Friday, April 15, 2011

Markets advance despite Greek debt worries

Dow rose 56 (still down 39 for the week), advancers ahead of decliners 2-1 & NAZ was up 4 (held back by Google's 47 decline). Bank stocks keep lumbering along, although held up well today after B of A reported mediocre earnings.

S&P 500 FINANCIALS INDEX

Value	217.27
Change	0.14 (0.1%)

The Alerian MLP Index had another solid gain, less than 3 from its record highs while the Dow Jones REIT.Index added almost 3 to the 237s (4 below its interim highs 6 weeks ago). Junk bond funds were flat but Treasuries had good gains. The yield on the 10 year Treasury bond fell 7½ basis points to 3.40%, where it has been for months. Oil worked its way back to the $109s, not far from the $112 records last week. Gold is in new record territory, nearing $1500. The chart below shows yesterday's prices in red & today;'s in green.

ALERIAN MLP INDEX

Value	380.92
Change	2.73 (0.7%)

Treasury yields:

U.S. 3-month		0.06%
U.S. 2-year		0.69%
U.S. 10-year		3.41%

CLK11.NYM

...Crude Oil May 11

...109.34

...

1.23 ...(1.1%)

Greece plans to implement €76B ($110B) in austerity measures & asset sales to meet budget-deficit goals to avoid restructuring its debt by enacting €26B in deficit cuts & €50B in asset sales through 2015. The measures will cut the deficit to 1% of GDP by 2015, from a targeted 7.4% this year. It will sell stakes in the phone, power, gas, gambling companies & airport to raise funds. The sales aim to slash debt by 20 percentage points of GDP by 2015. Greece will also cut defense spending by €1.2B, reduce public-sector wage costs by €2B & trim spending on pensions by €2.5B. A crackdown on tax evasion could yield €3.5B. The measures are aimed at meeting a target, agreed with the EU & IMF as a condition for the bailout. Despite these reassurances, Greece is still in trouble.

Greece Plans $110 Billion in Austerity Measures, Asset Sales to Cut Debt

Merck (MRK) will retain European rights to 2 lucrative arthritis drugs while ceding rights elsewhere to Johnson & Johnson (JNJ), both Dow stocks, & making other concessions as the drugmakers resolved a high-stakes dispute stemming from MRK & Schering-Plough merger. 2010 revenue from these drugs were about $2.8B. The companies also agreed to divide profits evenly from MRK's distribution of the drugs beginning Jul 1, previously 58% went to MRK & 42% to JNJ. JNJ will also receive a one-time payment of $500M. MRK expects EPS this year in a range of $3.64-$3.76, excluding special items. JNJ said the agreement would have added nearly $500M in sales last year, but that the impact on 2011 earnings is not expected to be significant. Each stock rose about 60¢ with charts that have been dragging for more than a year.

Merck, J&J reach pact on arthritis drug rightsat Reuters

Merck & Company, Inc. (MRK)

Johnson & Johnson (JNJ)

Price at the pump is pushing $3.82, not far from the record $4.11 in 2008. Gas already reached $4 in 5 states.

Source: AAA

Early earnings reports have not been inspiring. Dow's chart shows it has not been doing much for a few weeks. Value stocks I watch, Dividend Aristocrats with higher yields among others, have been doing well recently, but not sure how long that enthusiasm will last. After all, their earnings will be out in a couple of weeks. We're coming up on the one year anniversary of the market sell-off on Greek debt concerns & Greece is still struggling to deal with its extensive borrowings. But this time oil looks to be headed to take out its old highs, adding another major worry for investors.