Month: January 2014

By Mitchell Clark, B. Comm.

We won’t really get into the heart of the fourth-quarter 2013 earnings season until late January into early February. Smaller companies typically take longer to report, as they don’t have the large accounting departments that blue chips have.

I’ve noticed that quite a number of Wall Street research analysts have been boosting their 2014 full-year earnings expectations. They’re playing the same old game of cat and mouse with corporations and research analysts. Corporations always want to “outperform” if they can, so they deliberately keep their outlooks pretty conservative.

Companies getting a boost to their full-year earnings outlooks include: Wal-Mart Stores, Inc. (WMT), Microsoft Corporation (MSFT), Colgate-Palmolive Company (CL), Oracle Corporation (ORCL), E. I. du Pont de Nemours and Company (DD), Exxon Mobil Corporation (XOM), and Verizon Communications Inc. (VZ). Even Intel Corporation (INTC) is having its earnings outlook nudged higher by the Street for several upcoming quarters, including all of 2014.

According to FactSet, eight out of 10 S&P 500 market sectors are expected to report an increase in fourth-quarter earnings; these sectors are led by a strong expected gain in financials, followed by the telecom and industrial sectors. Energy is expected to produce a decline, comparatively.

While revenue growth from financials should be lackluster to negative on a comparative basis, a strong expected gain in earnings will be market-boosting news. Countless financials have been doing very well on the stock market since last November.

Over several of the last quarters, companies reported they were able to increase their selling prices without materially affecting demand. Sales growth has been a combination of increased volumes and rising prices.

Extreme monetary expansion wreaks havoc with the natural ebb and flow of capital markets, as we’ve seen. The share price performance of stocks in 2013 dramatically exceeded the amount of earnings growth as compared to 2012; therefore, the case can be made that stocks may sell off on a good fourth quarter.

Regardless, I still see a positive disposition to the equity market and, combined with certainty on short-term interest rates, we could very well get another positive year in the key stock indices.

Now is the time for corporations to live up to expectations. The earnings-multiple expansion last year now needs to be fulfilled and it will be a daunting task, as there is a lack of consistency among industries in terms of business conditions.

Equity market price strength in the financial sector always bodes well for the rest of the market. I would use the Dow Jones Transportation Average and financial stocks as two important indicators for the rest of the market.

At this specific point in time, I don’t see a lot of action to take in terms of a new portfolio strategy. (See “These Two Proven Wealth Creators Should Be at Top of Investors’ Wish List.”)

A well-balanced portfolio, including dividend-paying blue chips, would be well positioned for more gains this year, as large-caps have the earnings power. If anything, the current environment is a great time to re-evaluate your exposure to risk and perhaps lighten up on some winning speculative positions.

Fourth-quarter earnings season is just around the corner, and it should be decent like the last three. This market, however, is looking for a catalyst to sell. It hasn’t found one yet, but there definitely is one on the horizon.

This article Top Market Sectors for 2014 was originally published at Profit Confidential

By George Leong, B. Comm.

There’s a significant cold spell out there in the Mid-East and Northeastern parts of the country. At the same time, the stock market has cooled down a little, beginning the year on a cautious note.

I recently discussed my views for the stock market going forward and while it’s early on, the ability to move higher will largely depend on the economic renewal and its impact on what the Federal Reserve does. New Fed Chair Janet Yellen will be the focal point as Ben Bernanke departs.

Yellen will receive her first piece of key economic data this Friday when the non-farm jobs report for December is due. A decline in the unemployment rate to below seven percent and the creation of 200,000-plus jobs will clearly drive the Fed to seriously continue to taper. What happens to the stock market this year will be dictated by the rate of jobs growth and the number of unemployed.

We also need to see corporate America deliver stronger revenue growth to drive earnings. In the past few years, aggressive cost cuts have driven earnings, which is not sustainable.

If the tapering continues, bond yields will continue to rise to levels that will be difficult for stock market investors to ignore. Look for an initial break at the three-percent level for the 10-year bond to gauge its impact on the stock market.

