Tuesday, April 5, 2011

Markets vacillate on weaker service industry growth

Dow inched up 1, advancers barely ahead of decliners & NAZ gained 8. Bank stocks were also little changed.

S&P 500 FINANCIALS INDEX

Value	221.88
Change	-0.44 (-0.2%)

The MLP index fell 1 to 381, stlll looking to take out the old record high, while the REIT index was flat in the 237s. Junk bond funds were mixed as were Treasuries. The yield on the 10 year Treasury bond has remained close to 3.4% for over 3 months. Oil prices held near 2-1/2 year highs as unrest in oil exporting countries in the MidEast & Africa outweighed China's 4th interest rate hike in 6 months. Gold is still kicking around the 1430s, just under setting new records.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.06%
U.S. 2-year		0.78%
U.S. 10-year		3.43%

CLK11.NYM

...Crude Oil May 11

...108.03

...

0.44

(0.4%)

GCJ11.CMX

....Gold Apr 11

.........1,433.70

...

1.50

(0.1%)

The service sector in the US expanded in Mar for the 16th straight month, although growth slowed from the previous month's pace (the fastest in more than 5 years). The Institute for Supply Management index of service-sector activity dropped to 57.3 last month, from 59.7 in Feb, the first drop in 7 months. Still, any reading above 50 indicates expansion. Estimates ranged from 57.7-61. By way of comparison, the index plummeted to 37.6 in Nov 2008 at the height of the financial crisis. The measure of new orders decreased to 64.1 from 64.4 in Feb, while the gauge of business activity fell to 59.7 from 66.9 & the employment gauge dropped to 53.7 from 55.6 a month earlier. The index of prices paid declined to 72.1 from 73.3. Respondents expressed concern about rising fuel prices.

U.S. Service Industries Grew Less Than Forecast in March

Texas Instruments Bets Sales Army Can Spur National’s Growth

Photo: Bloomberg

Texas Instruments (TXN) is buying National Semiconductor (NSM) for $6.5B, paying a 78% premium to merge 2 of the industry's oldest firms into a dominant force in analog microchips used in products ranging from phones to cars. TXN will pay $25 for each NSM share, lifting NSM $10 to over $24.. The acquisition would extend TXN lead in the vast, fragmented market for analog chips. The extravagant premium could be to seal a deal & thwart rival bidders. TXN said it was "comfortable" with the price & estimates $100 million in annual cost savings. TXN rose 56¢.

Texas Instruments Bets It Can Stoke National Semi’s Growth

Texas Instruments Incorporated (TXN)

KB Home (KBH) widened its per share loss for the qtr ended Feb 28 to $1.49 from 71¢ a year earlier. Analysts predicted a loss of 30¢. KBH has communities in some of the markets hardest-hit by foreclosures, including Las Vegas, Riverside County California & Phoenix. The loss of $114.5M included an impairment charge of $53.7M & a loss on a loan guaranty of $22.8M. Revenue declined 25% from a year earlier to $196.9M & net orders slid 32% to 1302. The company delivered 949 homes in the qtr, down 28% from the same period in 2010. The stock dropped 76¢ in what has been a dreary year.

KB Home Reports Wider First-Quarter Loss as Revenue and Orders Plunged

KB Home (KBH)

A major buyout should have brought more buyers into the markets, but it didn't. The economic data was mushy, but not terrible. Problems around the globe are weighing on the markets & approaching earnings season is being viewed with caution.