Thursday, May 19, 2011

Mixed economic news limits stock market gains

Markets firmed in the PM, helped by the successful IPO for LinkedIn. Dow rose 45, advancers over decliners 4-3 & NAZ was up 8. Financials continue to drift along, looking for friendly sorts to buy their stocks.

S&P 500 FINANCIALS INDEX

Value	214.51
Change	0.13 (0.1%)

The MLP index rebounded, relieved that the proposal for added taxes on big oil companies was defeated (at least for the time being). MLPs are not directly involved, but just whispers about higher taxes on energy companies caused the selling. The REIT index was up a fraction in the 245s & junk bond funds were mixed. Treasuries were little changed, however the yield on the benchmark 10 year Treasury bond has been at its 2011 lows for 2 weeks. Oil just went over $100, but then pulled back. The average price for gas at the pump in the US was down to $3.90 yesterday following the decline in the price for crude. Gold has been trading sideways under $1500 for the last 2 days.

ALERIAN MLP INDEX

Value	364.36
Change	5.05 (1.4%)

Treasury yields:

U.S. 3-month		0.04%
U.S. 2-year		0.52%
U.S. 10-year		3.17%

CLM11.NYM

...Crude Oil Jun 11

...98.33

...

1.77

(1.8%)

LinkedIn (LNKD) soared to $94.25 (but off its highs above $122) after selling 8M shares at $45 in its IPO. At $100 a share, LNKD is worth over $9B, or 25X 2011 revenue assuming Q1 sales are matched over the next 3 qtrs. This performance is reminiscent of some of hottest stocks in the dot-com boom when Yahoo! (YHOO) rose 154% on its first trading day in 1996, a year after Netscape Communications more than doubled in its debut. LNKD gains bode well for other social-networking companies, including Facebook, that are expected to sell shares. They also brighten prospects for the venture capital industry, which lost money over the past 10 years amid a dearth of IPOs. Of course new investors are becoming accustomed to thinking there are no limits on gains in these stocks which eventually leads to bubbles bursting. For the time being, its fun to watch.

LinkedIn Surges in First Day of Trading

Photo Bloomberg

Amazon (AMZN) said sales of electronic books have overtaken those of printed versions for the first time, a sign of the growing dominance of its Kindle digital reader (along with its competition). AMZN now sells 105 electronic books for every 100 printed ones. The pace of US book sales this year is the fastest the company has seen in more than a decade. “We had high hopes that this would happen eventually, but we never imagined it would happen this quickly,” Jeff Bezos, AMZN founder & CEO. Kindle readers are priced at $114-$379. The company may have sold more than 8M Kindles last year, accounting for about 5% of sales, according to an outside source. However some of my friends like the Nook from Barnes & Noble (BKS).

Amazon Kindle E-Book Sales Top Print

Amazon.com, Inc. (AMZN)

Dominique Strauss-Kahn was formally indicted & made a new bid to get released from jail while he awaits trial on charges that he sexually abused a hotel maid. He offered to post $1M in bail to gain release from jail where he's been since his arrest on Sat. The prosecutor said that a grand jury had found enough evidence for an indictment. "The proof against him is substantial. It is continuing to grow every day as the investigation continues," said Assistant District Attorney John "Artie" McConnell. An attorney for Strauss-Kahn said "In our view, no bail is required to confirm Mr. Strauss-Kahn's appearance. He is an honorable man ... and he has only one interest at this time, and that is to clear his name." Strauss-Kahn resigned as managing director of the IMF to focus on clearing his name. His lawyers have promised that, if released, he won't flee to France, asking that Strauss-Kahn be placed under house arrest in NY & wear an electronic device to monitor his movements. There are financial implications to this case. The IMF has no official leader & they are hoping to select a replacement shortly (that means 2-3 months). Meanwhile sovereign debt issues are bubbling. A union leader in Greece, the country with the biggest problem, warns of an "employment crash." These concerns are haunting stock markets.

Former IMF Leader Indicted in Sex Abuse Case- AP

Volume continues sluggish (NYSE floor volume was under 0.9B shares again), stocks are wandering with an upward bias. After earnings last month, this month has largely been a disappointing follow thru similar to last May. MLPs are finding buyers again, but the index is still down 6% this month. Speculation is back in vogue & that can be dangerous for the overall markets. Markets are nervous.