Should yields rise, I would look at the higher dividend paying stocks, especially those in the small-cap sector that offer great opportunities for dividends and capital appreciation.

The reality is that, given that the stock market was able to rise as much as it did in the past year, the upside moves will likely be more limited and not at the same pace.

Also keep in mind that the stock market has yet to have a major stock correction, which I define as 10% or more, since this current bull market began in March 2009. Into the fifth year of the bull market and looking at the longer-term charts, I still feel the S&P 500 is vulnerable to a stock market correction that could be in excess of the seven-percent maximum we have seen.

But what makes me confident is that a major stock market correction would open up buying opportunities for traders and investors. (See “Five Profitable Plays for the Coming Stock Market Correction.”) It may be this expectation that helps to limit any strong upside advances, at least early on in the year.

The key is to look for opportunities and to look at what I call “chaos” as a buying opportunity.

Be careful with the housing sector, as much of the easy money has been made in this area. The housing market is much stronger than it was in 2008, but you should expect some stalling as mortgage rates begin to rise. I would look at the home supplies companies as an alternative, such as The Home Depot, Inc. (NYSE/HD) in the large-cap area and Builders FirstSource, Inc. (NASDAQ/BLDR) in the small-cap segment.

Should the economy continue to improve, watch for small-cap stocks to advance, but don’t expect them to rise at the same pace as 2013, when the Russell 2000 led the broader stock market with a gain in excess of 30%. Small companies tend to have the flexibility to more easily adapt to changes, so this group should be a key area to monitor this year.

Overall, I remain optimistic that the performance of the stock market will largely be dependent on the fundamentals and less on the flow of easy money into the economy.

This article Stock Market’s Dependence on Easy Money Weakening? was originally published at Profit Confidential

By Michael Lombardi, MBA

All of a sudden, auto sales are declining…

Auto sales in the U.S. economy declined to an annual rate of 15.4 million units in December. In November, this number stood at 16.41 million units—a decline of more than six percent. (Source: Motor Intelligence, January 3, 2014.) Analysts were caught off guard by the decline in December auto sales; they were expecting an increase!

I see the decline in auto sales as being directly related to rising interest rates. And it’s not going to get any better.

For years now (since the Credit Crisis), auto sales have been increasing due to low interest rates. It’s very similar to what happened to the housing market prior to 2007. More and more people went on a house-buying spree when the mortgage rates were at record lows. When mortgage rates started to increase in 2007, the already-inflated housing market got hit hard. The same thing is happening to auto sales now.

Interest rates are rising again. Look at the chart below of the bellwether 10-year U.S. Treasury. Since November, the yield on the 10-year U.S. Treasury has gone up roughly 20%. The higher interest rates go, the weaker auto sales will get. (And we can already see the impact on the auto stocks. The stocks of America’s major car makers are off five percent from their 2013 peak, but key stock indices are near their peaks.)

Chart courtesy of http://stockcharts.com

Rising interest rates will have the biggest impact on auto loans given to subprime borrowers (those who have a lower credit standing).

My readers should note that the delinquency rates on auto loans have been continuously increasing since the second quarter of 2012. TransUnion, a credit information company, expects delinquency rates on auto loans to continue rising right through to the end of 2014. (Source: TransUnion, December 17, 2013.)

I’m just not that bullish on the economy for 2014. Soft auto sales are just one factor to look at. But when we have a stock market that is topping out, a housing rebound starting to get sluggish in certain key markets (again, because of higher interest rates), and corporate earnings growth under pressure, I don’t see consumer confidence improving in 2014 to the point that it will positively impact consumer spending. In fact, I see the opposite: I see a pullback on consumer spending coming in 2014.

