Tuesday, January 30, 2018

Markets fall as Treasury yields rise to their highest in more than 3 years

Dow sank 242 (but off the lows), decliners over advancers 4-1 once again & NAZ dropped 56.  The MLP index declined another 6+ to the 289s.  Junk  bond funds were sold & Treasuries drifted lower, taking yield to their highest in more than 3 years.  Oil retreated to the 64s & gold added 2 to 1347.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil64.27

GC=FGold 1,350.10

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Stocks slumped for a 2nd day, following declines in Europe & Asia, as caution crept into markets after one of the best starts to a year in recent history.  Treasury yields lingered near the highest since 2014, the $ weakened & oil dropped for a 2nd session.  The S&P 500 & the Dow opened lower after posting their biggest losses since Sep yesterday.  The Stoxx Europe 600 headed for the biggest retreat in more than a month, tracking losses for gauges from Tokyo to Sydney.  The benchmark 10-year Treasury yield set a multi-year high of 2.73%, though most European gove bonds edged higher as traders digested growth data from the region.  The € advanced alongside the ¥ & £.  Equity markets are showing signs of wariness at the end of a hectic month as surging rates on gov bonds test appetite for stocks at elevated valuations.  Investors are weighing whether stronger corp earnings, a pick-up in economic growth & optimism over US tax cuts can continue driving up prices in markets that recently touched their highest on record.  Apple (AAPL), a Dow & NAZ stock, dropped over 2% yesterday amid renewed concerns about falling demand for the iPhone X.

U.S. Stocks Drop for a Second Day

Consumer confidence increased in Jan on more upbeat expectations, according to a report from the Conference Board.  The group’s index rose to 125.4 from a revised 123.1 in the prior month.  The projection called for a Jan of reading of 123.

U.S. Consumer Confidence Index Increased to 125.4 in January

McDonald’s (MCD), a Dow stock & Dividend Aristocrat, 3 years into a dramatic turnaround effort, has left investors hungry for more.  Though the company matched estimates for US comparable sales growth last qtr, the shares slipped back today -- a sign the bar has been raised for the fast-food giant.  MCD's US strategy also has increasingly become a race to the bottom.  The chain relied more heavily on a discounting push to maintain sales in its latest qtr.   The company has touted drink specials & sandwich promotions, & more recently revamped its Dollar Menu.  That move is showing early signs of attracting more customers.  The question now is how long MCD can fuel growth by appealing to Americans' penny-pinching instincts, especially as competitors fight back.  The Golden Arches are still outshining most of the restaurant industry. Last qtr, US comparable sales climbed 4.5%, a result most chains would envy.  Globally, MCD exceeded estimates.  Its lead intl markets, a category that includes the UK & Canada, gained 6% on that basis, better than the 5% prediction.  Overall, the sales climbed 5.5%, beating the 5% estimatep.  Profit also handily beat estimates.  Excluding some items, EPS came in at $1.71, compared with the $1.59 estimate.  CEO Steve Easterbrook believes the company can stay on track by touting convenience, menu variety & affordable prices.  He's also betting that a new mobile app & the rollout of delivery service can keep customers loyal.  “We are confident that we will accelerate our momentum by capitalizing on our strong business model,” he said.  The stock fell 35¢.
If you would like to learn more about MCD, click on this link:

McDonald’s Investors Hungry for More Growth After Comeback

Trading is shaping as as another ugly day.  The Dow is having its worst decline in months.  However the Dow is up about 1500 in Jan, still very respectable.  Higher interest rates are spooking the market while Janet is meeting with her friends at the Federal Reserve.  Stocks were not meant to go straight up without selling.  So far this only qualifies as a minor correction in a strong bull market.  This analysis is subject to change if the bears come out of hiding.

Dow Jones Industrials

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