Monday, November 30, 2015

Markets drift lower after early reports on holiday sales

Dow dropped 78, decliners ahead of advancers 5-4 & NAZ fell 18.  The MLP index lost a fraction to below 301, & the REIT index was 2+ lower to the 321s.  Junk bond funds did little & Treasuries traded higher.  Oil fell back & gold advanced.

AMJ (Alerian MLP Index tracking fund)

CLF16.NYM....Crude Oil Jan 16....41.64 Down ...0.07  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

Just hours after the Thanksgiving leftovers were packed away, shoppers hit the streets in search for the best Black Friday deals.  While expectations weren’t out of this world, shoppers proved one thing: The American consumer is gaining strength as the economy improves.  Sarah Quinlan, senior VP of Market Insights for MasterCard Advisors, said while shopping on Thanksgiving was a bit more muted than last year, as big-name retailers & others closed their doors to give their employees time with their families, it was still a good turnout overall.  “We were obviously expecting a short decline, as we saw, and now we’ll accelerate into the season,” she explained.  “Do remember, the holiday is all about experiences and it will be a long holiday shopping season that goes all the way through December 31.”  The Consumer Federation of America said about 38% of Americans planned to reduce their overall spend this holiday season, while 10% plan to spend more.  Meanwhile, spending overall is expected to rise 2.5% to 3% for the overall holiday season.  While figures from the Thanksgiving weekend won’t be finalized until next week, Quinlan said the initial trends suggest electronics are expected to be the biggest laggard since there’s no breakout product that would be likely to drive the consumer rush.  Meanwhile, apparel is seen as the biggest winner.  “There’s been this delayed pent up demand of people not actually buying clothing and because we haven’t seen the shift in the weather, but that’s what the deals – and that’s will drive them to the shopping space,” she said.  Department stores are also likely to see a drop off as shoppers increasingly turn to online sales to check off items on their holiday shopping lists, explaining part of the reason is because consumers are more choosy about where they spend their money – so, although they buy items department stores tend to sell, they’re not necessarily shopping at those particular outlets.  Quinlan added that consumers won’t just spend money this holiday season on physical goods, they’re also increasingly likely to spend on experiences like travel & dining out, thanks to an economy that continues to improve.  “The unemployment rate has dropped since last year, and more people, frankly, are finding full-time jobs, not just part time ones,” she said.  “So, that’s leading to the consumer having the money [to shop], and also, obviously, the gasoline savings dividend [is helping to drive traffic.]”  She estimated that savings from low oil & gas prices adds about $1054 to every pocket…& shoppers on average are spending about 72¢ per dollar saved.

Black Friday Muted, Shoppers Spend Online

Deere, the world’s largest manufacturer of agricultural machinery, is indefinitely laying off 220 workers amid weak demand for the company’s products.  The employees at its seeding & cylinder factory in Moline, Ill, will be laid off from Feb.  Last week DE forecast a 3rd successive decline in full-year sales.  The stock went up 48¢.  If you would like to learn more about DE, click on this link:

Deere to Lay Off Workers at Illinois Plant Amid Demand Slump

Deere (DE)

Target's, a Dividend Aristocrat, website was down for part of the day due to heavy traffic on Cyber Monday.  Shoppers looking for bargains were greeted with an error message: "So sorry, but high traffic's causing delays. If you wouldn't mind holding, we'll refresh automatically & get things going ASAP."  Mid-morning TGT said it had teams "working diligently" to restore  The site was up & running in the PM.  In what the company has called its "Biggest, Boldest Plans" for Cyber Monday, the retailer is offering 15% discounts on almost all items on  Deals include 50% off licensed kids' cameras & select in-ear headphones.  Other websites that have faced outages since early Thurs.  About 121M shoppers planned to shop online on Cyber Monday, down slightly from the 126.9M who planned to participate last year, according to the National Retail Federation.  The stock fell 94¢.  If you would like to learn more about TGT, click on this link:

Target Website Crashes on Cyber Monday Due to Heavy Traffic

Target (TGT)

Early retail reports are sketchy.  It looks like the stores did not do well & internet traffic was good, although perhaps below expectations.   Dow managed to eke out a tiny gain for Nov after finishing at its lows of a narrow trading range today.  Dec is generally a good month for stocks.  This time the FOMC meeting at mid-month looms large with a 25 bp rate hike widely expected.  

Dow Jones Industrials

3 Stocks You Should Own Right Now - Click Here!


Mixed markets on last day of November

Dow dropped 29, advancers over decliners 4-3 & NAZ lost 10.  The MLP index was a fraction lower, going below 301, & the REIT index gained a fraction to 326.   Junk bond funds were mixed to higher & Treasuries went up as stocks lost ground.  Oil & gold both rose.