This article Why Are Car Sales Down So Much? was originally published at Profit Confidential

By CentralBankNews.info
    Poland’s central bank, which earlier today kept its reference rate steady, said it still expects to keep rates unchanged “at least until the end of the first half of 2014” as the gradual economic recovery is likely to continue in coming quarters while inflationary pressures remain subdued.
    The National Bank of Poland (NBP), which cut rates by 225 basis points from November 2012 through July 2013, said economic data from November indicates “a continuation of the gradual recovery” and the past rate cuts “supports recovery of the domestic economy, gradual return of inflation to the target and stabilization in the financial markets.”
    After its last rate cut in July, the NBP said the cycle of easing and then in November it pushed back any rate rise until at least the end of June 2014 and today repeated this guidance.
    The central bank said data on industrial output and retail sales suggest that activity in these sectors remain on an upward trend while the decline in construction and assembly output has eased, indicating some improvement. Business climate indicators also signal further growth in economic activity.
    But employment growth remains too weak to bring down the still elevated unemployment rate, which reduces wage and demand pressures.

    Poland’s inflation rate fell to a five-month low of 0.6 percent in November from 0.8 percent in October, well below the NBP’s 2.5 percent target. The central bank said most core inflation indices also fell along with producer prices, which indicates low cost pressures in the economy.
    The central bank said the euro area was slowly recovering, yet the pace was limited and diversified across member countries and with moderate growth in global economic activity, inflation should stay low in many countries.
    Poland’s Gross Domestic Product expanded by 0.8 percent in the third quarter from the second quarter for annual growth of 1.9 percent, up from 0.8 percent. In November the Organisation for Economic Co-operation and Development (OECD) raised its forecast for Polish growth in 2013 to 1.4 percent and the 2014 forecast to 2.7 percent. In 2012 Poland’s economy grew by 1.9 percent.

    www.CentralBankNews.info

By HY Markets Forex Blog

The US dollar climbed to a five-year high against the yen on Wednesday, as investors focus on the release of the Federal Reserve (Fed) minutes which is expected to be released later in the day. The minutes are from the Fed’s last month’s meeting, where the Fed Chairman Ben S Bernanke confirmed the central bank would begin to reduce its monthly asset purchases.

The Japanese yen weakened against a basket of 16 major currencies, falling from its two-week high of ¥103.90 on Monday. The yen was weakened by the strong performance in the equities market in Tokyo, with the benchmark Nikkei and Topix index trading higher, adding over 1%. The Japanese yen lost 0.5% to 143.08 per euro, as the euro climbed 0.1% higher to $1.3632.

“Underlying yen sentiment remained bearish on the view that Japan would lag behind its counterparts in tightening monetary policy,” an analyst from Western Union said on Tuesday.

Following the Fed’s decision to reduce its monthly bond purchases, San Francisco Fed President John Williams said yesterday that the US central bank could possibly end the program this year if the US economy continuous to show signs of recovery and stability.”Faster or slower tapering will depend on the economy,” Williams said.

Last month, the Fed policymakers said they will begin to reduce its monthly purchases from $85 billion to $75 billion starting this month.

Japan

The yen weakened against the US dollar, while the Topic index advanced 1.4% higher.

“The stronger dollar, weaker yen trend remains intact,” said Akira Moroga, manager of currency products at Aozora Bank Ltd. “The gain in Japanese stocks is spurring risk-on sentiment” he added.

The Bank of Japan (BoJ) meeting is scheduled to take place January 22, with predictions that investors will continue to sell their positions to make profits on speculation of new quantitative easing measures from the BoJ.

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The post US Dollar Advances Against Yen Before Fed Minutes appeared first on | HY Markets Official blog.

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By HY Markets Forex Blog

Crude oil traded higher for the second day on Wednesday on predictions that the government data will reveal that crude stockpiles dropped for the sixth week in the US, the world’s biggest oil consumer.

The North American WTI crude for February delivery added 51 cents to $94.18 per barrel on the New York Mercantile Exchange stood at $94.15 at the time of writing. While the European benchmark Brent crude for February settlement rose 0.4% higher to $107.76 a barrel on the ICE Futures Europe exchange. Brent crude oil was at a $13.56 premium to WTI.

The strong cold weather in North America also had an effect on oil prices as oil refineries reported production disruptions.

Crude Oil – US Crude Inventories

Crude oil stockpiles in the US dropped by 7.3 million barrels in the week ending January 3, according to reports from the American Petroleum Institute (API).

According to a separate survey compiled by the Energy Information Administration (EIA), US crude inventories dropped by 2.75 million barrels last week. EIA are expected to release the data later in the day.

