Friday, February 16, 2018

Markets rise after Mueller indicts Russians over interference in 2016 election

Dow rose 18, advancers over decliners about 2-1 & NAZ lost 16.  The MLP index retreated 3+ to 270.  Junk bond funds went up & Treasuries inched higher.  Oil went up in the 61s & gold pulled back 5 to 1349.

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A federal grand jury indicted 13 Russians nationals & 3 Russian entities  for alleged illegal interference in the 2016 presidential elections, during which they boosted the candidacy of Donald Trumo, special counsel Robert Mueller's office said.  The indictment says that a Russian organization called the Internet Research Agency sought to wage "information warfare" against the US & to "sow discord" in the American political system by using fictitious American personas & social media platforms & other internet-based media.  Internet Research Agency, a "troll farm," was allegedly controlled by a wealthy associate of Russian Pres Putin.  While the effort to influence the 2016 election was launched in 2014, by early to mid-2016 the defendants were "supporting the presidential campaign of then-candidate Donald J. Trump ... and disparaging Hillary Clinton," the 8-count indictment charges.  "Some Defendants, posing at U.S. persons and without revealing their Russian association, communicated with unwitting individuals associated with the Trump Campaign and with other political activists to seek to coordinate political activities," the indictment claims.  Foreigners are barred from spending money to try to influence the outcome of a federal election.  As part of their efforts, the defendants also allegedly encouraged minority groups to either not vote for in the election or to vote for a third-party candidate.  Both actions would have hurt Clinton, who received significant support from minority voters. 

Coca-Cola's (KO), a Dow stock & Dividend Aristocrat, push to diversify its drinks & spin off company-owned bottlers is bearing fruit.  The company posted sales that beat estimates in Q4, helped by its growing beverage portfolio & reformulations.  Profit also topped projections.  The results validate its strategy of become a marketing & drink-formulation company, rather than a bottler.  The company has been in flux since it began offloading its bottling operations to independent owners.  CEO James Quincey has been working to slim down the company.  After taking over in May, he vowed to cut costs by an additional $800M , extending a productivity push started by his predecessor, Muhtar Kent.  EPS was 39¢, excluding some items, a penny higher than the estimate for 38¢.  The company sees the same measure growing 8-10% this year.  Revenue of $7.5B compared with an estimate of $7.4B.  Quincey has pushed KO to grow beyond its namesake brand & become a “total beverage company.”  The efforts, which began under his predecessor, have included a quest to find & acquire startup beverage companies, with the idea that one of these could potentially be the company's next $B brand.  The company is also expanding its venture model beyond the US & has already started looking for investment candidates in Central & Eastern Europe.  In addition to adding new products, the company wants to revive one of its biggest sellers: Diet Coke.  It relaunched the zero-calorie cola with 4 additional flavors in taller, skinnier cans, the biggest-ever makeover for the product.  KO previously revamped its Coke Zero with a new formula, which helped to boost results in Q3.  The company is dissatisfied with falling Diet Coke sales, Quincey said.  “Clearly, we would love to at least stop declining, if not get into growth,” he added.  “I’m not sure just the flavors and the packages will get us there, but it’s certainly going to be a good step in the right direction.”  KO has largely stuck with a strategy of smaller, bolt-on acquisitions, but pressure may be rising for larger deals.  The stock rose 19¢.
If you would like to learn more about KO, click on this link:

