Wednesday, October 1, 2014

Markets tumble on global conflicts and economic weakness

Dow dropped 238 (closing near the lows), decliners over advancers more than 3-1 & NAZ was down 71.  The MLP index plunged 7+ to 524 & the REIT index was up pennies in to the 293.  Junk bond funds retreated while Treasuries found buyers.  Oil slipped to a 17-month low & gold crawled higher.

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CLF15.NYM....Crude Oil Jan 15....89.00 Down ...0.76  (0.9%)

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Hong Kong's pro-democracy student leaders threatened to besiege gov offices if demands for free elections & the resignation of the city’s top official aren’t heeded, as the gov sought to start talks.  Demonstrations swelled for a 6th day, with one student leader estimating the crowd at close to 200K.  A member of the city’s executive council said today she tried to reach out to protest organizers.  This gesture comes after televised scenes of riot police using tear gas on unarmed students over the weekend spurred public outrage & led to calls for Chief Executive Leung Chun-ying to resign.  At a ceremony marking China's National Day today, Leung defended China’s plans to vet candidates for the city’s first leadership election in 2017, a proposal that had angered students, opposition lawmakers & civic groups.  Students kick-started the demonstrations after storming the premise of gov headquarters on Sep 26.  Tensions increased when Occupy Central With Love & Peace, an activist group, joined the students & called people to rally, leading to the clashes with the police over the weekend.  Student leaders today said they would escalate the protests & may surround Leung’s official residence, just above the central business district, if he didn’t resign tomorrow.  In a sign that a negotiated solution may be possible, a deputy secretary-general of the Hong Kong Federation of Students, said the group may be willing to hold talks with Carrie Lam, the city’s 2nd-highest ranking official.  This unrest has shaken Asian markets.

Hong Kong Students Threaten Escalation as Councilor Seeks Talks


Apple will add a gold color option for its full-size iPads in an effort to boost a category that’s posted declining shipments this year, according to leakers.  New versions of the company’s 9.7" iPads, anticipated to be unveiled this month, will include gold as a choice of color for the rear metal cover, adding to the silver & gray available for the lighter iPad Air, bringing the color palette into line with the iPhone 5s, which come with silver or gold backs for models with a white faceplate, & space gray for those with a black front.  Sales of the iPad have declined for the past 2 qtrs after soaring from $5B when the product was introduced in 2010 to $30B in 2012.  Last year, iPad sales were $32B.  AAPL has used color to goose sales of products many times in the past, starting with the introduction of candy-colored iMacs in 1999 with varied levels of success.  A larger iPad will be more important which may appeal to new types of customers, particularly business people.  But this device, with a 12.9" screen, won’t be introduced until next year.  The stock lost 1.57.  If you would like to learn more about AAPL, click on this link:
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Apple Said to Add Gold Option to IPad to Goose Sales

Apple (AAPL)




Smoke Rises from Kobani, Syria
Photo:   Bloomberg

Islamic State forces are closing in on the Syrian town of Kobani, a key Kurdish stronghold near the border with Turkey, even after US-led coalition warplanes again struck militant targets in the area.  Militants driving tanks & firing mortars captured the final village on the outskirts of Kobani & were one kilometer from the town’s entrance, according to a lawmaker from the pro-Kurdish People’s Democracy Party.  Warplanes bombed Islamic State positions repeatedly today without slowing their advance.  The US military said there were 3 strikes near Kobani, which destroyed an armed vehicle, artillery piece & tank.  The militants have besieged Kobani for more than 2 weeks, forcing an exodus of northern Syria's ethnic Kurdish population into Turkey.  The Turkish military has sent tanks & troops to the border in response, & is urging the creation of a buffer zone inside Syria.  Islamic State fighters now control 325 villages & towns around Kobani, said the UK based Syrian Observatory for Human Rights.  Syrian Kurdish militias known as the People’s Protection Units, or YPG, are resisting with AK-47 Kalashnikov automatic rifles & heavy machine guns against the “superior firepower” of Islamic State.  Kurdish fighters are putting up a stiff resistance but that the town was “not in danger of falling.”  Turkey is seeking parliamentary approval for possible military action in Syria & Iraq that would allow its own forces to target Islamic State & permit foreign troops to use Turkish soil.  Parliament is expected to vote & approve the bill tomorrow.  Joining the coalition assembled by the US to fight Islamic State would mark a change of course for Turkey, which earlier showed reluctance to get involved in the conflict.

