Wednesday, June 16, 2010

Lower stocks following weak housing data

After rising 500 in 6 days, Dow is taking a breather. Dow is down 19, decliners over advancers 5-2 & NAZ is even. Banks are down a fraction allowing the Financial Index to remain near 200.


Value 198.44 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -0.58 (-0.3%)

MLPs & REITs also need a rest. The MLP index fell 1.30 to 303 while the REIT index fell 1.61 to the 206s. Junk bond funds were flat to down a tad on worries about large numbers of junk bonds which will have to be refinanced in the next few years. The VIX, volatility index, was up a fraction in the 26s. Treasuries rose as the yield on the 10-year Treasury bond fell 4 basis points to 3.27%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index -- 2 weeks

Oil was also down fractionally in sympathy with the stock markets. Gold continues to do well, holding 2% below its recent record highs.

CLN10.NYM...Crude Oil Jul 10...76.50 ...Down 0.44

GCM10.CMX...Gold Jun 10...1,232.00 ...Down 1.20

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Housing starts in U.S. fell to 593,000 pace in May

Photo: Bloomberg

Housing starts fell to a 5 month low in May while industrial output rose, evidence of an uneven recovery. As tax incentives expired, new home building dropped 10% to an annual rate of 593K units, the lowest level since Dec. However, industrial production rose 1.2%, partially attributable to a spike in utilities as rising temperatures prompted many to turn on their air conditioners. But manufacturing output was firm as well, climbing 0.9%. The housing numbers are not considered "good." Surplus housing inventory is taking its toll on the recovery for home builders.

Housing Starts in U.S. Declined to 593,000 Annual Pace in May

Housing starts - 1 year

One-Year Chart for Total starts (NHSPSTOT:IND)

FedEx earnings forecast trails estimates

Photo: Bloomberg

FedEx (FDX) offered a conservative outlook for its new fiscal year even as strong exports from Asia led to healthy Q4 results. It forecast EPS of $4.40-5.00 for next FY, but short of predictions of $5.05. The outlook also reflects expected higher costs as shipping volume picks up. Fred Smith, CEO, said intl growth is especially strong in India, China & Brazil. Smith sees growth in those 3 fast-paced economies picking up steam over the next year. FDX is also seeing double-digit growth in Europe, despite economic concerns there. The company expects EPS of 85¢ to $1.05 for the qtr ending in Aug. In the latest qtr (ended May 30), FDX had EPS of $1.33 compared to a loss of $2.82 in the prior year. Excluding a writedown on the value of assets & aircraft, EPS was 64¢ last year. Revenue climbed 20% in the qtr to $9.43B. FedEx took delivery of 18 planes in the qtr. 6 were Boeing 777Fs, which can fly from the company's hub in Memphis to China without refueling. The stock fell 1.75 to 81.26.

FedEx --- 2 years

Bulls are happy with today's performance, just a mild pullback. The € is $1.23¼, a relatively good price compared to where it has been in the last few weeks. But financial problems in Europe remain. The housing numbers are a grim reminder of how deary that important business is. The pres is trying to show BP execs that he is a man of action (after weeks of little action) in today's meeting. More regulation is in the cards for energy companies & congress is working on the financial regulation bill. But markets are not greatly concerned.

Dow Jones Industrials -- 2 weeks

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