Markets rise on hopes for Greece bailout II

Stocks started strong, sagged at midday & gained in the PM to finish at their highs.  Dow rose 128, advancers over decliners 3-1 & NAZ was up 38.  There was also late day buying in bank stocks, the Financial Index finished near its daily highs (but down about 7 in May). 

S&P 500 FINANCIALS INDEX

Value	213.09
Change	2.04     (1.0%)

The MLP was up a fraction in the 367s while the REIT index was up 4 to its 2011 highs at 350.  Junk bond funds were a little lower & Treasuries gained slightly, bringing the yield on the 10 year Treasury closer to 3%.  Oil had another good day & may be heading for its 2011 highs of 107 while there was profit taking in gold.

ALERIAN MLP INDEX

Value	367.64
Change	0.46    (0.1%)

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.461%
U.S. 10-year	3.048%

CLN11.NYM

...Crude Oil Jul 11

...102.63

... 2.04  (2.0%)

Photo:   Yahoo

Greece appears to have agreed a tax cut with its intl lenders to avoid a debt default.  But the opposition said this would still not win its support.  Intl lenders are demanding leading Greek political parties sign up to the latest austerity & reform drive to ensure that Greece keeps tackling its huge budget deficit for years to come, whoever's in power.  A German source said European Union, IMF & ECB inspectors had struck a deal with the Socialist gov on a VAT cut.  Greece's conservative opposition demanded tax cuts, including a 15% flat rate for corp tax, as the price for a deal with the gov, which the EU has insisted on as a condition for more funds.  The VAT deal has not been officially confirmed & the timing of any cut remained unclear.  "As the negotiations are not yet over, it would be inappropriate to reveal everything I know," a gov spokesman said. "We shouldn't create expectations that may not be fulfilled."  The drama plays on, but a final deal is still down the road.

Greece Moves on Austerity Deal, Opposition Wants More- Reuters


Intel, a Dow stock, is promoting a new type of thinner laptop called an ultrabook, to help the personal-computer industry fend off a challenge from the iPad from Apple & other tablets.  The new machines will be less than an inch thick, have days of battery life on standby, start up in just seconds & retail for less than $1K according to INTC Exec VP Sean Maloney.   INTC aims to convert 40% of consumer laptops to the new category by the end of 2012.“We want to find new ways to propel the PC forward,” Maloney said.  “With what has happened in the tablet space, there is a ‘hurry-up’ to the PC industry.”  The stock was up 30¢.

Intel to Challenge Apple’s IPad With ‘Ultrabook’

Intel Corporation (INTC)

Photo:   Bloomberg

Apple CEO Steve Jobs will deliver the keynote speech the Apple conference next Mon. The speech will feature new Mac software, Lion, & the next version of iPhone & iPad software.  The keynote will also feature an "iCloud" service, but AAPL didn't explain what the service will do.  AAPL rose 10.42 after trading flat for most of this year.  Just hearing that Steve Jobs is back brought most of the buyers today.

 Apple’s Jobs to Unveil ICloud, New Software

Apple Inc. (AAPL)

 


The price for gas at the pump fell another 3¢ but has to be near its bottom with oil well over $100 & possibly headed higher.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.780	$3.923	$4.049	$4.012	$3.231	$4.251
Yesterday Avg.	$3.785	$3.929	$4.055	$4.016	$3.244	$4.269
Week Ago Avg.	$3.828	$3.972	$4.099	$4.049	$3.281	$4.317
Month Ago Avg.	$3.943	$4.081	$4.209	$4.153	$3.326	$4.377
Year Ago Avg.	$2.732	$2.901	$3.005	$3.004	$2.199	$2.894

Source:   AAA


Stocks finished the month on a positive note, however Dow still fell 240 in May.  Last May was worse, but the chart below shows Dow has been treading water for weeks.  The MLP index rebounded off the 350 lows, considered an important technical test, but has been in a rut around around 365 since then.  Bailout II for Greece is not a done deal yet, although the markets are treating it as if it were final.  Auto sales for May should be reported tomorrow & Fri is the big unemployment report.  Expectations are for an increase of 180K jobs while unemployment is stuck at its high levels.