Crude Oil – Fuel Supplies

Analysts are expecting to see a rise in Distillate inventories, including heating oil and diesel by 2.25 million barrels in the week ended Jan 3, according to a survey. Investors are also expecting to see a rise in gasoline stockpiles by 2.5 million barrels.

Crude Oil – Libya

Libya has restarted its largest oil fields, El Sharara on Monday, with an initial output of 60,000 barrels a day after protesters in the area agreed to end their blockade which has been disrupting production in the country for weeks, the state National Oil Corp (NOC) confirmed.

Production in Libya dropped to 250,000 barrels a day, down from 1.43 million barrels per day in July 2012.

In Sudan, the ongoing crisis continues as the country’s government has rejected the rebels’ demands after meeting each other for the first time on Tuesday.

All eyes are focus on the release of the Federal Reserve’s minutes from the December meeting, which will be released later during the day.

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The post Crude Oil Prices Climbs as US Crude Inventories Declines appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By CentralBankNews.info
    Poland’s central bank held its reference rate steady at 2.50 percent, as widely expected, along with its other main rates, and said in a brief statement that it would provide further details at a press conference later today.
   The National Bank of Poland (NBP) cut its rates by 175 basis points in 2013 and repeated last month that it would keep rates unchanged at least until the end of the first half of 2014. Last July the central bank said its cycle of easing had ended after rates were cut by 225 basis points since November 2012.
    Poland’s inflation rate fell to a five month low of 0.6 percent in November, below expectations, from 0.8 percent in October. The NBP targets 2.5 percent inflation.
    Poland’s Gross Domestic Product expanded by 0.6 percent in the third quarter from the second quarter for annual growth of 1.9 percent, up from 0.8 percent.
    In November the OECD raised its forecast for Poland’s 2013 growth to 1.4 percent from a previous 0.9 percent and the 2014 forecast to 2.7 percent from 2.2 percent. In 2012 Poland’s economy grew by 1.9 percent.

    www.CentralBankNews.info

By CentralBankNews.info
    Romania’s central bank cut its policy rate by 25 basis points to 3.75 percent, its fifth rate cut in a row, and lowered the minimum reserve requirements on both domestic and foreign currency liabilities by banks.
    In a brief statement, the National Bank of Romania said the reserve requirements on leu-denominated liabilities would be cut by 300 basis points to 12 percent while foreign currency liabilities would be cut by 200 basis points to 18 percent starting from the Jan. 24-Feb. 23 maintenance period.
    Further details about the central bank’s decision would be released at a press conference later today.
    Romania’s central bank cut its rate by 125 basis points in 2013, most recently in November, in response to falling inflation.
    In its November inflation report, the bank revised down its forecast for end-2013 inflation to 1.8 percent from 3.1 percent, and the 2014 forecast down to 3.0 percent from 3.1 percent. The central bank bank, which targets inflation of 2.5 percent within a one percentage point band, said it expected inflation to fall below its lower bound during the first half of this year and then gradually rise.
    Romania’s inflation rate eased to a new low for the year of 1.83 percent in November, down from 1.88 percent in October and a 2013-high of 6.0 percent in January. The fall in inflation was due to lower agricultural prices due to a good harvest and a cut in taxes on bread and other bakery products.
    The cut in reserve requirements comes after the central bank in December released a report into the reporting of bad bank debts that showed that the proportion of non-performing bank loans was 21.7 percent at the end of October.

    www.CentralBankNews.info

By HY Markets Forex Blog

Forex trading has resulted in the EUR/USD pair rising in value in 2013. Those who trade the pair may benefit from knowing that the changes in the value of the two currencies were attributed by many to the stimulus of the central banks in both the U.S. and the euro zone. In addition, it was noted that speculation surrounding the actions that these financial institutions will take going forward was factored into the fluctuating value of the exchange rate.

EUR/USD rose last year

In 2013, the common currency rose more than 4 percent against the greenback. It is important to note the differences between the monetary policies being used by the Federal Reserve and the European Central Bank, as Kathleen Brooks, research director at Forex.com in London, told the news source that the latter is experiencing a decline in its balance sheet, while the former is still seeing increases.

