Wednesday, April 27, 2011

Markets hesitate ahead of FOMC announcement

Dow was flat, decliners ahead of advancers 4-3 & NAZ was off 3. Bank stocks moved little.

S&P 500 FINANCIALS INDEX

Value	217.86
Change	0.07 (0.0%)

MLPs sold off. Many unit holders have forgotten about selling, it's been so long. The index fell 2½ to the 386s, off its fresh record high reached yesterday. The REIT index was up pennies in the 245s (an almost 3 year high). Junk bond funds keep inching higher but Treasuries were little changed ahead of the FOMC announcement in a few hours. Oil extended declines (but still at high levels) after the Energy Dept said stockpiles gained 6.16M barrels. Gold has been hanging in above 1505 all week

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.06%
U.S. 2-year		0.68%
U.S. 10-year		3.34%

CLM11.NYM

...Crude Oil Jun 11

...111.27

....

0.94

(0.8%)

GCJ11.CMX

.....Gold Apr 11

.......1,508.50

...

1.50

(0.1%)

Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, will buy Swiss medical devices maker Synthes for 19B Swiss francs ($21.6B) in its largest ever buy to give it a leading position in equipment to treat trauma. The premium was 8.5% over Synthes's closing share price on Tues. The acquisition will likely to close in 2012 & has the backing of both the Synthes & JNJ. A deal had been anticipated after Synthes said 2 weeks ago it was in talks with JNJ. Synthes posted 2010 sales of $3.7B. "Orthopedics is a large and growing $37 billion global market and represents an important growth driver for Johnson & Johnson," said Bill Weldon, JNJ's CEO. The deal is expected to have a modestly dilutive impact on JNJ adjusted EPS in 2012. The stock fell 93¢ but has had a nice run in the last month from the high 50s.

J&J Agrees to Buy Synthes for $21.3 Billion in Cash, Stock

Johnson & Johnson (JNJ)

Boeing Profit Tops Estimates as Military Jet Earnings Rise

Photo: Bloomberg

Boeing (BA), a Dow stock, Co. Q1 profits beat expectations & it reaffirmed profit & revenue guidance for the full year. EPS was 78¢, well above forecasts of 70¢ & last year's 70¢. But operating profits fell 15% & revenue was down 2% to $14.9B, below expectations of $15.3B. Earnings from operations in the commercial airplane unit dropped 25% to $509M as revenue fell 5% to $7.12B when BA delivered fewer 777s than a year earlier. Later this year 777 production should be raised to 7 per month, from 5 now. Defense revenue was flat at $7.6& earnings from operations rose 1% to $671M. BA said its profit & revenue expectations for the full year are unchanged, with EPS of $3.80-4.00 & revenue of $68B - $71B. It still expects to deliver the new 787 during Q3 & the freighter version of its new 747-8 shortly. The stock gained 1.10 to a 3 year high.

Boeing Profit Tops Estimates as Military Jet Earnings Rise

Merck Announces New $5 Billion Share Repurchase Program

Photo: Bloomberg

Merck, a Dow stock, approved additional purchases of up to $5B in treasury stock. "Merck has a history of leadership in returning cash to shareholders," said CEO Kenneth C. Frazier. "Together with our strong dividend, today's action reflects our confidence in Merck's strategy and demonstrates our commitment to delivering shareholder value." The current share repurchase program is now $6.4B. Earnings will be announced Fri AM & analysts are looking for 84¢ in Q1, representing a 1.2% over 2010. The stock was up 13¢.

Merck Increases Stock Repurchase Program by $5 Billion

Merck & Company, Inc. (MRK)

Greek, Irish & Portuguese bonds slumped & costs to insure the securities against default climbed to all-time highs as concern deepened that the nations will need to restructure their debts. Greek 2 year yields rose above an eye popping 25% for the first time, while 10-year yields advanced to €-era highs for the 9th consecutive day. Portuguese 2 & 10 year & Irish 10- year yields also reached records. Even German 2 year notes slid as a report showed inflation in Europe’s largest economy accelerated in Apr. Last year, May was the month when stock markets sold off badly on worrries about Greek & European debts.

Greek, Portuguese Yields, CDS Reach Records as El-Erian Sees ‘Lost Decade’

Stock markets are taking it easy ahead of the announcement by the Federal Reserve. Interest rates will remain remain low for some time, although there might become hints about when higher rates will begin. QE2 has just 2 months left, the FOMC should also give that a mention. The MLP index slipped, but it's entitled. It has gone pretty much straight up for 2½ years with only a few, minor bumps along the way. The yield for the index is approaching record lows of 5.4% reached 4 years ago.