Friday, December 19, 2014

Higher markets on continued US economy growth

Dow climbed 26, advancers over decliners 2-1 & NAZ added 16.  The MLP index slid fractionally lower in the 453s & the REIT index rose 1 to the 528s for a new multi year high.  Junk bond funds continued recovering from recent selling & Treasuries rose.  Oil had a huge rebound, up more than 6% to the 58s, & gold was only able to crawl higher.

AMJ (Alerian MlP Index tracking fund)

3 Stocks You Should Own Right Now - Click Here!

CLK15.NYM....Crude Oil May 15....57.84 Up ...2.42 (4.4%)

Live 24 hours gold chart [Kitco Inc.]

China revised the size of the economy by $309B, adding almost the entire output of Malaysia.  The GDP was 59T in 2013, according to the results of a nationwide economic census announced today.  That’s 3.4% larger than the previously reported figure.  Malaysia’s 2013 GDP was $312B.  The size of the revision was smaller than the last time China made a similar change in 2008, reflecting more accurate counting of a rapidly expanding services industry.  The larger GDP makes China’s debt look smaller by comparison, which may give policy makers more room to maneuver as they seek ways to bolster growth set to be the lowest since 1990 this year.  The revision will barely affect the 2014 GDP growth rate, the National Bureau of Statistics said.  Tertiary industry’s share of GDP is revised to 46.9% from 46.1%, it said, reflecting a more active services sector.  The economic census is conducted about every 5 years to gather information on the manufacturing & services industries.  Over 10M businesses & about 60M enterprises were visited early this year, according to the official Xinhua News Agency.  The past 2 censuses led to a 16.8% boost to 2004 GDP & a 4.4% increase in 2008.  The head of the National Bureau of Statistics said that China would revise 2013 GDP upward by “a bit more than 3 percent.”

China’s GDP Revision Adds Output Equal to Malaysian Economy

Cisco, a Dow stock, filed 2 patent-infringement complaints against Arista Networks (ANET), seeking a quick order to block its rival’s networking devices from the US.  The complaints cover the same 12 patents that were asserted in civil suits filed earlier against ANET.  CSCO claims the competing company, founded by a former CSCO exec, was built by copying CSCO technology.  The ITC, a quasi-judicial agency, typically completes investigations in 15-18 months, & it’s that speed that prompted the new filings, CSCO said.  “Our ITC actions are consistent with our commitment to do everything possible to expedite review of Arista’s illicit copying” CSCO said.  The stock went up pennies.  If you would like to learn more about CSCO, click on this link:

Cisco Seeks to Block Arista Network Devices From the U.S.

Cisco (CSCO)

Federal Reserve (FED) Bank of San Francisco pres John Williams said next Jun will be the right time to consider when to start raising interest rates, even as inflation is likely to stay below the central bank’s goal.  “June 2015 seems like a reasonable starting point for thinking about when liftoff could happen,” Williams  (who will vote on policy next year) said.  “It would depend on where the U.S. economy is relative to our goals.”  Chair Janet Yellen said Wed that the FED will be “patient” in considering when to raise interest rates for the first time since 2006 & is unlikely to move before the end of Apr.  Her remarks helped propel the best 2-day rally in US stock in 3 years.  “The introduction of the ‘patient’ word was a natural progression” toward a period when interest rates begin to rise, said Williams.  His views align closely with those of Yellen, his predecessor at the helm of the San Francisco Fed.  Williams never dissented from an FOMC policy statement during 8 meetings in 2012, the last time the San Francisco FED pres held a voting seat.  He was among the early supporters of open ended-bond purchases by the FED to boost the economy.  Williams expects consumer spending & wage growth to improve, & he views the drop in oil prices as “a huge windfall for American consumers.”  He projects unemployment at about 5.25% by the end of 2015.  The faster-than-expected drop in unemployment has bolstered the views of officials who favor raising rates sooner.  At the same time, policy makers urging caution have pointed to an inflation rate that has languished below the FED goal for 30 straight months.  Its preferred inflation gauge, the personal consumption expenditures price index, rose 1.4% in the year through Oct.  Officials don’t expect to meet their inflation goal until 2016, according to projections released this week.

