Monday, August 2, 2010

Markets soar after strong markets in Asia & Europe

Stocks roared out of the gate & remained higher, following the lead of higher markets in Asia & Europe. Reported earnings were good, especially for European banks. Dow was up 178, advancers over decliners better than 6-1 & NAZ added 38. Banks were part of the rally, taking the Financial Index back over 200 (again).


Value 201.52 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change 3.60 (1.8%)

MLPs are surging after last week's setback. The Alerian MLP Index rose 3+ to the 332s. Helping MLPs was the rebound by Enbridge Energy (EEP). It rose 1.42 to the 56s, heading back for its record high of 60 reached just last Mon. Its oil spill into Lake Michigan is being dealt with successfully. The REIT is up a massive 5+ to the 211s. Junk bond funds are up 1-2% while the VIX, volatility index, fell another 1 to the 22s, a 3 month low. As expected, Treasuries sold off, but not that badly. The yield on the 10 year Treasury bond went up 4½ basis points to 2.95% but remains at very low levels which are troubling. The € gained again to almost $1.32, a 3 month high.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index --- 2 weeks

Euro --- 3 months


Oil is participating in the broad based rally, taking it above the important ceiling of 80. The problem is that higher priced oil threatens to put a crimp in the economic recovery. Gold is also sharing in the rally, but remains off its record highs in the 1260s.

CLU10.NYM...Crude Oil Sep 10...81.45 ...Up 2.51

GCQ10.CMX...Gold Aug 10...1,189.60 ...Up 7.90

Gold Super Cycle!!
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The Institute for Supply Management (ISM) said its manufacturing index slipped to 55.5 in Jul from 56.2 in Jun, the slowest pace this year. Economists had forecasted a lower reading of 54.1 (a reading above 50 indicates growth). A swell of production in factories has helped lead the economic recovery as exports increased & companies rebuilt their stocks, which had dwindled during the downturn. But ISM's index shows momentum has been slowing since spring as consumer demand lags investment from businesses.

Manufacturing in U.S. Expanded at Slower Pace in July

Manufacturing index - 1 year

One-Year Chart for ISM PMI (NAPMPMI:IND)

Oshkosh (OSK), specialty vehicle maker, said it turned a profit in the FY Q3 due to soaring sales for defense vehicles & parts, beating estimates. OSK had EPS of $2.31 per share, in Q3 ended Jun 30, compared with a loss of 36¢ per share a year ago as revenue doubled to $2.44B from $1.22B last year. These results easily beat estimated earnings of $1.92 on revenue of $2.3B. Defense segment sales soared to $1.7B from $605B in the same period a year ago. Nearly all of that increase, $1.08B, was thru the company's M-ATV contract, including related aftermarket parts & service sales (the M-ATV is a mine resistant armored fighting vehicle). It sees its defense segment providing "a solid foundation to what we anticipate will be a gradual economic recovery" & expects revenue will be higher in its other segments next year. The stock lost 10¢ to 34.28.

Oshkosh 3Q profit soars on defense unit sales AP

Oshkosh --- 2 years

Stocks had a great month in Jul, Dow was up almost 700. Less noticed is junk bond funds were also creeping higher, but not in a dramatic fashion. This is sign that risk is accepted again, encouraging for stocks. Auto sales for Jul are coming out & they could be weaker than expected. On Fri, the important Jul jobs report is due & it will probably have mixed results.

Dow Jones Industrials --- 2 weeks

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