Wednesday, January 24, 2018

Markets struggle after comments by Secretary Ross on China trade

Dow rose 41, decliners marginally ahead of advancers & NAZ retreated 45.  The MLP index lost 1+ to the 301s.  Junk bond funds fluctuated & Treasuries continued weak.  Oil finished the day above 65 (more below) & gold shot up 21 to 1358.

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General Electric (GE), a Dow stock, forecast further weakening of its troubled power business as it reported a $10B loss & a 5% fall in revenue in Q4, driven by previously-announced charges for insurance losses & taxes.  While the results contained no new sizeable charges, they threw into stark relief how far the industrial conglomerate had veered from its outlook less than a year ago, when former CEO Jeff Immelt predicted that sales would rise as much as 5% in 2017 & margins would expand by a full percentage point.  In fact, sales fell 1% to $122B in 2017 & operating profit margins contracted by 5.7 percentage points to 5.7% .  The results also indicated that its painful turnaround, which has sent its stock down 43% over the last year as investors fled, likely has more months to run.  GE kept unchanged its recent outlook for 2018 EPS of $1.00-1.07, which contrasts markedly with $2 a share that Immelt had promised before being replaced as CEO in Aug.  GE's weakening performance largely reflected deterioration in the power business, where profit fell 88% in the qtr.  The division, which makes & services electricity generating equipment, attributed the drop to unspecified charges & other factors.  GE said the power market remains challenging as revenue & orders also fell sharply at the power business.  The aviation, healthcare & renewable energy divisions reported rising profit, while profits in oil & gas & transportation fell.  Cash from industrial operating activities totaled $7.8B, above expectations of about $7B, & GE said its ability to generate cash is improving.  The loss totaled $10B in the qtr, compared with a profit of $3.48B a year earlier.  On a per-share basis, GE reported a loss from continuing operations of $1.15, compared with EPS of 39¢.  GE said last week it would book a $11B charge in Q4, including $6.2B for reevaluation of insurance assets (double what GE had warned last year).  Total revenue in the qtr fell to $31.4B from $33.09B.  The stock fell 44¢, hanging in above the important support level of $16.
If you would like to learn more about GE, click on this link:

GE posts $10 billion loss, sales drop as power weakens

United Technologies (UTX), another Dow stock, reported better-than-expected Q4 revenue & forecast higher profit for the full year, benefiting from higher sales of parts & maintenance for commercial jets.  The company expects 2018 adjusted EPS of $6.85-7.10, up 3-6.8% from a year earlier.  The company forecast 2018 sales of $62.5-64.0B, slightly above analysts' estimate of $63.08B.  Net sales for Q4 rose to $15.68B from $14.66B a year earlier, topping the expectation of $15.4B.  UTX is spending more money to speed up production of its fuel saving GTF engines that power Airbus' newest narrow-body jet, the A320neo, & Bombardier's CSeries aircraft.  EPS from continuing operations attributable to common share owners fell to 50¢ from $1.26 a year earlier.  The latest qtr included a 90¢ charge related to changes in the US tax law.  On an adjusted basis, EPS was $1.60.  Net sales rose to $15.68B from $14.66B a year earlier.  Analysts had expected EPS of $1.56 & revenue of $15.4B.  The stock slid back 35¢.
If you would like to learn more about UTX, click on this link:

United Tech beats revenue estimates, forecasts higher 2018 profit

Abbott Laboratories (ABT), a Dividend Aristocrat, reported a Q4 loss of $828M, thanks to a hefty $1.46B charge due to the recent US tax overhaul (versus a profit in the same period a year earlier).  The loss per-share was 48¢.  EPS, adjusted for one-time gains & costs, came to 74¢, beating expectations of 73¢.  Revenue was $7.59B, which also beat the forecast of $7.37B for the qtr.  For the year ABT reported EPS of 27¢ & revenue of $27.39B.  For the current qtr ending in Apr, ABT expects EPS of 57-59¢ & the company expects full-year EPS of $2.80-2.90 per share.  The stock advanced 2.49.
If you would like to learn more about ABT, click on this link:

Abbott reports 4Q loss, adjusted income beats estimate

US Commerce Secretary Ross concedes "potential for retribution and retaliation" from China following recent US tariffs.

US Commerce Secretary Ross concedes "potential for retribution and retaliation" from China following recent US tariffs

Oil prices fell, weighed by data showing an increase in US crude oil & gasoline inventories.  Prices were pressured by US data showing an increase in crude & gasoline stocks.  The American Petroleum Institute said yesterday crude inventories rose by 4.8M barrels in the latest week to 416.2M, after 9 weeks of drawdowns.  Gasoline stocks climbed 4.1M barrels, while refinery crude runs fell by 420K barrels per day.  In Asia, oversupply of gasoline has pulled down refinery profits their lowest level since 2015.  Amid these indicators, traders are taking measures to protect themselves from a potential fall in crude prices.  Russian Energy Minister Alexander Novak said that an average Brent price of around $60 was a reasonable forecast for this year.  In the latest sign of healthy economic growth, Japanese manufacturing activity expanded at the fastest pace in almost 4 years in Jan, a survey showed.  Economic growth is translating into oil demand growth & comes at a time that OPEC & Russia lead production cuts aimed at tightening the market.  The deal to withhold output started in Jan last year & is currently set to last thru 2018.

Oil dips on higher US fuel supplies, but overall market remains supported

This was a choppy day for stocks.  Earnings are generally coming in good but the comments from Sec Ross on the future of trade relations with China were chilling.  However, China also has a lot riding on increasing trade with the US.  Meanwhile gold continues in demand from risk averse investors who are seeking safety while the popular stock averages are at or essentially at record highs.

Dow Jones Industrials

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