "mid-single digits" on a year-over-year basis as the company streamlines its intl print operations & continues to invest in its digital growth initiatives. The stock was off 20¢.  If you would like to learn more about NYT, click on this link:

The New York Times Co. Revenue Falls on Weak Advertising Sales

New York Times (NYT)

Stocks closed the day higher, but Dow had a small loss this week.  The chart below shows Dow has been trading sideways in 2016.  Economic fundamentals remain weak & Q1 earnings are drab.  The bulls are hoping that this data will give the Fed an excuse to leave the interest rates alone for awhile (as has been the case for a decade).

Dow Jones Industrials


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