Tuesday, January 12, 2010

Stocks edge lower after Alcoa earnings

Following unsatisfactory earnings from Alcoa (AA), Dow stock, last night, markets opened soft. Dow fell 29, decliners over advancers 2-1 & NAZ was off 17. Banks slipped, hurt by a proposed plan to tax banks which received federal help during the financial crisis.


% Change

The MLP index fell a fraction in the 293s & the REIT index dropped 2. Real estate faces problems from high vacancy rates which are likely to rise. But junk bond funds remain hot, up again. AA's disappointing earnings increased demand for Treasuries. The yield on the 10-year Treasury bond sank 9 basis points to 3.73% taking it away form the high levels it has been at.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-year Treasury Yld Index - 1 month

Oil fell to the 81s on expectations that frigid temps in the northern hemisphere will ease. Even cold weather systems need a break. Gold is showing last night's close at 1150.

CLG10.NYM...Crude Oil Feb 10...81.55 ...Down 0.97

President Obama is weighing a levy aimed at recovering tax dollars from the rescued financial institution, seeking modifications to the law that sent $Bs in bailout money. The 2008 law that created the Troubled Asset Relief Program requires the president to seek a way to recoup unrecovered TARP money from financial institutions 5 years after the law was enacted but does not specify how the money should be recovered. Such a plan could raise up to $120B from banks, not a plus for bank stocks.

Obama Plans to Raise as Much as $120 Billion From Bank Fees to Refund TARP

photo: Bloomberg

KB Home (KBH) turned a profit in its Q4, the first time since early 2007, helped from a new tax rule that allowed it to offset past losses. KBH earned $1.31 a share, in the 3 months ended Nov 30, including a tax gain of $192M. However, on a pretax basis, KB Home lost $91 million as it abandoned land contracts & had to write down the value of joint ventures & inventory of homes. In the Q4 of 2008, the builder lost $3.96 a share. Revenue dropped to $675M from $919M in the prior year. KBH was the 5th-largest homebuilder in 2008. The stock dropped 85¢ to 15.53.

KB Home Reports First Profit Since 2007 on Tax Boost

KB Homes --- 1 year

Stocks absorbed the first earnings report pretty well, but more are coming. JP Morgan (JPM), a Dow stock, will lead bank earnings reports on Fri.

Dow Jones Industrials --- 2 weeks

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