Wednesday, July 14, 2010

Mixed markets following mediocre June retail sales

Stocks don't know what to do so they are sliding even after a very optimistic report from Intel (INTC). Dow is down 6, decliners over advancers 2-1 & NAZ is up 4. Bank stocks sold off taking the Financial Index below 200 one more time.

Value 198.18 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -2.44 (-1.2%)

Even MLPs are subject to profit taking. The Alerian MLP Index pulled back 1 to the 322s after a stellar run in the last 2 weeks. The REIT Index dropped 3 to the 195s. Junk bond funds were off a tad. The VIX, volatility Index, rose ½ taking it over 25 after its recent decline. Treasuries were in demand. The yield on the 10-year Treasury bond fell 4 basis points to under 3.08%. The € is still strong at just over $1.27.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index -- 2 weeks

VIX -- 2 weeks

30-Year Treasury Yld Index -- 2 weeks

Gloomy Wed is dragging down commodities, but gold is able to hold above 1200.

CLQ10.NYM...Crude Oil Aug 10...76.70 ...Down 0.45
GCN10.CMX...Gold Jul 10...1,207.20 ...Down 6.10

$$$ Gold Super Cycle $$$
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Americans are torn between whether the gov should focus on curbing spending or creating jobs More than 7 in 10 Americans say reducing unemployment is the priority according to a Bloomberg National Poll. At the same time, the public is skeptical about the stimulus program & wary of more spending (more than half saying the deficit is “dangerously out of control”). With the unemployment rate at a near-record high of 9.5%, the public is closely split on whether another extension of jobless benefits, which is stalled in Congress, is worth the $34B cost. The only deficit-reduction measure that gets strong support is higher taxes on upper-income Americans. The public mood is bleak, with 63% saying they believe the country is on the wrong track, the most negative reading of Obama’s presidency. After a year of economic growth, 71% say the economy is still in recession. Another 13% say the economy is faltering & will dip back into recession. More than half say they are responding to the economic climate by hunkering down with fewer than a qtr saying they are getting back to normal & only 16% see opportunities & are taking risks.

Americans in 70% Majority See More Jobless as Deficit Widens

Retail spending dropped 0.5% in Jun according to the Commerce Dept, following a 1.1% fall in May. Excluding autos, spending was down 0.1%. Much of the weakness came from a drop in auto sales & a decline in gas prices. Excluding autos & gasoline, sales would have risen 0.1% in Jun after a 1% plunge in May. The economic recovery may have shifted into a lower gear towards the end of Q2 which could lead to a disappointing H2. The Jun decline was larger than the expected 0.2% fall. The biggest drag was a 2.3% decline in auto sales, the largest monthly drop since Feb. This report follows a reading last week from the nation's big retailers showing only modest growth in Jun.

Sales at U.S. Retailers Fell for a Second Month in June

Retail sales -- 1 year

One-Year Chart for Monthly % Change (RSTAMOM:IND)

Excluding autos dealers - 1 year

One-Year Chart for Monthly % Change (RSTAXMOM:IND)

Intel, a Dow stock, posted its largest quarterly net income in a decade as large corps bought more computers using Intel's most expensive chips. INTC said companies are starting to replace 4&5 year old PCs now that they have some "breathing room in the economy and their budgets." INTC results topped forecasts & the company raised guidance for 2010. EPS was 51¢, in the qtr ended Jun 26, above estimates of 43¢. The last time Intel's quarterly net income topped $2.5B was in 2000 during the dot-com heyday. Last year, INTC lost 7¢ per share after it paid a $1.45B fine in Europe. Revenue was $10.8B in the qtr, above the $10.25B expected. Its profit forecast also got a lift. Intel expects gross profit margin (a key measure of a company's ability to control costs) of 64-68% of revenue for the full year versus a previous forecast of 62-66%.

Intel posts biggest quarterly profit in a decade

Intel --- 2 years

INTC earnings last night gave futures a lift, extending the favorable outlook for earnings season. But a dismal retail sales report & survey from Bloomberg on the outlook of consumers dampened enthusiasm. Sales & earnings reports should be favorable but guidance for H2 may prove difficult for stock markets to understand.

I changed the color of the blog, hoping it will be easier to read than when it was in blue.

Dow Jones Industrials -- 2 weeks

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