Wednesday, May 9, 2018

Markets rise as Treasury yield tops 3% and oil tops $71

Dow jumped up 182, advancers over decliners around 2-1 & NAZ added 73.  The MLP index went up 1+ to the 259s & the REIT index fell to 334.  Junk bond funds pulled back to 334 & Treasuries were sold, bringing the 10 year yield just over 3%.  Oil rose over 2 to the 71s & gold lost 1 to 1312.

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A measure of US wholesale trade continued its growth streak in Mar, though its gains fell below expectations.  The US Census Bureau's gauge of wholesale inventories in Mar increased 0.3% from the prior month, totaling about $627B.  The latest reading fell short of the 0.5% increase expected.  The metric posted significant gains in Jan & Feb.  The ratio of inventories to sales for merchant wholesalers was 1.26 in Mar, meaning it would take merchants 1.26 months to clear shelves of their inventories, a slight tick downward from the year-ago ratio of 1.28.  The monthly survey tracks merchants in various businesses, including exporters & industrial distributors.

Wholesale trade misses expectations in March, but keeps growth streak alive

US producer prices barely rose in Apr after strong gains in Q1, held down by a moderation in the cost of both goods & services, which could ease fears that inflation pressures were rapidly building up.  The slowdown in wholesale price growth reported by the Labor Dept is likely temporary as manufacturers have been reporting paying more for raw materials.  Economists also expect oil prices to surge after Pres Trump pulled the US out of an international nuclear deal with Iran.  The Labor Dept said its producer price index for final demand edged up 0.1% last month after increasing 0.3% in Mar.  That lowered the year-on-year increase in the PPI to 2.6% from 3.0% in Mar.  The forecast called for the PPI gaining 0.2% last month & rising 2.8% from a year ago.  A key gauge of underlying producer price pressures that excludes food, energy & trade services also nudged up 0.1% last month.  Core PPI had increased by 0.4% in each of the past 3 months.  In the 12 months thru Apr, the core PPI rose 2.5% after jumping 2.9% in Mar & vore goods prices increased 0.3%in Apr, matching the Mar gain.  Inflation is flirting with the Federal Reserve's 2% target.  The central bank's preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food & energy, increased 1.9% year-on-year in Mar & is expected to breach its target in the coming months.

US producer prices inch up in April after recent solid gains

Walmart (WMT), a Dow stock & Dividend Aristocrat, will soon reach shoppers in India's massive consumer market directly, as it takes control of the online retailer Flipkart that's known for its ubiquitous delivery drivers on motorcycles with oversized backpacks.  The $16B controlling stake is the largest acquisition yet by the world's largest retailer.  India's hot economy makes it attractive to companies eager to sell goods to its massive population.  The company has pushed hard to catch up to Flipkart, to establish a substantial foothold in the country.  But instead of competing with Flipkart, WMT has essentially taken over the company.  It's a move that might have near-term losses but is part of a larger shift by the company to look toward the future.  That includes its decision last month to sell its British unit, Asda, which primarily operated a chain of traditional supermarkets.  Flipkart had net sales of $4.6B in its latest fiscal year, a fraction of WMT's latest annual revenue of $485B.  But WMT believes India with 1.3B people could be among the world's top 5 e-commerce markets within the next 5 years.  "We are actively working to shape the portfolio of geographies and businesses we're in, in order to set the company up for success for another generation,"  CEO Doug McMillon said.  WMT stock dropped 2.68 on the news.
If youw oudl like to learn more about WMT, click on this link:

Walmart makes a $16 billion bet on India's booming economy

Stocks like Trump's move to bring back sanctions on Iran.  Oil is over 71 in NY & Brent is approaching 80 (which affects much of the world outside the US).  That will bring higher oil prices at the pumps & for all the companies which use gas.  Higher interest rates are no great surprise.  But when reality sinks in, investors & traders grow nervous.  The Dow is back to where it was at the start of Dec & looks to be stuck in a sideways trading pattern as intl trading relations are changing.

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