The Fed announced at the conclusion of a policy meeting in December that beginning in January 2014, it would reduce the amount of bonds it purchased on a regular basis to $75 billion per month instead of the prior figure of $85 billion. Even though the financial institution indicated that its transactions were slowing, the balance sheet of the organization recently surpassed $4 trillion.

Brooks told the media outlet about how the changing policies of the Fed could result in the greenback rising in value.

“Once the Fed’s balance sheet starts to contract then we could see the dollar strengthen sharply, although this is unlikely to happen at all next year,” she told the news source.

Economic data key to tapering, says expert

However, another market expert emphasized that the pace with which the financial institution gradually reduces and then eliminates its bond purchases will hinge largely on the strength of the figures that are released in relation to the economy, according to Reuters.

“We think things are going to be very data-dependent,” Paul Chappell, chief investment officer of U.K.-based hedge fund manager C-View, told the news source. “At the moment that looks like U.S. numbers are going to be relatively robust compared with some other G7 peers, so the dollar is likely to be relatively robust versus other developed country currencies.”

Central Banks moving in different directions

Regardless of what the economic figures look like further down the road, central banks in varying jurisdictions are moving in vastly different directions in terms of their use of policy to affect the economy, according to Bloomberg. For example, the European Central Bank, which was scheduled to hold a meeting during the week starting on Jan. 6, has mostly made an effort to push stubbornly low price levels higher through the use of stimulus.

“The world’s main central banks have very different things going on, which is an opportunity for investors,” Scott Thiel, managing director, deputy chief investment officer of Fixed Income, Fundamental Portfolios and head of European and & Global Bonds for BlackRock Inc., told the news source. “It’s very important to look at the economies close to inflection points on monetary policy.”

Thiel predicted that central banks across the world have begun their slow withdrawal from using bond purchases to help manage economic growth and inflation, and that the move made by the Fed to start reducing these transactions represents the start of this new trend.

Another factor that could easily have an impact on the decisions of those who trade forex pairs such as the EUR/USD is the benchmark rates that central banks have. In November, the ECB announced its forecast that the 18-nation region could easily run into a “prolonged period” where the price level rises at a very modest rate, according to Bloomberg News.

In addition, Fed officials recently stated that they plan to keep their key rates low “well past the time that the unemployment rate declines below 6.5 percent,” the media outlet reported.

While it seems that both of these financial institutions will likely keep their borrowing costs low for some time, one market expert noted that the ECB may need to purchase assets if inflation in the euro zone does not pick up to adequate levels, according to Bloomberg.

Ken Wattret, who works for BNP Paribas SA in London as an economist, told the news source that the officials in the region’s central bank may opt to start off by buying private-sector securities since they have not formed a consensus opinion on whether they should purchase government debt.

A willingness to engage in further stimulus has been indicated by Mario Draghi, president of the ECB, the media outlet reported. This key official has promised to keep interest rates at a low level for an “extended period,” and has refrained from indicating that rates cannot be cut any further.

Such a situation could easily have any impact on forex trading and the value of the EUR/USD.

The post Forex Trading Results in EUR/USD Rising in 2013 appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

Article By RoboForex.com

Analysis for January 8^th, 2014

EUR/USD

Eurodollar is still moving downwards. Possibly, pair may beak current minimum during Wednesday. If later price rebounds from lower levels, market may start new correction.

Yesterday, after pair completed correction, I opened one more sell order. Market has almost reached level of 38.2%. According to analysis of temporary fibo-zones, predicted targets may be reached during the day.

USD/CHF

Franc continues breaking maximums; market has almost reached several fibo-levels located in upper area. I’ve moved stops on my buy orders to latest maximum in order to secure some part of profit.

At H1 chart we can see, that market is about to reach temporary fibo-zone quite soon. Local correction, which took place earlier, turned out to be quite short, and then price broke maximum. In the near term, instrument is expected to start deeper and more serious correction.

RoboForex Analytical Department

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.