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Stock markets climb on hopes for another European bailout

Dow rose 64 (half its advance at the earlier highs), advancers over decliners 5-2 & NAZ added 16.  Bank stocks led the way up, but are also off their highs of the day.

S&P 500 FINANCIALS INDEX

Value	212.11
Change	1.06   (0.5%)

The Alerian MLP Index is up a fraction in the 367s, but has done little in May after plunging at the start of the month.  The REIT index rose 2 to the 248s, just below its 2011 high of 250.  Junk bond funds were mixed to lower, still near or at post recession highs. Treasury yields are at 5 month lows & the yield on the 10 year bond may be testing the 3% level soon.  Oil climbed, trimming the biggest monthly drop in a year, on signals the European Union will approve aid for Greece.  Gold was up a tad & has done well in May, a tough month for other markets.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.472%
U.S. 10-year	3.060%

CLN11.NYM

...Crude Oil Jul 11

...102.71

... 2.12

(2.1%)

GCM11.CMX

...Gold Jun 11

.....1,538.90

... 2.60

(0.2%)

Consumers are losing faith that the economy will keep improving.  The Conference Board's Consumer Confidence Index fell to 60.8 from a revised 66 in Apr on worries about jobs & inflation for groceries & gasoline, significantly under expectations for an increase to 67.  Results from the survey have been choppy in recent months, rising in Apr but falling in Mar. Before that, the measure had risen for 5 consecutive months & hit a 3-year high in Feb.  The index is still far from the reading of 90 that indicates a healthy economy which hasn't been approached since the recession began in Dec 2007.  The Conference Board says dimmer expectations of business & job conditions 6 months from now were behind the decline.

 Consumer Confidence Slumps to 6-Month Low

 

Photo:  Yahoo

Home prices in major areas have reached their lowest level since the housing bubble burst in 2006, driven down by foreclosures, a glut of unsold homes & the reluctance or inability of many to buy.  Prices fell from Feb to Mar in 18 of the metro areas tracked by the Standard & Poor's/Case-Shiller 20-city index, prices in a dozen markets have reached their lowest points since the housing crisis began. Prices in Mar rose only in the Seattle & Washington, DC metro areas (no recession in DC).  The nationwide index fell for the 8th straight month.  A record number of foreclosures are forcing prices down, & they are expected to keep falling through this year.  The 12 cities now at their lowest levels in nearly 4 years are: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., & Tampa.  Some of the worst declines in home prices are in cities hit hardest by unemployment & foreclosures, such as Phoenix, Tampa & Las Vegas.  In the 7 years before its peak in July 2006, the home-price index surged 155%. Since then, it's fallen 33%.

Home Prices in 20 U.S. Cities Fall to 8-Year Low


EU leaders will decide on additional aid for Greece in Jun & have ruled out a “total restructuring” of the nation’s debt according to euro-area finance ministers.  Inspectors from the EU, the IMF & the European Central Bank (ECB) will wrap up a review of Greece’s progress in meeting the terms of last year’s €110B ($158B) bailout in the next few days. Then the EU will formulate its plan for further aid to Greece.  Under the terms of the rescue package, Greece was due to return to financial markets & sell about €30B of bonds next year. With its 10-year bonds yielding 16.4%, the EU has indicated Greece will need more aid to plug its financing gap. The IMF has threatened to withhold its share of the payments until the EU explains how Greece will be funded. If, as expected, it turns out that Greece isn’t meeting the program’s conditions, euro-region countries must determine what steps Greece can undertake to get back on track in addition to what it’s doing already.  EU & ECB officials remain divided over how to aid Greece.

Greek Aid Package to Be Decided by June


Stock markets aren't really doing all that much, but the whiff of another bailout for Greece is enough to bring out buyers.  The consumer confidence data today is not encouraging for the US economy & its message is similar to other reports about a recovery that is sputtering.  When compared to past recoveries, this one is not does not get high marks.  In particular, high unemployment dragging on along with a housing market that shows no signs of recovery are holding back stock markets from further advances.  Presently Dow is down over 300 in May, less bad than last May but not encouraging for Jun.  Plus the outcome for Greek debt remains fuzzy.

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Higher stocks on low volume

Dow had a good rise on a largely non event day going into a long holiday weekend.  It finished up 38, advancers ahead of decliners 3-1 & NAZ rose 13.  Bank stocks, usually market leaders, finally had a good day but the chart below shows the Financial Index is still down in the dumps longer term.

