Business News Archives for 2015-08

Investors Dump Stocks

On this last trading day of August, the S&P 500 and Nasdaq are on track for their biggest monthly percentage losses since May of 2012, despite actually gaining ground last week.  The S&P 500 is down about 5% and the Nasdaq is down the same. (CNBC)

US investors pulled $17.8 billion out of stock funds last the week. The outflows from stock funds were the biggest since mid-December of last year. Funds that specialize in US shares bled $11.7 billion, while funds that specialize in foreign shares posted $6.1 billion in outflows to mark their biggest outflows since Jan. 2008. Taxable bond mutual funds bled $4.7 billion. (Thomson Reuters' Lipper)

Someone believes the age of oil is not dead. Warren Buffett's Berkshire Hathaway has disclosed a $4.48 billion stake, or roughly 10.8%, in Phillips 66. (Reuters)

Mark your calendar for potentially market moving news this week.  Wednesday is the ADP private sector employment report and Friday is the big  August government jobs report.  Investors will be mining the numbers for clues on whether the Fed might hike rates at its mid-September meeting or delay to December.

Down 6% for August

The Nasdaq is on pace for its best week in six, while the S&P 500 could chalk up its best week in four. The major averages, however, are all down roughly 6% for the month of August with two trading sessions remaining. (CNBC)

July figures show personal income rose 0.4% and spending rose 0.3% for the month. Income had risen 0.4% in June, while spending was higher by 0.3%. (Fox Business News)

Smith & Wesson reported first-quarter profits of $14.4 million. The results surpassed Wall Street expectations. The firearm maker posted sales of $147.8 million. Smith & Wesson shares have climbed 71% since the beginning of the year. (AP)

Just 119 days till Christmas. Can you hear the sleigh bells jingling? Wal-Mart launches its holiday layaway program today two weeks earlier than last year. The retailer will also reveal the season's toy trends ahead of its rollout of new "Star Wars" merchandise to be released next week on "Force Friday." (CNBC)

Join us Saturday at 10 for Financial Focus, your smart money radio, when Tyler and I will tell you your next moves in this crazy market.

US Economy Grows at 3.7% Rate

I told you on Monday the world was not coming to an end.  Stocks are extending gains on Wall Street, which featured the biggest jump for the S&P 500 since November 2011. The big swings in the markets has indices moving back to just above breakeven at the open. (CNBC)

The government revised its second reading on second quarter GDP from an annual growth rate of 2.3% to 3.7%.  That is a big positive move for the economy and growth.  (Fox Business News)

Michaels reported second-quarter profits of $35.7 million, after reporting a loss in the same period last year. The arts and crafts store operator posted revenue of $984.3 million. Michaels shares have dropped slightly more than 3% since the beginning of the year. (AP)

Dollar General, the No.2 U.S. discount retailer by store count, reported a better profits, helped by strong demand for candy, snacks and tobacco products. Dollar General had about 12,000 stores. Profits rose 12.4% to $282.3 million. Dollar General's sales rose 7.9% percent to $5.10 billion. Same-store sales rose 2.8%. (Reuters)  

J.M. Smucker profits rose as cuts in prices of its coffee brands helped coffee sales in U.S. to rise for the first time in 11 quarters. The biggest U.S. roaster, considered an industry trendsetter, reduced prices for its Folgers and Dunkin' Donuts coffee brands by 6%.  Sales in the company's U.S coffee business rose 12%  in the quarter. Total profits rose to $136.4 million. Net sales at the company, also known for its Jif peanut butter and Crisco shortening rose 47.5%. (Reuters)  

Pain and consolidation in the oil patch

Stocks are sharply higher on Wall Street, but as yesterday showed, that may not mean much by the end of the day. At this point the S&P 500 and Nasdaq could post their largest monthly fall since October 2008. A decline by the S&P 500 today would mark its first seven-day losing streak since November 2011. (CNBC)

Consolidation continues in the oil patch. Oilfield services company Schlumberger is buying Cameron International for $14.8 billion. Shares of Cameron, a provider of flow equipment products, is surging more than 40%. (Dow Jones)