AMJ (Alerrian MLP Index tracking fund)

CLF16.NYM...Crude Oil Jan 16...42.36 Up ...0.65 (1.6%)

GCZ15.CMX...Gold Dec 15....1,061.30 Up ...5.10 (0.5%)

Online sales on Cyber Monday may rise at least 18% from a year earlier, slower growth than during the holiday weekend, as consumers start their internet shopping earlier, according to forecasts by International Business Machines.  Total Web-based sales for the weekend after Thanksgiving increased 26% from a year earlier.  Even with the smaller gain, Cyber Monday spending may hit a record $3B this year, according to Adobe Systems.  Retail analysts have been paying close attention to holiday purchasing patterns as more spending shifts online & away from traditional stores.  For most of the last decade, the Mon following Thanksgiving was the busiest day for Web shopping as US consumers returned to work & used their offices’ fast internet connections to buy holiday gifts.  But the rise of smartphones & speedier home internet service has led consumers to snag online deals throughout the holiday weekend.  Retailers, traditional & electronic, are now offering bargains earlier than ever.  Some of the most popular items on weekend shopping lists included televisions, as well as the Apple (AAPL) Watch & Beats by Dre headphones, according to IBM’s Watson Trend.  Other popular choices are hoverboards, running shoes, video-games & Star Wars R2-D2 droids.  Thanksgiving was the fastest-growing online shopping day, with sales rising 25% to a record $1.7B, according to Adobe.  About 37% of Thanksgiving sales came from smartphones & tablets, up from 29% in 2014, according to Adobe.  Online spending on Black Friday increased 14% from 2014.

Cyber Monday Online Sales Seen Rising at Least 18%, IBM Says

Contract signings to purchase previously owned homes in the US rose less than forecast in Oct after declining in the prior 2 months, showing residential real estate is cooling heading into the quieter selling season.  An index of pending home sales increased 0.2% after a revised 1.6% decline a month earlier, the National Association of Realtors said.  Economists projected a 1% advance last month.  Lean inventories of available properties are limiting choices for prospective buyers who qualify for credit.  At the same time, steady hiring gains & early signs of a pickup in worker pay probably will continue to support housing demand even after a recent gain in borrowing costs in anticipation of an increase in the Federal Reserve’s benchmark interest rate.  “In the most competitive metro areas -- particularly those in the South and West -- affordability concerns remain heightened as low inventory continues to drive up prices,” NAR chief economist Lawrence Yun said.  Purchase contracts rose 2.1% in the 12 months ended in Oct on an unadjusted basis after a 3.2% annual gain in Sep.  The pending sales index was 107.7 on a seasonally adjusted basis.  A reading of 100 corresponds to the average level of contract activity in 2001, or “historically healthy” home-buying traffic.  Economists consider pending sales a leading indicator because they track new purchase contracts. Existing-home sales are tabulated when a deal closes, usually a month or 2 later.  Prices increased compared with a year earlier as the number of dwellings on the market declined.

Pending Sales of Previously Owned Homes in U.S. Increase 0.2%

China’s stocks erased steep losses in the last hour of trading, led by financial companies, as a 2nd day of wild price swings tested the gov plan to trim support for the equity market.  The Shanghai Composite Index climbed 0.3% to 3445 at the close, erasing a loss of as much as 3.2%, as a gauge of volatility traded near its highest level in 2 months.  The benchmark gauge climbed 1.9% this month, the smallest move since Jan.  Fri's plunge, the biggest in 3 months, illustrates the challenge facing Chinese officials as they seek to wean the equity market off gov support without precipitating another crash.  As price swings on the index fell to their lowest levels since Mar, the gov lifted a freeze on IPOs, raised margin requirements & scrapped a rule requiring brokerages to hold net-long positions.

China’s stock rout from mid-Jun thru Aug was only halted after the gov took a series of measures to backstop the market, including banning major stakeholders from offloading shares, ordering state funds to buy & restricting short selling.  Policy makers also armed one state agency with more than $480B to prop up shares. The Shanghai Composite re-entered a bull market earlier this month.  On Fri, there was little sign that gov-run funds had stepped in to ease the selloff.

There is not much for stocks to do as they wait to hear more about holidays retail sales.  Early Nov reports are coming in the next few days, followed by the Nov jobs report on Fri.  Obama has his big meeting on global warming which will get little accomplished besides the usual hot air.  Hard to believe, Dow is up 100 this month after its surge last month.

Dow Jones Industrials