S&P 500 FINANCIALS INDEX

Value	210.92
Change	1.57   (0.7%)

The Aleiran MLP Index was up a fraction & has gone nowhere this week after a big pop off its 350 low last last week. The REIT had a better week.  It's up a fraction to 246 today & up 3 this week.  Junk bond funds inched higher in a good week for them,  Treasuries were strong on European debt problems & a growing awareness that the economic recovery is slowing.  The yield on the 10 year Treasury bond fell 8 basis points to under 3.1%, a key support level.  Oil has been mostly sideways, above $100, while gold rose $35 this week & is near its record high of $1577.

ALERIAN MLP INDEX

Value	366.77
Change	0.57   (0.2%)

Treasury yields:

U.S. 3-month	0.041%
U.S. 2-year	0.476%
U.S. 10-year	3.074%

CLN11.NYM

...Crude Oil Jul 11

...100.42

... 0.19  (0.2%)

Johnson & Johnson, a Dow stock & Dividend Aristocrat, rose as analysts increased price target for its stock a day after a positive update on its prescription drug business.  JNJ told analysts that the company is on pace to have nearly 20 new drugs approved between 2009 & 2015.  Productivity is up & generic competition is subsiding.  JNJ will seek approval of 11 new drugs by 2015, after getting 6 new medicines approved since 2009 & 2 others could get approved very soon.  Potential blockbusters under review or in final-stage testing include Xarelto, for preventing strokes & other dangerous blood clots, a new diabetes pill called canagliflozin & bapineuzumab, which could be the first Alzheimer's disease drug to slow mental decline.  Its stock has been under pressure after its revenue & reputation have repeatedly taken hits over nearly 2 dozen product recalls since Sep 2009, mostly in its consumer health division.  The stock is up $9 in the last 2 months after years of a lethargic performance (up $1.26 today).

J&J shares climb after upbeat update on its drugs AP

Johnson & Johnson (JNJ)

George Papandreou
Photo:   Bloomberg


George Papandreou, Greece's prime minister, has ruled out early elections after opposition leaders rejected his new plea for cross-party agreement on new austerity measures.  Papandreou pledges to get Greece out of its acute debt crisis, "with or without broader political consensus."  The country has been kept solvent for the past year through gradual release of a €110B ($157B) intl bailout.  But a first batch of austerity measures failed to ease market concerns that the economy can be salvaged, & Greece's creditors are urging new cutbacks & extensive privatizations.  The main opposition conservative party rejected a gov plea for cross-party agreement on new austerity measures, drawing swift criticism from the European Union.  Its leader, Antonis Samaras, said he could not endorse a program that would "flatten the Greek economy and destroy Greek society" -- rejecting the call for cooperation during strong pressure from the EU & investor worries about a default.  This Greek drama plays & could get ugly, affecting other countries as it did last year.

Greece’s Papandreou Vows to Press Ahead With Austerity Measures to Win Aid


Apple, with the 2nd largest market cap in the world, has a soggy stock this year after many analysts posted target prices of $400-$450.  The iPhone & iPad are leaders in growing global markets markets, but AAPL is facing tons of competition.  That can lead to slowing growth rates & lower profit margins.  The chart suggests the the stock market is catching on although it rose $2.41 today.

Apple Inc. (AAPL)

The price for gas slipped a fraction of a penny yesterday.  With oil above $100, that may be the end of its slide.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.809	$3.952	$4.078	$4.025	$3.247	$4.273
Yesterday Avg.	$3.813	$3.952	$4.080	$4.032	$3.257	$4.287
Week Ago Avg.	$3.886	$4.029	$4.157	$4.080	$3.287	$4.325
Month Ago Avg.	$3.879	$4.017	$4.148	$4.140	$3.274	$4.308
Year Ago Avg.	$2.759	$2.929	$3.035	$3.024	$2.210	$2.908

Source:   AAA


This must have been the lightest volume day this week with NYSE floor volume of 0.7B shares (one of the slowest days in recent years).   Very little was decided, but on balance the buyers were in command.  Dow is down about 370 in May with major problems looming (Greek debts, the budget deficit in the US, a slowing economic recovery in the US & China trying to slow the rapid expansion of its economy).  One more day of trading in May.  This will be a down month for the markets, but less bad than last year.  However, this time Greece did not gotten a bailout & the US economy is sputtering.  Next week will bring auto retail sales for May & the big jobs report on Fri.   Have a good weekend!

