Dow lost 64 (but off the lows), advancers over decliners 5-4 & NAZ gained 3. The MLP index climbed 2 to 456 & the REIT index was up fractionally in the 272s. Junk bond funds were higher & Treasuries had a good day. Oil
slipped as OPEC said demand for its crude will fall amid rising
output from non-members. Gold inched higher.
AMJ (Alerian MLP Index tracking fund)
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Photo: Bloomberg
Big Ben defended quantitative easing, saying it has helped the economy & shows no immediate sign of creating a bubble in asset prices. “We don’t think that financial stability concerns should at this point detract from the need for monetary policy accommodation which we are continuing to provide,” he said today. Bernanke said of all the concerns raised about bond buying, the risk it could prompt financial instability is “the only one I find personally credible.” Currently, asset prices are broadly in line with historical norms, he said. Bernanke is seeking to define his legacy before stepping down in 2 weeks. During his 8 year tenure as leader of the Federal Reserve (FED) he piloted the economy thru a financial crisis that led to the longest recession since the 1930s. He has tried to bolster growth by holding the target interest rate near zero & pushing forward with unprecedented bond buying. “Those who have been saying for the last five years that we’re just on the brink of hyperinflation, I think I would just point them to this morning’s CPI number and suggest that inflation is not really a significant risk of this policy,” Bernanke said, referring to a report showing the CPI rose 1.5% in the past year. The FED has set an inflation target of 2%. Referring to the FOMC decision to hold its main interest rate close to zero, Bernanke said, “I’m not yet ready to conclude that very low interest rates are going to be a permanent condition.” FED Vice Chairman Janet Yellen, one of his chief lieutenants in engineering unprecedented accommodation, won Senate approval this month as his successor beginning Feb 1.
CSX tumbled the most in more than 2 years after the biggest railroad in the eastern US posted a profit that trailed estimates for the first time in 2 years as coal shipments slumped. The company cast doubt on its earnings potential when CFO Fredrik Eliasson said demand for coal shipments will have to rebound by 2015 in order for the company to reach the low end of its forecast for compound annual earnings per share growth of 10-15% over the next 2 years. The results led off earnings reports for the rest of the rail industry, with other major railroads coming next week. A shift to natural gas from coal at power plants hurt CSX, with a 5% drop in shipments of the fuel. Domestic coal volumes fell 9% in Q4 & 7% for all of 2013. CEO Michael Ward said he expects earnings growth in H1 of this year to be “flat to slightly down.” “We thought in ’14 the coal market would be settled down, and on the domestic side we think it is, but the world coal market is over-supplied,” Ward said. “We think there’s a reasonable likelihood we can achieve the growth we’ve talked about or we would change the guidance.” The company has been building facilities to handle intermodal business, which includes shipping by truck, rail or ship & has been growing 7-8% on a yearly basis, Ward said. “As the highways become more congested and the infrastructure is improved in the highway system, then we will have more and more chance to work with trucking companies to convert business to intermodal,” he added. EPS slid to 42¢, missing the 43¢ estimate. Sales climbed 4.7% to $3.03B, just above the $3.01B estimate. Shipments of intermodal freight climbed 11% while chemical carloads, including crude oil, grew 18%. The stock dropped 1.99 (7%).
CSX Tumbles Most Since 2011 as Coal Decline Weighs on Profit
UnitedHealth Group, a Dow stock, said gov cuts to Medicare may make it harder to increase earnings in 2015. Rate cuts that may reach 7%, following a similar reduction for this year, could be “extraordinarily disruptive” to the program, CEO Stephen Hemsley said. Medicare Advantage, insurers’ private version of the gov program for the elderly, has been a key source of growth for the industry & provided about a 1/5 of last year's profit. The companies’ reimbursements are being scaled back to help pay for the insurance expansion under Obamacare. Its stock was lower after reporting Q4 earnings rose 15%, boosted by growth in its Optum technology business as well as enrollment gains. The company also reaffirmed its 2014 forecast. Hemsley said the company will “focus on delivering EPS growth” in 2015 while saying results will depend in part on Medicare Advantage payments. The Centers for Medicare and Medicaid Services is due to propose its preliminary rates next month, with a final decision expected in Apr. Hemsley also said it’s unclear how quickly insurers may be able to collect higher premiums to recoup new taxes imposed by Obamacare. Obamacare reduced Medicare payments to insurers by an estimated $145B over a decade & UNH is the biggest private provider of Medicare plans. EPS in Q4 for UNH was $1.41, matching estimates. Revenue increased 8.2% to $31.1B. UNH reaffirmed its 2014 EPS forecast of $5.40 -$5.60, compared with $5.50 last year. Last month, the company said it expects after-tax earnings in its insurance division to fall $1.1B this year under the health law. The stock fell 2.07.
