Friday, July 30, 2010

Markets little changed after Q2 GDP figures

Stocks have drifting sideways all week & decided to continue with that motion today. Dow fell 30, advancers over decliners 3-2 & NAZ dropped 3. The Financial Index inched higher.


Value 198.18 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change 0.21 (0.1%)

After substantial selling this week, MLPs found buyers. The index rose 1+ to the 324s. The REIT index was up a fraction in the 205s. Junk bond funds were also higher while the VIX was flat at 24 (near recent 3 month lows). Treasuries rallied, viewing the GDP news favorable for gov bonds. The yield on the 10 year Treasury bond dropped 6½ basis points to only 2.93%. The € finally weakened, dropping ½ a penny to $1.30½.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index --- 2 weeks

The GDP news was a negative for oil, but it's it's still close to its highs in the last year. Gold is trying to build a base for more advances.

CLU10.NYM...Crude Oil Sep 10...77.38 ...Down 0.98

GCQ10.CMX...Gold Aug 10...1,172.70 ...Up 4.30

Gold Super Cycle!! Click Here

GDP recovery lost momentum in Q2 as growth slowed to a 2.4% pace, its most sluggish showing in nearly a year & too weak to drive down unemployment. Consumers spent less, companies slowed their restocking of shelves & the trade deficit dragged more on the economy in Q2. In a separate report, the Commerce Dept said the recession was deeper than previously estimated. Together, the reports raise doubts about whether employers will hire enough & consumers will spend enough to invigorate the economy. However, today's report also showed that the economy grew at a 3.7% pace in Q1, much better than the 2.7% pace estimated just a month ago.

U.S. Economy Grew 2.4% in Second Quarter, Below Forecast

The oil spill into Lake Michigan has prompted local health officials to call for the evacuation of as many as 50 homes & recommend residents living close to the Kalamazoo River stop using well water for drinking & cooking after the spill contaminated more than 20 miles of the river. There is plenty of finger-pointing between those leading the clean up & state & local officials who have described the response as inadequate & slow-footed. The pipeline, owned by Enbridge Energy Partners (EEP), is a 30-inch pipe that moves light synthetic, heavy & medium crude oil northeast about 1,900 miles. The affected section of the line stretches from Griffith, Ind, thru Michigan & just over the border to Sarnia, Ontario. EEP saw more selling at the opening, taking the price to 51. Buyers returned bringing it back to a gain of 33¢ in the 53s (although down almost 7 from its high on Mon). Traditionally these units are very low beta, this kind of volatility is eye popping.

Michigan Oil Spill Prompts Evacuations, Finger-Pointingat The Wall Street Journal

Enbridge Energy --- 2 weeks

Chevron (CVX), a Dow stock, had great earnings in Q2, easily beating expectations. EPS was $2.70 compared with 87¢ last year. Revenue jumped 32% to $53B. Expectations were for EPS of $2.44 on revenue of $52.5B. These results are similar to other major petroleum companies. But the stock fell 58¢ in the 75s.

Chevron 2Q income triples on higher energy prices

Chevron --- 2 years

Merck (MRK), a Dow stock, reported a 52% drop in Q2 net income, weighed down by big merger & restructuring charges from buying Schering-Plough , generic competition & other factors. MRK, the world's 2nd-biggest drug company, beat EPS expectations by 3¢ a share, but came up short on revenue & slightly reduced its sales forecast for 2010. EPS for Q2 was 24¢ down from 74¢ in 2009. Excluding a host of one-time items, EPS would have been 86¢, beating estimates of 83¢. MRK forecast full-year net income of 82¢-$1.16 per share or $3.29-3.39 excluding items, a slightly narrower range than before. Analysts are forecasting $3.37. Merck expects revenue of $45.4-46.1B, down slightly from its Apr forecast. The stock dropped 73¢ in the 34s.

Merck Profit Rises More Than Estimated on Cost Cuts

Merck --- 2 years

Earnings stories give mixed messages about the economic recovery & markets keep wandering, not knowing where to go. Dow was not able to charge forward to new highs this week as the 10½K ceiling is proving to be formidable. Maybe next week, with earnings season largely over, it will be able to climb again.

Dow Jones Industrials --- 2 weeks

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