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Markets higher as commodities rise

Dow gained 78, advancers ahead of decliners better than 3-1 & NAZ was up 17.  Bank stocks are up, giving the Financial Index one of its best days this year.

S&P 500 FINANCIALS INDEX

Value	211.45
Change	2.10    (1.0%)

The MLP index rose 1+ to the 367s & also up 1+ for the week.  The REIT index was up a fraction in the 245s, also little changed this week. Junk bond funds were flat as were Treasuries with yields at or near their lowest levels of 2011.  Oil rose, heading for a weekly gain after leaders of the Group of 8 said the global economy is gaining strength.  Gold rose to a 3-week high as the dollar’s slump spurred demand for commodities.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.484%
U.S. 10-year	3.064%

CLN11.NYM

....Crude Oil Jul 11

...100.49

..... 0.26 (0.3%)

GCM11.CMX

...Gold Jun 11

.......1,533.10

... 10.30

(0.7%)

Pending sales of existing US homes dropped far more than expected in Apr to touch a 7-month low, dealing a blow to hopes of a recovery in the housing market.  The index of pending home resales declined 12% after a revised 3.5% increase in the prior month, according to the National Association of Realtors, & much worse than the median forecast of a 1% decline. The prospect that foreclosures will continue to drive down property values may keep buyers on the sidelines awaiting further price declines.

Pending Sales of U.S. Existing Homes Drop 12% as Foreclosures Hurt Values

Photo:   Yahoo

Consumers spent more in Apr but much of the increase was eaten up by higher food & energy prices. After discounting for the jump in prices, spending barely budged & after-tax incomes were flat for a 2nd straight month.  Consumer spending rose 0.4%, reflecting a surge in the category that covers food & gasoline, with the biggest price gains last month according to the Commerce Dept. Excluding price changes, spending rose only 0.1%.  Incomes rose 0.4% but after-tax incomes adjusted for inflation were flat.  The savings rate was unchanged at 4.9% of after-tax incomes, the same as Mar.  Both months represented the smallest savings rate since Oct 2008 when the US plunged into a deep financial crisis. During the recession, savings were built up on concerns about massive job layoffs. A key inflation gauge preferred by the Federal Reserve (FED) showed prices rose 0.3% in Apr, the 5th straight month of gains of 0.3% or higher. However, excluding food & energy, inflation was up just 1%, well below the FED's target levels.  More evidence of a recovery that is just muddling along.

U.S. Consumer Spending Rose Less Than Forecast

Photo:   Bloomberg

Christine Lagarde, French Finance Minister, said Europe's debt crisis & the aftermath of the Arab Spring will be priorities for the next chief of the IMF. “Europe will be a clear focus for the next couple of years,” Lagarde said. “I also think that what is happening in northern Africa, in the Middle East, and the major economic developments that will be needed to accompany what is happening, will probably attract the IMF’s attention and possibly financing.”  The IMF said in a report that oil-importing nations in the Middle East & North Africa will require more than $160B in external funding through 2013. Lagarde, vying to become the 5th IMF chief from France, also said she would “remedy the situation” if she found developing countries underrepresented at the fund. “I don’t think it should be a European or an emerging economies candidate” for the top job, Lagarde said. “It should be a good candidate. My sense is that it should be an open, transparent and merit-based process.”  While developing nations have called for an end to Europe’s 65-year hold on the post, they've failed to unite behind one nominee.  More muddle for intl finance when there are major problems that need to be solved.

Lagarde Sees Europe Debt Crisis, Middle East as Focuses for Next IMF Chief


Markets are having a good day & as on prior days this week, volume is low.  This could be lowest this week.  As a result small amounts of buying (or selling) will have a big influence on the outcome for the day.  European finances remain a mess with Greece, the most vulnerable, in a rebellious mood.  The US recovery is sputtering & that should not improve with high gas prices hurting demand for "real" goods.  Foreign markets will be open on Mon but will probably do little until US markets reopen on Tues.

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