Friday, October 15, 2010

Markets ease back on uncertainty about Federal Reserve actions

Stocks sank but are recovering from early losses.  Dow is down 32, decliners ahead of advancers 3-2 but NAZ is up 18 helped by a favorable report from Google (GOOG).  Bank stocks have also partially recovered from their lows but the Financial Index still looks very weak. 


Value 193.94 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -2.34   (-1.2%)

The MLP index index fell back almost 2 to the 248s, profit taking which is understandable given its run in recent months.  The REIT index was up a fraction in the 219s, essentially at its yearly highs.  Junk bond funds were mixed at their high levels for 2010.  Treasuries sold off.  The yield on the 10 year Treasury bond rose 5 basis points to 2.54%.

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

10-Year Treasury Yield Index   ---   2 weeks

Oil fell following lower stock markets, but remains near its highest levels in more than a year.  Gold declined on concern for further policy easing in the US prompted selling in gold.

CLX10.NYM...Crude Oil Nov 10.....82.11 ...Down 0.58  (0.7%)

GCV10.CMX...Gold Oct 10........1,369.20 ...Down 7.50  (0.5%)

Gold Super Cycle Link! Click Here

US consumer sentiment unexpectedly dipped in early Oct to its weakest level since Jul, with buying plans on the decline.  The Thomson Reuters/University of Michigan's preliminary Oct reading on the overall index on consumer sentiment came in at 67.9, down from 68.2 in Sep & below the 69.0 median forecast.  The survey's barometer of current economic conditions at 73, compared with 79.6 in Sep, was at the lowest level since Nov 2009.  The survey's gauge of consumer expectations rose to 64.6, above last month's 60.9 reading while the measure on consumers' 12-month economic outlook rose to 70 compared with 61 in Sep.  The survey's one-year inflation expectations measure rose to 2.6% from 2.2% last month, while its 5-10 year inflation outlook index was unchanged from Sep at 2.7%.

U.S. Michigan Consumer Sentiment Index Unexpectedly Declined in October

Consumer sentiment - 1 year

One-Year Chart for Sentiment (CONSSENT:IND)

Expectations - 1 year

One-Year Chart for Expectations (CONSEXP:IND)

Current conditions - 1 year

One-Year Chart for Current (CONSCURR:IND)

Google Rises Most in Two Years, Sales, Profit Top Estimates

Photo:  Bloomberg

Net income in Q3 for Google surged 32% & would have been even higher if management hadn't decided to hire more workers, buy other companies & invest in more equipment to keep its services humming.  Q3 EPS was $6.72 up from $5.13 last year.  Excluding certain expenses, GOOG earned $7.64, topping expectations of $6.69.  With business going so well, GOOG added 1500 workers in Q3, the most during any qtr since the spring of 2007.  Although it remains a small piece of GOOG business, CEO Eric Schmidt remains convinced that the company will bring in more ad revenue from mobile phones than it does from computers in homes & offices.  Text links placed above or alongside search results are still Google's main source of revenue, which totaled $7.3 billion, a 23% increase from last year.  The stock jumped 52 to 293, its highest level since Jan.

Google Jumps Most Since 2008 as Sales Top Estimates

Google   ---   2 months

General Electric (GE), a Dow stock, said Q3 income fell 18% because a Japanese finance division required additional cash reserves. Lower equipment sales, reflecting a slowdown in the once red-hot US manufacturing sector, also damped results.  The industrial & financial giant reported EPS for Q3 of 18¢ which compares with 23¢ last year.  Excluding $1.1 billion in reserves GE had to add to its Japan consumer finance business, the company earned 29¢, 2¢ above estimates.  However, revenue slipped 5% to $35.9B, falling short of estimates by $1.7B.  There were double-digit profit declines at NBC Universal & its technology infrastructure businesses.  Overall, the US manufacturing sector is seeing a more modest pace of growth following a rapid increase in activity when companies rushed to replenish inventories coming out of the recession.  GE's health care business was the only industrial division with a significant 14% profit increase.  GE Capital, the company's lending arm that suffered huge losses during the financial crisis, saw a year-over-year profit increase from $141M to $871M.  GE expects revenues in its industrial division to be flat in Q3 & its overall order backlog remained steady at $172B. Higher equipment & service orders are expected to help drive company profits next year.  "Third-quarter 2010 results should give investors confidence that a renewed GE should grow earnings and dividends in 2011 and beyond," said CEO Jeff Immelt.  The stock fell 80¢ to 16.36 after lumbering along in 2010.

General Electric   ---   2 years

Ben Bernanke, the Federal Reserve Chairman, signaled the central bank may inject more monetary stimulus to bolster the economy.  But that left the markets hanging, unable to move up.  MLPs & gold fell on profit taking.  Dow is up more than 10% in Sep & Oct.  It will need help from strong earnings reports to advance & early indications are mixed at best.

Dow Jones Industrials   ---   2 weeks

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1 comment:

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