Williams Sees June as Time to Start Weighing Higher Fed Rate

Stocks have had a memorable 3 day rally when the Dow advanced 740.  This kind of correction was to be expected in an oversold market, especially after an announcement by the FOMC.  Next week (with 3½ trading days) will demonstrate whether the rally has legs.  After high volatility this month, anything is possible. 

Dow Jones Industrials

Markets climb cautiously as oil prices increase

Dow rose 39, advancers over decliners 3-2 & NAZ added 12.  The MLP index slid 2+ to the 451s & the REIT index went up a fraction in the 326s.  Junk bond funds rose & Treasuries also advanced.  Oil rebounded from the lowest closing levels in 5+ years as comments from Saudi Arabia’s oil minister yesterday added to the most volatile market in 3 years (see below).  Gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...56.47 Up ....1.05 (1.9%)

GCZ14.CMX...Gold Dec 14.......1,197.70 Up ...3.00 (0.3%)

3 Stocks You Should Own Right Now - Click Here!

China offered enhanced economic ties with Russia at a regional summit this week as its northern neighbor struggled to contain a currency crisis.  “To help counteract an economic slowdown, China is ready to provide financial aid to develop cooperation,” Premier Li Keqiang said on Mon.  While the remark applied to any of the 5 other nations represented at the meeting of the Shanghai Cooperation Organization group, it was directed at Russia.  Any rescue package for Russia would give China the opportunity of exercising the kind of great-power leadership the US has demonstrated for a century, sustaining other economies with its superior financial resources.  Pres Xi Jinping last month called for China to adopt “big-country diplomacy” as he laid out goals for elevating his nation’s status.  Russia isn’t in talks with China about any financial aid, said a spokesman for pres Puitn & added he didn’t know if China is preparing to offer aid.  China’s Foreign Ministry, asked about assisting Russia, said yesterday the country is ready to work with all members of the SCO group to strengthen economic cooperation.

China Offers Enhanced Cooperation as Russia Struggles

Saudi Arabia & OPEC would find it “difficult, if not impossible” to give up market share by cutting crude production, the country’s oil minister said.  Global oil markets are experiencing “temporary” instability caused mainly by a slowdown in the world economy, Oil Minister Ali Al-Naimi  said, according to the Saudi Press Agency.  He reiterated the country’s intention to maintain output amid plunging prices.  “In a situation like this, it is difficult, if not impossible, that the kingdom or OPEC would carry out any action that may result in a reduction of its share in market and an increase of others’ shares,”  Al-Naimi said.  Saudi Arabia, the largest producer in OPEC, will stick to its oil policies, he said.  Steady global economic expansion will resume, spurring oil demand, Al-Naimi said, leading him to be “optimistic about the future.”  Increased supply from regions outside OPEC, where oil-production costs are higher, is affecting the market, Al-Naimi added.  OPEC’s decision to maintain output fanned speculation that Saudi Arabia & other members want North American shale drillers & other producers outside the group to be the first to cut production.  Saudi Arabia & Iran this month cut the official price levels of their main light crude grades for sale to Asia to the lowest in at least 14 years.

Saudi Arabia Says Difficult for OPEC to Give Up Market Share

Nike Inc.
Photo:   Bloomberg

Nike fell after it guided that future orders would trail estimates, hurt by slowing demand in western Europe & emerging markets.  Orders for delivery from Dec thru Apr rose 11%, excluding the effects of foreign-currency exchange-rate fluctuations.  Analysts estimated an 11.3% gain, according to Consensus Metrix.  Orders are closely watched because they are viewed as a proxy for future sales.  In North America, its largest market, orders rose 13%, compared with an estimate of 13.1%.  In western Europe, they also increased 13%, trailing an estimate of 15%.  Orders in emerging markets advanced 1%, below the estimate of 7%.  EPS in the qtr thru Nov 30 rose to 74¢ from 59¢ a year earlier.  The estimate was 70¢.  Revenue jumped 15% to $7.4B, beating projections for $7.15B.  The stock slumped 2.68.  If you would like to learn more about NKE, click on this link:

Nike Drops as Brand’s Future Orders Trail Analysts’ Estimates

Nike (NKE)

After 2 days of massive gains, the stock market is taking a breather.  However, buyers still have the upper hand.  The Saudi comments about oil add fuzziness to what is already an unclear future for oil prices.  MLPs have lost their "darling" status enjoyed for many years & now are like stocks, they go up & down.  In addition, they have to live with higher volatility.

Dow Jones Industrials