Thursday, May 17, 2018

Markets climb after opening lower, led by energy shares

Dow crawled up 7, advancers over decliners almost 2-1 & NAZ gained 47.  The MLP index added 4+ to the 269s & the REIT index fell 1 to the 338s.  Junk bond funds declined & Treasuries slid lower again.  Oil climbed in the 71s & gold lost 2 to 1289.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil71.97

GC=FGold  1,289.00

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Stocks declined, with the technology sector under pressure following Cisco's (CSCO, a Dow stock) tepid outlook, which overshadowed Walmart (WMT, another Dow stock & Dividend Aristocrat) reporting surprisingly strong Q1 earnings.  WMT reported an adjusted Q1 EPS of $1.14, topping the estimate for $1.12.  Revenue of $122.7B, also beat the estimate for $120.5B.  WMT, the world's biggest retailer, reported a EPS of $1.00, on revenue of $117.5B in the same period last year.  CSCO shares were under pressure after the company reported positive earnings, but a disappointing sales outlook.  Meanwhile, Brent crude hit $80 a barrel for the first time since Nov 2014 & US crude broke above $72.

US stocks down despite big Walmart first-quarter earnings

Dow component WMT surpassed expectations in Q1, as the company saw a big boost in intl sales while unveiling some details on how its purchase of Flipkart will impact its finances.  Adjusted Q1 of $1.14, topped the estimate for $1.12 & revenue of $122.7B, also beat the estimate for $120.5B.  Same-store sales were up 2.6% (2.3% excluding fuel) while its intl sales jumped 12% to $30.3B.  WMT reported this week that Lord & Taylor's flagship store is teaming up with to sell more than 125 premium brands.  WMT announced earlier this month that it was paying $16B for majority control of India's online retailer, Flipkart.  The deal is its largest ever.  The investment in Flipkart will negatively impact its 2019 EPS by about 25-30¢ if the deal closes at the end of Q2.   The company also noted that it had recently reached agreements to divest its banking operations in Canada & Chile.  The stock fell 69¢.
If you would like to learn more about WMT, click on this link:

Walmart tops expectations, sees big boost in international sales

US household debt grew by $63B (0.5%)  to $13.21T in Q1, driven largely by the increase in mortgage balances, a NY Federal Reserve quarterly report showed.  The amount of mortgage balances rose by $57B in Q1 to $8.94T.  Families, however, paid down their home equity loans, which fell by $8B to $436B.  "Although household debt has been growing for five years, its growth has been slow relative to earlier periods, as mortgage debt has continued to be relatively flat," NY Fed analysts wrote.  Overall tight lending standards have likely contributed to the modest increase in mortgage debt.  Meanwhile, the US housing sector has continued to its recovery since the global credit crisis a decade ago.  However, the housing recovery & its impact have been uneven across age groups & between homeowners & renters.  "In particular, the factors that determine housing wealth are not evenly spread across the population, and those relationships have changed since the pre-financial crisis housing boom," NY Fed's director of research said.

US household debt edges up to $13.21T in 1Q: N.Y. Fed

New applications for US jobless benefits increased more than expected last week, but the number of Americans on unemployment rolls fell to its lowest level since 1973, pointing to diminishing labor market slack.  Initial claims for state unemployment benefits rose 11K to a seasonally adjusted 222K for the latest week, the Labor Dept said.  Claims data for the prior week was unrevised.  The forecast called for claims rising to 215K.  The labor market is viewed as being close to or at full employment, with the jobless rate near a 17 year low of 3.9%.  The unemployment rate is within striking distance of the Federal Reserve's forecast of 3.8% by the end of this year.  The 4-week moving average of initial claims, viewed as a better measure of labor market trends as it irons out week-to-week volatility, fell 2K to 213K last week, the lowest level since 1969.  The claims data covered the survey period for the nonfarm payrolls portion of May's employment report.  The 4-week average of claims fell 18K between the Apr & May survey periods, suggesting solid job growth.  Nonfarm payrolls increased 164K jobs in Apr after rising by 135K in Mar.  Job gains are slowing as employers struggle to find skilled workers.  There were a record 6.6M unfilled jobs in Mar.  The claims report also showed the number receiving benefits after an initial week of aid declined 87K to 1.71M in the latest week, the lowest level since 1973.  The 4-week moving average of the continuing claims dropped 39K to 1.77M, also the lowest level since 1973.

US weekly jobless claims rise; unemployment rolls smallest in 45 years

Stocks began the day in the red, but buyers returned to bid prices higher.  Earnings report were not greeted with excitement, hard to figure out what is stimulating the buying.  The Dow is still stuck in the 24Ks where it has been for much of this year..

Dow Jones Industrials

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