Tuesday, May 3, 2011

Markets uncertain after weaker earnings

Dow was flat (actually up pennies), decliners over advancers 2-1 & NAZ dropped a big 22. There was a little buying in bank stocks, but nothing meaningful.

S&P 500 FINANCIALS INDEX

Value	220.52
Change	0.84 (0.4%)

The Alerian MLP Index started the week at 389 & has had a very bad sell-off in just 2 days. The REIT index fell 2 to the 246s. Junk bond funds slipped a few pennies but Treasuries gained. The yield on the 10 year Treasury bond is flirting with 5 months lows, under 3.2%. Oil fell to a 2-week low as the Standard & Poor’s 500 Index dropped & on projections that a gov report will show US crude inventories climbed. Gold was subject to profit taking, maybe affected bv the big sell-off in silver this week. The green line in its chart shows the effects today's selling.

ALERIAN MLP INDEX

Value	377.57
Change	-7.02 (-1.8%)

Treasury yields:

U.S. 3-month		0.02%
U.S. 2-year		0.60%
U.S. 10-year		3.25%

CLM11.NYM

...Crude Oil Jun 11

110.88

...

2.64 (2.3%)

GM Sales in April Beat Analysts’ Estimates

Photo:   Bloomberg

Small cars sold briskly in the last month, as gas prices approached $4 a gallon & some buyers worried about shortages of Japanese-made vehicles . Sales in Apr were led by highly fuel-efficient models such as Chevrolet's Cruze, Hyundai's Elantra & Ford's Focus.  Don Johnson, GM's VP of sales & marketing, said consumers shifted into smaller cars starting in Mar & the trend continued in Apr. Unlike 2008, GM & other companies now have good small cars & can quickly boost production of them. "We're probably the best prepared ever for this shift," he said. So far, GM says the Mar earthquake won't affect its profit, although it has had to slow production because of a lack of parts from Japan. Chrysler said this week that the earthquake will cost it between 50-100K vehicles this year, but it won't have an impact on earnings. Hyundai sales jumped 40%, largely because of fuel-efficient models such as the Elantra, which gets an estimated 40 mpg on the highway. The car's sales more than doubled. Combined with the Sonata midsize car, the 2 made up 71% of its sales. GM sold more than 25K Chevrolet Cruze compact models in Apr, the best performance for the 36-mile-per-gallon car since it was introduced in Oct. Ford (F) sales of its new Focus compact rose 22% from last year. GM US car & truck sales jumped 26%, led by the shift to small cars. People switched to more efficient engines, which use less gas.

Ford (F) US sales rose 13%, largely because of a 26% jump in car sales. But it wasn't only the most efficient cars like the Fiesta & Focus that buyers demanded. Sales of the Mustang sports car rose 59%. The impact of gas prices could be felt in its largest vehicles, half of all pickup buyers chose Ford's new V-6 engine instead of the less efficient V-8. Chrysler's sales rose 22% to 117K, the best Apr in 3 years. Sales were led by the Jeep brand with a 65% increase. Toyota (TM) sales rose only 1.3%, led by a 9% gain from the Camry midsize sedan, traditionally the most popular car in the US. But sales of the Corolla compact fell 13.3%, & 2 models made in Japan, the Yaris & the Prius, saw sales declines. Nissan sales were up 12.2% to 71K. Honda (HMC) sales rose 9.8%, led by a 73% leap in sales of the Fit subcompact.  Subaru sales were up 7% to 24K, led by the Outback small SUV which rose 23%. This is a fairly good report, but even higher gas prices could pinch hard in May. GM stock was up 81¢ & other majors were lower.

GM’s April Sales Beat Analyst Estimates as Ford, Nissan Miss

General Motors Company (GM)

Gas prices are still pushing on $4.00.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.967	$4.104	$4.233	$4.161	$3.318	$4.367
Yesterday Avg.	$3.952	$4.092	$4.218	$4.155	$3.331	$4.384
Week Ago Avg.	$3.869	$4.008	$4.138	$4.139	$3.271	$4.305
Month Ago Avg.	$3.645	$3.782	$3.912	$3.978	$3.074	$4.045
Year Ago Avg.	$2.895	$3.074	$3.184	$3.099	$2.281	$3.002

Source: AAA

The sales reports for the auto industry were fairly good although it's difficult to make too much of it when forecasting (with sharply higher gas prices). The bigger picture is that higher price gas is pinching consumer spending. The broad selling in MLPs is eye popping. Today was one of the worst days ever for the index! This is the time of ex-distributions which aggravated the decline, but this effect is routine (every 3 months). I have a feeling there are more substantial reasons behind the selling. The selling in NAZ was also unusual. Apple (AAPL) could be the reason, but not today. It added almost 2 to the 348s (where it was in mid Jan).