Markets drift lower after disappointing Alcoa earnings

Dow fell 10 taking it below 11K, decliners over advancers 2-1 & NAZ dropped 3. Banks were caught up in the selling, but the Financial Index is coming off a very nice run in the last 2 months.

S&P 500 FINANCIALS INDEX

Value 222.64

Change -1.20

% Change -0.5%

MLPs finally ran into profit taking, the index dropped 4½ to the 309s, following a nice run. The index was hurt by Enterprise Products (EPD) announcing a big offering of its units, taking its price down 93¢. The REIT went up 1½, but has been flattish for a couple of weeks. Junk bond funds did little at their elevated levels. Demand for Treasuries continues strong, the yield on the 10-year Treasury bond dropped 1 basis point to 3.84%.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil & gold also sold off on the gloomy earnings report from Alcoa (AA). Both have had a nice run this year, but may have to give some of that back if sluggish earnings reports suggest demand for commodities are lower than forecasted.

CLK10.NYM

...Crude Oil May 10

...82.75 T

... 1.59 .......(1.9%)

GCJ10.CMX

...Gold Apr 10

...1,147.50

... 14.10 .......(1.2%)

OIL (ETF) --- YTD




GLD (ETF) --- YTD






The Greek gov sold €780M ($1.06B) of 26-week bills at a yield of 4.55%, which drew stronger demand than at a previous sale. Yields more than doubled after Greece won a pledge of aid from the European Union. The auction attracted bids for 7.67X the securities offered. Greece also offered €780M of 52-week securities at a yield of 4.85% with a bid-to-cover ratio of 6.54X. In Jan, the 52-week bills yielded only 2.2%. The package put in place on Sun enabled Greece to fund itself but longer-term fundamentals haven’t changed. It has to put its finances in order against the backdrop of a shrinking economy.

•Greece Sells More Bills Than Planned as EU's Bailout Promise Stokes Demand



Alcoa, Dow stock which starts earnings season, reported a net loss of 20¢ per share in Q1 versus a loss of 61¢ last year (when the company struggled with weak demand in the depths of the recession). These results include 29¢ in one-time charges related to the health care reform law & closing of 2 smelters. Analysts had been looking for earnings of 10¢ (typically they exclude one-time items). Revenue rose nearly 20% to $4.9B (again, below estimates). "2010 will clearly be better than 2009 but it's going to be below historic norms in many of the markets," according to Klaus Kleinfeld, president & CEO. He expects aluminum consumption worldwide to grow 10% in 2010, driven strongly by demand from China & improving demand in the US & Europe. Their average price per metric ton of aluminum in Q1 was $2.33 up from $1.57 last year. AA fell 32¢.

•Alcoa narrows 1Q loss; sees improving demand
AP

Alcoa --- 1 year

Alcoa's earnings were viewed as lackluster. Earnings for the last qtr got poor reviews which could be repeated. Dow huffed & puffed, after struggling for 2 weeks, & finally went over 11K, but was unable to hold that line in the sand. Markets don't like that signal.

Dow Jones Industrials --- 2 weeks

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