Coca-Cola Gains After New Drinks, Coke Zero Boost Earnings

Deere (DE) raised sales forecasts for its farm & construction equipment this year, even as supply & delivery bottlenecks crimped quarterly sales.  The machinery maker reported a fiscal Q1 loss from charges related to new federal tax legislation & lower than expected equipment sales.  But DE said demand for farm & construction machinery is improving & raised its forecasts for sales this year.  "Deere has continued to experience strong increases in demand for its products as conditions in key markets show further improvement," said CEO Sam Allen.  Despite another bumper harvest last year that kept crop prices low & farmers' incomes under pressure, rising sales of high-horsepower equipment lately show that some farmers are buying again.  The company has encountered difficulties accelerating production from the low volumes of recent years.  "We are working with our suppliers and logistics providers as they adjust to the present conditions," said CFO Rajesh Kalathur.  "It takes time for them to actually put the people in place and get them trained and have them working."  Sales of green-&-yellow farm & landscaping machinery rose 18% during the fiscal Q1 to $4.2B, while profit from the business soared 78% to $387M.  The company expects its world-wide farm equipment sales to increase 15% this year, up from a 9% increase anticipated in Nov.  It anticipates overall sales of farm & construction equipment will rise 29% in the fiscal year thru Oct 2018, up from a 22% forecast in Nov.  The sales growth is being aided by the addition of German road-paving equipment manufacturer Wirtgen Group, which DE bought last year for $5B.  The Wirtgen acquisition is also expected to add 56% to sales in its construction unit this year.  DE expects Wirtgen to expand the reach of its construction equipment business beyond North America & help offset sales in the cyclical farming business.  The construction-machinery business is also continued to benefit from resurgent demand from the North American construction machinery market.  DE reported tax-related charges in the qtr of about $965M.  The company wrote down the value of its net deferred tax assets as a result of the lower federal tax rate for corp income.  The company also recorded a charge of $262M for the repatriation of previously untaxed earnings held overseas.  Overall in Q1, DE reported a loss of $1.66 per share, compared with EPS of 61¢ a year earlier.  Excluding the tax charges, the EPS was $1.31 & analysts expected $1.20.  Quarterly equipment sales rose 27% to $6B, but analysts' were expecting $6.42B.  The stock advanced 2.66.
If you would like to learn more about DE, click on this link:

Deere sees strong equipment demand

The Commerce Dept recommended imposing heavy tariffs or quotas on foreign producers of steel & aluminum in the interest of national security, following a trade investigation of imports.  Pres Trump & his administration announced the Section 232 investigation into steel & aluminum imports in Apr.  The investigation sought to determine whether the imports posed a threat to the country's national security.  Commerce Sec Wilbur Ross reported that steel is in fact important to US national security, & current import flows are adversely impacting the steel industry.  "[T]he Secretary of Commerce concludes that the present quantities and circumstance of steel imports are 'weakening our internal economy' and threaten to impair the national security as defined in Section 232," the dept said.  In the document, Ross recommended a couple alternatives for the pres to take "immediate action by adjusting the level of imports through quotas or tariffs."  The dept's goal is to increase demand for American-made metals.  Trump has 90 days to review the findings & recommendations before deciding on what course of action to take.  Among the recommendations in the reports are a global tariff of 24% on all steel imports.  An alternative option would impose a tariff of at least 53% on steel from 12 countries including China & Brazil.  A 63% quota of those countries' 2017 steel imports is recommended in the report.  The aluminum recommendations include a 7.7% tariff on imports from all exporter nations.  Ross also suggested a 23.5% tariff on aluminum products from China, Hong Kong, Russia, Venezuela & Vietnam.  Companies can also seek appeals based on US production of steel & aluminum & specific national security-based considerations.  Ross said each of the measures should enable US steel producers to operate at 80% average capacity utilization rates or better based on available capacity in 2017.  According to the Aluminum Association, there are 5 US smelting facilities that are operating with three partial curtailments.  This is a fraction compared with the 24 operational smelters up and running in 2001.

Commerce Department calls for Trump to impose steep tariffs or quotas on foreign steel and aluminum

The Dow was up a massive 1100 this week.  It looks like the Mueller probe may be finished which should lift a major cloud hanging over the stock market.  However inflation fears & its effects on the economic expansion are still around, creating more demand for gold.  Next week will be a major test to see if the stock market recovery has legs to go forward.

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