The pain in oil is being seen ever more clearly. Transocean, an off shore drilling company, will cancel two quarterly dividend payments and take $2 billion in impairment charges in the face of falling crude oil prices. (AP)

Specialty truck maker Oshkosh has secured a $6.75 billion contract to replace the U.S. Army and Marine Corps' fleet of aging Humvees with 17,000 tactical vehicles. The value of the contract could grow to $30 billion as the two military branches seek to replace 55,000 vehicles in the future. (Reuters)

Now this is e-commerce. Amazon has launched one- and two-hour delivery of beer, wine and liquor in Seattle through its Prime Now service. Seattle is the first U.S. city to test out the booze-on-demand service following its June rollout in London. (Re/Code)

Oh What a Beautiful Morning ....

Oh what a difference a day can make.  Spurring todays snap back is Chinas move to cut interest rates and lower reserve requirements for banks in an effort to lower corporate borrowing costs. (AP)

Goldman Sachs sought to calm market watchers, saying in a note late Monday that there was little threat of global recession. The bank said growth in developed markets remains intact and relatively shielded from weakness in China and emerging markets. (CNBC)

Not all the news out of China is bad. Boeing raised its forecast for aircraft demand in China over the next 20 years by 5%, estimating 6,330 aircraft purchases during that period. (Reuters)

Best Buy's second-quarter results beat expectations as shoppers picked up major appliances, large screen televisions and mobile phones. Best Buy posted profits of $164 million, up 12% YOY. Sales rose slightly to $8.53 billion. Strength in the domestic segment helped to offset weakness in the international unit, which was hampered by store closures in Canada, ongoing softness in the Canadian consumer electronics industry and a stronger dollar. Online sales rose 17 percent. (AP)

No Need For Alarm

We are having one of those days when if it can sell off it will sell off.

US oil prices are headed for their ninth consecutive week of falls, the longest losing streak since 1986. (Bloomberg)

Let’s put this in perspective.  Markets on average have one 10% decline each year.  The last time we saw a run of the mill correction was four years ago in 2011.  So we were due.  Corrections like this should be expected, anticipated and welcomed as a normal part of the business cycle. Corrections and there short-term volatility are the price we pay as investors to get returns that beat inflation.

So what to do?  If you are a long-term investor with a well-diversified portfolio all you can do is sit tight. This too shall pass.  Selling now is just locking in loses and doing the wrong thing.  

Don’t act on your emotions.  It is normal to be concerned, this correction has been abrupt, but kicking in the flight response in our primitive brain is not appropriate.

Walmart, Home Depot and Dick's Sporting Goods

Walmart's earnings continued to fall in the second quarter due to currency fluctuations and the retailer's investment in employee wages and training. Walmart reported profits of $3.48 billion, down 15.1% from a year ago. The company had sales of $120.2 billion. US stores boosted sales at stores open at least a year by 1.5%. (USA Today)
Home Depot earned $2.2 billion in the second quarter. Sales rose 4.3% to $24.8 billion. Sales at U.S. stores open at least year were up 5.7% from the same-period last year. The company raised its sales forecast for the year to 5.2% to 6% growth. (USA Today)
Dick's Sporting Goods reported second-profits of $90.8 million. The Pennsylvania-based company had sales of $1.82 billion in the period. Dick's shares have climbed 2% since the beginning of the year and 18% in the last 12 months. (AP)
With two Central Oregon locations Petco is filing an Initial Public Offering.   It would be a return to public markets after being purchased and taken private in the summer of 2006. (NY Times)
Oil is down 25 cents at $41.66 a barrel. A Venezuelan bond default is on the radar screen leading to fears that the oil-dependent country could become the first sovereign victim of plummeting oil prices. (CNBC)