UnitedHealth CEO Sees Medicare Payment Cuts Weighing on Future Profits
Today's decline was not significant on its own. Companies reporting disappointing earnings saw selling in their stocks. But the breadth was favorable with more stocks advancing. The report from CSX was meaningful because it is sensitive to the economics in its area. Obamacare made is present felt, as it will in more reports. Dow still remains lower in the new year, down 160.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month |
0.03% | |
U.S. 2-year |
0.38% | |
U.S. 10-year |
2.84% |
| CLG14.NYM | Crude Oil Feb 14 | 94.09 |  0.08 (0.1%) |
Big Ben defended quantitative easing, saying it has helped the economy & shows no immediate sign of creating a bubble in asset prices. “We don’t think that financial stability concerns should at this point detract from the need for monetary policy accommodation which we are continuing to provide,” he said today. Bernanke said of all the concerns raised about bond buying, the risk it could prompt financial instability is “the only one I find personally credible.” Currently, asset prices are broadly in line with historical norms, he said. Bernanke is seeking to define his legacy before stepping down in 2 weeks. During his 8 year tenure as leader of the Federal Reserve (FED) he piloted the economy thru a financial crisis that led to the longest recession since the 1930s. He has tried to bolster growth by holding the target interest rate near zero & pushing forward with unprecedented bond buying. “Those who have been saying for the last five years that we’re just on the brink of hyperinflation, I think I would just point them to this morning’s CPI number and suggest that inflation is not really a significant risk of this policy,” Bernanke said, referring to a report showing the CPI rose 1.5% in the past year. The FED has set an inflation target of 2%. Referring to the FOMC decision to hold its main interest rate close to zero, Bernanke said, “I’m not yet ready to conclude that very low interest rates are going to be a permanent condition.” FED Vice Chairman Janet Yellen, one of his chief lieutenants in engineering unprecedented accommodation, won Senate approval this month as his successor beginning Feb 1.
CSX tumbled the most in more than 2 years after the biggest railroad in the eastern US posted a profit that trailed estimates for the first time in 2 years as coal shipments slumped. The company cast doubt on its earnings potential when CFO Fredrik Eliasson said demand for coal shipments will have to rebound by 2015 in order for the company to reach the low end of its forecast for compound annual earnings per share growth of 10-15% over the next 2 years. The results led off earnings reports for the rest of the rail industry, with other major railroads coming next week. A shift to natural gas from coal at power plants hurt CSX, with a 5% drop in shipments of the fuel. Domestic coal volumes fell 9% in Q4 & 7% for all of 2013. CEO Michael Ward said he expects earnings growth in H1 of this year to be “flat to slightly down.” “We thought in ’14 the coal market would be settled down, and on the domestic side we think it is, but the world coal market is over-supplied,” Ward said. “We think there’s a reasonable likelihood we can achieve the growth we’ve talked about or we would change the guidance.” The company has been building facilities to handle intermodal business, which includes shipping by truck, rail or ship & has been growing 7-8% on a yearly basis, Ward said. “As the highways become more congested and the infrastructure is improved in the highway system, then we will have more and more chance to work with trucking companies to convert business to intermodal,” he added. EPS slid to 42¢, missing the 43¢ estimate. Sales climbed 4.7% to $3.03B, just above the $3.01B estimate. Shipments of intermodal freight climbed 11% while chemical carloads, including crude oil, grew 18%. The stock dropped 1.99 (7%).
CSX Tumbles Most Since 2011 as Coal Decline Weighs on Profit
CSX Corp (CSX)
UnitedHealth Group, a Dow stock, said gov cuts to Medicare may make it harder to increase earnings in 2015. Rate cuts that may reach 7%, following a similar reduction for this year, could be “extraordinarily disruptive” to the program, CEO Stephen Hemsley said. Medicare Advantage, insurers’ private version of the gov program for the elderly, has been a key source of growth for the industry & provided about a 1/5 of last year's profit. The companies’ reimbursements are being scaled back to help pay for the insurance expansion under Obamacare. Its stock was lower after reporting Q4 earnings rose 15%, boosted by growth in its Optum technology business as well as enrollment gains. The company also reaffirmed its 2014 forecast. Hemsley said the company will “focus on delivering EPS growth” in 2015 while saying results will depend in part on Medicare Advantage payments. The Centers for Medicare and Medicaid Services is due to propose its preliminary rates next month, with a final decision expected in Apr. Hemsley also said it’s unclear how quickly insurers may be able to collect higher premiums to recoup new taxes imposed by Obamacare. Obamacare reduced Medicare payments to insurers by an estimated $145B over a decade & UNH is the biggest private provider of Medicare plans. EPS in Q4 for UNH was $1.41, matching estimates. Revenue increased 8.2% to $31.1B. UNH reaffirmed its 2014 EPS forecast of $5.40 -$5.60, compared with $5.50 last year. Last month, the company said it expects after-tax earnings in its insurance division to fall $1.1B this year under the health law. The stock fell 2.07.
UnitedHealth CEO Sees Medicare Payment Cuts Weighing on Future Profits
UnitedHealth Group (UNH)
Today's decline was not significant on its own. Companies reporting disappointing earnings saw selling in their stocks. But the breadth was favorable with more stocks advancing. The report from CSX was meaningful because it is sensitive to the economics in its area. Obamacare made is present felt, as it will in more reports. Dow still remains lower in the new year, down 160.
Dow Jones Industrials
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