Islamic State Closes in on Syria’s Kobani as Kurds Resist


October started in an ugly way for stocks.  As if there weren't enough problems, political & econoimc, Bill Gross, king of bonds, left PIMCO, the largest bond fund in the world, on Fri.  But Treasuries have rallied in the last 2 weeks from growing global uncertainties.  The other traditional safe haven investment, gold, has been left behind.  With Obama in hot water at home & economies around the world stumbling (at best), Oct may be a bad month for the stock market.
   
Dow Jones Industrials




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Markets tumble on weak economic data

Dow dropped 139, decliners over advancers 2-1 & NAZ fell 42.  The MLP index was up fractionally in the 531s & the REIT index which has been weak in recent weeks rose a fraction to the 293s.  Junk bond funds were little changed & Treasuries saw buying.  Oil climbed higher after recent selling & gold keeps losing ground.

AMJ (Alerian MLP Index tracking fund)


CLF15.NYM....Crude Oil Jan 15...90.47 Up ...0.71 (0.8%)

GCQ15.CMX...Gold Aug 15....1,211.80 Down ...2.50  (0.2%)










Companies hired 213K workers in Sep as the labor market continued to strengthen, based on a private report.  The gains in employment last month followed a revised 202K increase in Aug, according to the ADP Research Institute.  The forecast called for an advance of 205K.  Stronger demand for goods & services is prompting companies to hold the line on layoffs & expand headcount.  Continued progress in the labor market will be needed to boost aggregate income & drive consumer spending.  The Aug figure was revised from a previously reported 204K.  Goods-producing industries, which include manufacturers & construction companies, increased headcount by 58K in Sep.  Construction employment rose by 20K & factory payrolls climbed 35K while payrolls at service providers increased 155K (typically lower paying jobs).  Companies employing 500 or more workers added 77K jobs.  Employment at businesses with 50-499 employees increased 48K & the smallest companies boosted payrolls by 88K, the report showed.

Private Payrolls in U.S. Increased by 213,000 in September


Manufacturing cooled in Sep following the strongest rate of growth in 3 years as US factories settled into a more sustainable expansion that will spur the economy.  While the Institute for Supply Management index dropped to 56.6 from 59 in Aug, the gauge’s average over the past 3 months was the highest since early 2011.  The forecast called for a decline to 58.5.  Rising sales at automakers & growing corp orders for equipment are keeping the nation’s assembly lines busy.  Improving consumer & business spending are bolstering American factories at a time global markets from China to Europe show few signs of gaining traction.  The new orders gauge declined to 60 last month from a 66.7 reading that was the highest since 2004.  The ISM measure of production advanced to 64.6, the highest since May 2010, from 64.5 the prior month.  The index for orders waiting to be filled decreased to 47 from 52.5.  Measures of factory & customer inventories fell from a month, while an index of prices paid climbed.

Manufacturing in U.S. Cools From Strongest Pace in Three Years


China’s manufacturing stayed subdued last month as an official gauge was unchanged, with the economy weighed down by a property slump.  The gov Purchasing Managers' Index was at 51.1 in Sep, the same as the Aug reading & compared with the 51 estimate.  Readings above 50 signal expansion.  A pullback in manufacturing, declining industrial profits, & factory-output growth at a 5-year low point to a deepening economic slowdown.  Authorities have been reluctant to use broader stimulus to prop up growth as they seek to curb debt risks, instead taking targeted steps such as yesterday’s easing of mortgage policies to aid the housing market.  Another PMI from HSBC Holdings & Markit Economics for Sep was at 50.2, according to a release yesterday (unchanged from Aug).  The official measure typically registers a higher reading than the HSBC survey, which is based on responses from purchasing managers at more than 420 businesses.  China's economy may expand 7.3% this year, according to a recent survey.  Economists reduced their forecasts after Aug registered the slowest industrial-output expansion since the global financial crisis.

China Factory Gauge Unchanged as Manufacturing Subdued


The new month/qtr started off on the wrong foot.  Initial economic data was not encouraging & foreign unrest is not helping matters.  The Ukraine & Iraq conflicts drag on, seemingly going from bad to worse.  Now Hong Kong is seeing more unrest, not a plus for the Chinese economy which is not doing as well as in the past.  More data is coming in the next few days, highlighted by the Sep jobs report on Fri.  Dow is dragging its feet, back to where it was in Jun & earnings season begins next week.

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