Oil is a Two Sided Coin

Warren Buffett has his elephant gun loaded again and may be getting ready to shoot. Charter Communications recently got an increased investment from Warren Buffett's Berkshire Hathaway. The latest government filing also signaled Berkshire may be planning another large investment. (Reuters)
Strength in the U.S. dollar continues to weigh on dividend payouts, which fell around the world for a third consecutive quarter.  Currency movements deducted 12% from the growth rate in dividends. This amounted to some $52.2 billion—the largest quarterly exchange rate effect on dividends ever recorded. On average, dividends fell by 6.7% to around $405 billion in the second quarter. (Henderson Global Investors)
Lots of action in the oil patch. KKR-owned Samson Resources is announcing plans to file for bankruptcy, and hand control of the oil and gas producer to creditors. Samson, like many of its rivals, has been hurt by the extended period of low crude prices. (CNBC)
Williams Companies is the target of a bid by smaller oil and natural gas pipeline company Spectra Energy. Williams put itself up for sale in June after rejecting a buyout bid from Energy Transfer Equity. (CNBC)

China Enters the Fray

If Tuesday's devaluation of the renminbi was China's entry to the currency war, it brought a knife to a gunfight.  The currency fell just under 2% against the dollar yesterday, and another 2% today - which is the biggest two-day fall ever, but still barely makes a dent in its rise of a fifth against both the yen and the euro since last summer.  (FT)

Law enforcement Authorities have dismantled what officials say is the largest to date collaboration between hackers and traders.  The hackers scheme involved tapping into the servers of business news wire providers and feeding the information to traders before the announcements were made public. The SEC tallied the illicit gains at as much as $100m.  (FT)

McDonald's plans to shrink by 59 U.S. locations this year, attempting to reverse its worst sales slump in more than decade. According to a franchise operations document, the chain is closing 184 restaurants and opening 125 new ones in 2015. The move follows seven straight quarters of slumping sales across the nation, and marks the first time in 45 years McDonald's has closed more domestic locations than it has opened. (SA)
And finally, just eight days after it defaulted on bond payments for the first time, Puerto Rico is planning the issuance of $750M more in bonds for several construction and maintenance projects. (SA).  

Jobs, Jobs, Jobs

This morning's closely-watched jobs report is out: U.S. employers added jobs at a steady pace and wages rose slightly in July, but millions of Americans stayed on the sidelines in the latest sign of lingering slack in the labor market.  Nonfarm payrolls rose a seasonally adjusted 215,000. Revisions showed employers added 14,000 more jobs in May and June than previously estimated.  The unemployment rate, which is obtained from a separate survey of U.S. households, held steady at 5.3%  (WSJ)

Apple, the world's most valuable company with a $658bn market capitalization, is losing its lustre: the stock price has fallen more than 10% since mid-July.  You might ask - how does this affect the market?  Every $1 change in Apple's share price results in a .65 point shift in the S&P 500.  Long-term holders of the stock are still soundly in the black - it's up 872% since 2009! (FT)

2015 has been an unusual year for US stocks.  The S&P 500 has never been as much as 3.5% above or below its starting figure for the year, and the first and second quarters saw growth of almost exactly zero - the last time that happened was 1904.  (FT)

The US Trade gap grew 7% to $43.8bn in June, a consequence of the continued strength of the dollar.  Exports declined 3%, on weak Chinese and European demand.  (WSJ)

Gold and Oil Come Crashing Down

Barrick Gold is cutting its dividend and considering asset sales, as it copes with the lowest gold prices in more than five years. The dividend will be cut by 60 percent to two cents per share. (Fox News)

More than half of small businesses that accept point-of-sale card payments are not aware of a major change in chip-card liability coming Oct. 1. The new EMV chip technology is designed to protect in-store payments. But card issuers and merchants who do not pay to upgrade their point-of-sale systems to accept the new chip cards will assume liability for any fraudulent transaction after Oct. 1. (AP)

Oil is down 33 cents at $44.82 a barrel. Oil is hovering near multi-month lows this morning after investors sold crude on worries about rising U.S. gasoline inventories as peak summer demand comes to an end. The national average for unleaded gasoline could fall by another 15%to 20% by the end of the year, and in many states the price at the pump could even fall below $2 a gallon. (CNBC)

