Tuesday, May 24, 2011

Markets mark time following dreay new home sales

Dow went up 9. advancers ahead of decliners 4-3 & NAZ was off 1. Bank stocks were a tad lower.

S&P 500 FINANCIALS INDEX

Value	208.31
Change	-0.24 (-0.1%)

The MLP index rose a fraction in the 363s & the REIT index was also up a fraction, but just above 240. Junk bond funds were mixed & Treasuries slipped. The yield on the benchmark 10 year Treasury remains very near its 5 month lows. Oil rose the most in almost a week as the dollar declined, boosting commodities’ appeal & Goldman Sachs & Morgan Stanley increased their oil-price outlooks. Gold gained for a 3rd day as deepening concern over Europe's sovereign debt crisis spurred demand for the metal as a protection of wealth.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.05%
U.S. 2-year		0.52%
U.S. 10-year		3.14%

CLN11.NYM

...Crude Oil Jul 11

...99.76

...

2.06 (2.1%)

Purchases of New Homes in U.S. Probably Held Near Record Low

Photo: Bloomberg

More people bought new homes in Apr, but sales remain far below the pace that would represent a healthy housing market. The Commerce Dept reported new-home sales rose 7.3% to an annual rate of 323K homes, the 2nd straight monthly gain. However, a normal housing market would mean a pace of about 700K new-home sales. There is little incentive to buy new homes, in part because they're comparatively expensive. Last year, Americans bought the fewest number of homes on records going back 47 years. Fewer new homes mean fewer jobs. Each new home creates an average of 3 jobs for a year and generates $90K in taxes, according to the National Association of Home Builders.

Purchases of New Homes in U.S. Probably Stagnated in April Near Record Low

Caterpillar, a Dow stock, plans to sell $4.5B of bonds to help fund its $8.6B acquisition of Bucyrus International. The offering will be split between 18-month floating-rate notes, 3-, 10-, & 30-year bonds. Moody’s assigned A2 ratings to the debt & said it expected the balance of the acquisition to be paid for with $800M in commercial paper & $3.3B from cash on hand. CAT hasn’t issued debt at the parent-company level since 2008. From a debt-to-capital perspective, Caterpillar “finished the first quarter with the strongest balance sheet we’ve had in more than 20 years,” CFO Ed Rapp said. The stock was flat.

Caterpillar Plans to Sell $4.5 Billion of Bonds for Acquisition of Bucyrus

Caterpillar, Inc. (CAT)

Deere (DE) raised its div 17% after reporting surging Q2 profits & boosted its revenue forecast for the year. The quarterly div will be 41¢, up from previous div of 35¢. This is the 9th time DE has raised its div since 2004. Last week, DE reported Q2 profit soared 65% because of strong demand for its agricultural equipment, especially in the US, Canada & Brazil. The shares rose 1.24.

Deere raises dividend by 17 percent to 41 cents AP

Deere & Company (DE)

Markets are idling. The IMF is working hard to get elect a new leader so it can move forward on the debts problems in Europe. The plan by Greece to restructure is considered a "horror." The dollar was a little weaker giving some relief to the markets, but that is expected to be only temporary considering the financial mess in Europe. The MLP index has stabilized, 7% off its record highs at the start of May. Investors may demand higher yields (& lower prices) giving the threats to the favorable tax treatments for distributions.