Wednesday, September 22, 2010

Markets meander after Federal Reserve meeting

Uncertainty about the next moves by the Federal Reserve is starting to take hold in the stock markets. Dow fell 27, decliners over advancers 3-2 & NAZ was off 19. Bank stocks continued their weakness following selling after the Federal Reserve meeting yesterday.


Value 195.68 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -2.77 (-1.4%)

The Alerian MLP Index keeps pushing to reach a new yearly high. Today it's up 1 to the 332s, needing only 4 more to reach a new 2010 high & 11 for an all time record. The REIT index pulled back another 2 to the 213s after touching its 219 yearly high on Mon. Junk bond funds were flattish to higher while the VIX was up a fraction in the 22s. The weak dollar sent the € up another 1½ pennies to $1.34 (essentially at its interim high in early Aug). Treasuries turned in a major rally on expectations the Federal Reserve will buy more bonds. The yield on the 10 year Treasury bond fell 6 basis points to 2.53%, near its recent low levels.

Treasury Yields

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index --- 2 weeks

Gold climbed to a record in New York and London

Photo: Bloomberg

Oil recovered after yesterday's decline but is still in the middle of its longer term 70-80 trading zone. Gold climbed to a record $1,298 after the Federal Reserve said it was willing to ease monetary policy further to boost the US economy, triggering a slump in the dollar.

CLX10.NYM...Crude Oil Nov 10...75.53 ...Up 0.56

GCU10.CMX...Gold Sep 10...1,293.50 ...Up 21.10

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Adobe (ADBE) plunged when the software maker forecast soft demand for its flagship software package. The company said while demand for Creative Suite 5 (CS5) continued to be positive, sales in Japan & to US education customers could be weaker-than-expected. ADBE expects current qtr revenue in its creative solutions business, including CS5, to be flat to slightly down sequentially. Estimates are that Q4 business will also have a sequential decline, which is not the normal seasonal pattern. The stock received numerous downgrades today & fell 6.83 (21%).

Adobe Plunges the Most in Eight Years After Sales Outlook Misses Estimates

Adobe --- 1 month

General Mills (GIS) Q1 net income rose 12% on higher prices & stronger sales of products such as Cheerios, Cinnamon Toast Crunch & Yoplait yogurts. "Economic conditions remain relatively weak and consumer confidence is still pretty low, so it is a challenging time," said Ken Powell, . "But as we've said before, it's still a great time to be in the food business." GIS reported EPS of 70¢ for its Q1, up from 62¢ last year. On an adjusted basis, the company earned 64¢, a penny better than expected. GIS revenue edged up 1% to $3.53B, slightly short of expectations of $3.57B. Revenue in its US business grew 6%. Intl revenue was up slightly (less than 1%), but, excluding the impact of unfavorable foreign exchange, rose 4%. There were big gains for its cereals, snacks & Yoplait yogurt business, but Pillsbury & baking products reported revenue declines. Advertising spending was increased 8% in the qtr & GIS said it would continue to reinvest in the creation & marketing products to drive future growth. The company maintained that its guidance of adjusted EPS at $2.46-2.48 for fiscal 2011. The stock was up 90¢ (more than 2%).

General Mills First-Quarter Profit Rises 12% on Sales of Cereals, Snacks

General Mills --- 2 years

Photo: Yahoo

Microsoft (MSFT), a Dow stock, raised its quarterly div 23% to 16¢ per share, its first increase in 2 years. The company, whose stock is trading at the same level it was 8 years ago, has been under pressure to distribute more of the $37B in cash. In addition, its board approved to sell up to $6B in additional debt to fund working capital, capital expenditures, stock buybacks & acquisitions. The bonds may be sold as soon as today. MSFT is one of only a handful of companies to earn a AAA credit rating. The stock fell 63¢ on the news.

Microsoft Plans Bond Offering After Boosting Dividend

Microsoft --- 2 years

There's not a lot happening, or maybe there is! Stock markets meander but gold & Treasuries are rocketing ahead. Money can not keep going into all 3 areas very long. At least one will have to experience selling.

Dow Jones Industrials --- 2 weeks

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