Monday, April 11, 2011

Markets drift lower in spite of buyouts

Dow was up all of 1, decliners ahead of advancers 5-2 & NAZ fell 8 (hurt by Apple falling 4+ to a 3 month low). Bank stocks were also soft as the Financial Index returned to its staring value at the start of 2011.

S&P 500 FINANCIALS INDEX

Value	22158
Change	-0.12 (-0.1%)

The MLP index fell back 2+ to the 279s while the REIT index was up pennies in the 233s. Junk bond funds slipped a few pennies & Treasuries hardly changed but the yields remain high relative to recent months. Oil was hit with profit taking, although $109 is still very high! Gold fell (green line in the chart) on sales by investors after a rally to a record of $1478 an ounce.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.04%
U.S. 2-year		0.81%
U.S. 10-year		3.57%

CLK11.NYM

...Crude Oil May 11

...109.43

...

3.36

(3.0%)

Endo Pharmaceuticals (ENDP) is buying American Medical Systems (AMMD), a urology & pelvic health company, for $2.6B to expand its medical device business. ENDP is offering $30 a share in cash & will assume $312M in AMMD debt. AMMD reported $542M in sales for 2010 with almost half its revenue coming from sales of men's health products & drugs for urinary incontinence & impotence. The deal is the 4th for ENDP in less than a year. The deal should close late in Q3 & will reduce EPS at ENDP by 61¢ in 2011 & about 5¢ in 2012. But it is should boost EPS 25¢ in 2013 with $50M in cost savings. ENDP added 21¢ to 41.06 while AMMD shot up 7.17 to the 46s

Endo Pharma buying American Medical for $2.6B- AP

Endo Pharmaceuticals Holdings Inc. (ENDP)

American Medical Systems Holdings, Inc. (AMMD)

Photo: Yahoo

There are signs that people are cutting back on driving, reversing a steady increase in demand for fuel as the economy improves. For 5 consecutive weeks, Americans have bought less gas than they did a year earlier, according to MasterCard Spending Pulse. In the week of Apr 1, drivers bought 2.4M fewer gallons than they did one year earlier (a 3.6% drop), the biggest decline since Dec when many stayed home because of snowstorms. Before the decline, demand was increasing for 2 months. Analysts are generally sticking to forecasts of a high of $4 a gallon, but some have predicted $5. The price of gas at the pump averaged $3.77 yesterday, a new high since the lofty days of 2008

Drivers start to cut back on gas as prices rise- The Daily Ticker
State's Graph

Source: AAA

Besides Aloca (AA) reporting Q1 earnings shortly, many of the biggest banks will announce by week's end. Bank stocks have been mushy for weeks, not a good sign for them. Now that the federal gov remains open, the next big battle has begun. The debt ceiling must be raised above $14T within about 35 days. The Treasury can juggle a litte to buy more time, but the absolute deadline is around mid Jul. After that, the FY2012 budget has to be worked on by congress & the senate which are sharply divided. Reps are looking for BIG budget cuts, good for putting controls over massive gov spending but hard on the economic recovery.