Wednesday, May 4, 2011

Lower markets on disappointing data

Dow slumped 122, decliners over advancers 3-1 & NAZ fell 28. Bank stocks were weak, taking the Financial Index lower.

S&P 500 FINANCIALS INDEX

Value	218.80
Change	-1.72 (-0.8%)

The Alerian MLP Index fell a whopping 11 to the 366s, down a massive 23 this week. I haven't seen any new news, but there could be worries about changing the tax preferred status of MLPs. This sell-off is the worst in the 15 year history of the index. The chart below belows shows the fund tracking the index & it looks ugly. Meanwhile the REIT index is down only 1 to the 245s. Low priced junk bond funds were down a few pennies. But Treasuries rose, taking their yields back down to near the lowest levels in months. The yield for the 3 month bill is only 0.03%, a significant sign of market nervousness. Oil is down from its recent highs in the 113s & gold is sinking in response to the 15% sell-of for silver this week.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.03%
U.S. 2-year		0.59%
U.S. 10-year		3.22%

CLM11.NYM

...Crude Oil Jun 11

...109.70

...

1.35

(1.2%)

GCK11.CMX

....Gold May 11

.....1,532.70

...

7.40 (0.5%)

ADP Estimates U.S. Companies Added 179,000 Jobs in April

Photo: Bloomberg

ADP, the payroll processing company, said private sector payrolls grew 179K last month, after an upwardly revised 207K increase in Mar. Expectations were for a gain of 200K private sector jobs. Monthly gains over the last 4 months have been holding steady around 200K which is "consistent with only modest declines in the unemployment rate." according to ADP. Smaller businesses led the charge in Apr. Medium-size businesses, 50-499 workers, & small businesses each added 84K jobs but large businesses added just 11K.
A separate report showed employers announced fewer planned job cuts in Apr, even as gov sector layoffs mounted. The number of jobs cut fell 12% to 36K in Apr from 41K in Mar, according to outplacement consulting firm Challenger, Gray & Christmas. Year over year, job cuts dropped 5% from 38K in Apr 2010. The job cut number is the lowest so far this year, & the 3rd lowest over the last 16 months. "The slow pace of downsizing suggests employers remain optimistic about business conditions going forward, despite higher energy costs, government deficits and slipping confidence among consumers," said John Challenger, CEO of Challenger, Gray & Christmas. Despite the slow pace of layoffs in the economy at large, the gov & non-profit sector was hit hard by job losses. Gov positions dominated planned job cuts, accounting for 10K job cuts last month, bringing the 4-month total to 52K. Challenger said. "Most of cuts tracked this year were concentrated in the state & local agencies." The important jobs report on Fri is expected to say the unemployment rate held steady at 8.8% while employers added 185K jobs in Apr. For the full year, 2.3M new jobs are expected, just under 200K per month & an unemployment rate of 8.4% by year end. More of the same kind of news, good, but not good enough to have a major impact on high unemployment.

ADP Estimates U.S. Companies Added 179,000 Jobs in April

Photo: Yahoo

Kellogg Q1 net income fell 12% as K dealt with higher ingredient costs & spent more on marketing &new products. EPS was $1, down from $1.09 last year & below forecasts of $1.04. Revenue climbed 5% to $3.49B on sales increases in North America & overseas, surpassing $3.39B estimated by analysts. K said results don't fully reflect price increases that have been made & raised full-year revenue outlook to an increase of 4%, expecting to benefit from higher prices. K still expects full-year earnings to climb in the low single-digits, implying EPS of $3.33-3.40 with no foreign exchange impact while analysts expect $3.48. The stock fell 95¢ after having a good run in 2011.

Kellogg 1Q net income falls on higher costs AP

Kellogg Company (K)

CBS had a strong Q1 performance & doubled its dividend, a sign that it has recovered from the latest advertising downturn. Q1 gains were credited to overhauling unprofitable businesses. CBS also has been trying to lessen its dependence on advertising by taking advantage of growing demand for CBS content streamed over the Internet. "We are clearly benefiting from the strategic actions we have taken to enhance and de-risk our business model, including diversifying our revenue streams and managing our cost structure," CEO Les Moonves said. He said selling shows in more profitable ways "positions CBS for success, not just for the rest of this year, but for many years to come." EPS was 29¢, compared with a loss of 4¢ last year (last year's EPS totaled 5¢ after excluding special items). Sales were $3.51B. Results beat expectations of 19¢ on revenue of $3.46B. The quarterly div was boosted to 10¢ & the stock jumped 1.16 to the 26s.

CBS Shares Gain Most in 21 Months on Doubling of Dividend, Earnings Growth

CBS Corporation (CBS)

This week has been a pause period for the markets but now it's getting more serious. In the high yield sector, the performance of the MLPs is unnerving. This is a low beta group. To see the index drop over 20 in 3 days brings back memories of the sudden sell-off in Jul 2007 when the index plunged off its (then) record high. Bigger picture, the jobs data was OK but not inspiring with growing worries about the big jobs report on Fri. Shaky markets may continue drifting lower..