Gold is flat at $1085 a Troy ounce.  Gold is struggling  to pull away from a 5-1/2-year low on more upbeat U.S. economic data bolstered prospects that the Federal Reserve could lift interest rates as soon as next month. (CNBC)

Private Sector Adds Jobs

Payroll giant ADP says the private sector added 185,000 jobs in July.  That is slightly below expectations. The report was led by job weakness in mining and oil drilling. The big government jobs report will be unveiled on Friday morning. (Fox News)

Northwest exercise equipment-maker Nautilus reported quarterly sales of $59.7 million, a 23% jump from the same time last.  The company posted a profit of $2.2 million. Direct to customer sales climbed 29% and retail sales climbed 16%. (Portland Business Journal)

The SEC is scheduled to vote today to formally adopt a rule to compel public companies to disclose the ratio between the annual compensation of their CEOs and the median pay of their employees. The vote is likely to split the five-member SEC along partisan lines. (AP)

General Electric is announcing today, a push into cloud-based services, connecting sensors on machines to distant computing centers to track performance and maintenance. (NY Times)

Mortgage volume finally made a move, jackhammered out of three stagnant weeks by a drop in interest rates. Total applications increased 4.7%, with refi loans surging 6%, according to the Mortgage Bankers Association. (CNBC)

Puerto Rico: Not a Good Bet

Puerto Rican government debt prices slid yesterday as investors sold off positions after the US commonwealth failed to make a requisite payment on one its bonds this weekend, setting off what is likely to be a long restructuring process for the territory's $72bn debt load (2035 General Obligation bonds are now trading at $.70 on the dollar).  Puerto Rico's payment this weekend totaled a paltry $628,000 - toward a $58m obligation! (FT)

The sharp rise in the US dollar may slice more than $100bn off corporate revenues at some of America's largest multinationals this year, a sum larger than the sales of Nike, McDonald's, and Goldman Sachs combined.  Companies within the S&P 500 earned roughly 48% of their revenues abroad in 2014.  Diverging monetary policies have pushed the dollar 19% above year-ago levels, including a 22% gain against the euro. (FT)

Auto makers are prospering: industry sales rose 5.3% to 1.51 million vehicles in July, and are on pace to exceed 17m for the first time since 2001.  With the national average for fuel prices at $2.65 a gallon, consumers are snapping up trucks and SUV's.  Auto makers have already begun lobbying to relax fuel economy restrictions, arguing their capital investments in improving fuel economy have been made in vain. (WSJ)

Worldwide acquisition-related debt issuance has reached $290bn so far this year, which is the highest year-to-date total on record and triple the amount seen at this time last year.  With interest rates low in the US - at least for the time being - and the European Central Bank's launch of quantitative easing, credit is cheap. At the same time, for many companies, organic growth is hard to come by, prompting companies to look at acquisitions for growth. (Dealogic)

China and Greece Raise New Concerns

The Athens stock market plunged today, reopening for the first time in five weeks. It dropped more than 20% at the open. Greek banking stocks were the worst hit. (CNBC)

U.S. labor costs in the second quarter recorded their smallest increase in 33 years amid tepid gains in the private sector. The Employment Cost Index, edged up 0.2%. That was the smallest gain since the second quarter of 1982. In the 12 months through June, labor costs rose 2.0%. (CNBC)

A key China economic indicator took a sharp turn for the worse, with the final reading for the Caixin China purchasing managers index for July surprising with a drop to a two-year low. (CNBC)

Oregon’s Columbia Sportswear reported a loss of $6.5 million in the second quarter. The maker of outdoor gear posted sales of $380.2 million. Columbia Sportswear shares have risen 40% since the beginning of the year and 62% in the last 12 months. (AP)

Oil is down 68 cents at $46.44 a barrel. Oil prices are at their lowest levels in six months, knocked by fresh evidence of growing oversupply and the data highlighting slowing demand in China. (Bloomberg)


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