Thursday, April 28, 2011

Markets rise on strong earnings reports

Dow shot up 72 to an almost 3 year high, advancers ahead of decliners 3-2 & NAZ rose only 2 ahead of the earnings report from Microsft (MSFT). Bank stocks had a good day but the Financial Index continues lumbering around 220.

S&P 500 FINANCIALS INDEX

Value	220.94
Change	1.76 (0.8%)

The MLP index has recouped energy & is back at new record highs while the REIT index shot up 3 to an almost 3 year high (above 250). Junk bond funds were a penny or 2 lower from their lofty levels while Treasuries were stronger on inflation fears. The yield on the 10 year Treasury dropped 6 basis points to 3.31%, the low region of its zone in recent months. Oil fell from a 31-month high as the US economy grew at a slower pace in Q1 than forecast & jobless claims unexpectedly rose. Gold surged to a record for the 2nd straight day (the green line in the chart is today's trading) after the Federal Reserve pledged to keep borrowing costs low, eroding prospects for the dollar .

ALERIAN MLP INDEX

Value	390.02
Change	1.12 (0.2%)

Treasury yields:

U.S. 3-month		0.03%
U.S. 2-year		0.62%
U.S. 10-year		3.31%

CLM11.NYM

....Crude Oil Jun 11

.....112.87

....

0.11 (0.1%)

Pending Sales of Existing Homes in U.S. Increased 5.1%

Photo: Bloomberg

The number of contracts signed to buy previously owned homes rose more than forecast in Mar. The index of pending home resales climbed 5.1% after a revised 0.7% increase in Feb, the National Association of Realtors said, versus a forecast of 1.5%. Improving job market, falling home prices & low borrowing costs may help to attract more buyers in coming months. However, foreclosures are worsening the glut of unsold properties. Any increase is coming off a depressed base & it will take many increases to have a substantial impact on this soggy market.

Pending Sales of Existing Homes in U.S. Increase 5.1%, More Than Estimated

Photo: Yahoo

Eastman Kodak lost $246M in Q1, its 3rd quarterly loss in the last year, on weaker sales of digital cameras & film. The loss amounted to 91¢ a share which compares with net income of 40¢ last year when results were swelled by $550M in one-time revenue from a digital-imaging patent-litigation triumph. Excluding items, EK lost $1.13 per share & revenue dropped 31% to $1.3B from $1.9B last year. Analysts expected an adjusted loss of 48¢ on revenue of $1.41B. Sales of low-end cameras have been hurt by lingering weakness in discretionary consumer spending & stiff competition from smart phones & video cameras. Part of the decline can be attributed to its attempt to shift to pricier cameras with higher profit margins. The stock lost 32¢, going below $3.

Kodak posts 1Q loss on weaker salesAP

Eastman Kodak Company (EK)

Dow Chemical Q1 income gained 34% on stronger sales of products used in everything from smartphones to farming. Sales were robust in emerging countries, such as in the Asia Pacific region & Latin America, but it also saw improvement in regions where economic growth has lagged, such as North America. DOW believes the economy will continue to improve in the US, Western Europe & other developed countries despite high unemployment rates, lingering sovereign debt problems & inflation concerns. EPS rose to 54¢, above 41¢ last year. Adjusted to exclude certain one-time items, EPS was 82¢ & revenue increased 10% to $14.7B. Analysts expected EPS of 67¢ on sales of $13.9B. Prices rose 12%, offsetting higher energy costs. All operating segments reported double-digit price increases, except electronic & specialty materials, health & agricultural sciences (each had 3% increases). The stock rose 79¢ but this is also a reminder that inflation is picking up steam.

Dow Chemical 1st-quarter earnings grow 34 percent AP

Dow Chemical Company (The) (DOW)

The average price of gas at the pump yesterday was $3.89 & the trend below is ugly.

Markets continue to roar ahead although NAZ was quiet (its breadth was barely positive) as earnings news is driving the rise. But more signals about higher inflation are worrisome & that has sent gold to records only dreamed of last year. European debt issues are lurking in the background, the debt limit for the Treasury has to be raised shortly (a hot polictical debate) & high unemployment rates continue (among other problems). But buyers remain in control of the markets. Dow is up an impressive 300 this week in the heart of earnings season. Not sure earnings deserve that much respect when projecting them forward.