Wednesday, May 11, 2011

Stock markets fall after another slump in commodity markets

Dow sank 63, decliners over advancers 5-2 & NAZ fell 5. Bank stocks also were lower as the Financial Index can't get very far from 220.

S&P 500 FINANCIALS INDEX

Value	217.45
Change	-0.89 (-0.4%)

The Alerian MLP Index sank 6 to the 365s, having a very tough go of it after comments last week about changing tax advantage of MLPs. The idea looks to be going nowhere, but worries persist. The REIT fell 2 to the 245s. Junk bond funds were mixed, generally at their highest levels in a few years, & Treasuries sold off. The yield on the 10 year Treasury bond rose 3 basis points to 3.22%, but is still near the 3.14% six month low reached at the start of this week. Oil extended declines (to $101) after a gov report showed a bigger-than-forecast increase in inventories. Gold fell to under 1510 & silver also retreated.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.03%
U.S. 2-year		0.57%
U.S. 10-year		3.21%

CLM11.NYM

...Crude Oil Jun 11

...101.16

.....

2.72

(2.6%)

GCK11.CMX

...Gold May 11

......1,505.50

...

11.10

(0.7%)

SIK11.CMX

.....Silver May 11

........37.92

.....

0.56 (1.4%)

Photo: Bloomberg

US companies sold the most overseas in nearly 2 decades, but a big jump in oil prices pushed the nation's trade deficit higher in Mar (this trend will continue in Apr & May). The trade deficit rose 6% to $48.2B, according to the Commerce Dept, & is up from $45.4B in Feb. Exports increased to $172.7B, the most on records dating back to 1993. A weaker dollar has made US goods cheaper overseas. In addition, exports have risen because of rapid growth in developing countries. However, oil imports soared to $39.3B, an 18% rise from the previous month & was the highest level since Aug 2008, reflecting steep price increases, as well as greater demand. The average price for a barrel of imported crude oil was $93.76 in Mar, up 7.6% from Feb. Excluding oil imports, the deficit narrowed. The trade deficit is currently running at a $562B annual pace, above last year's total of $495.7B. Economic growth generally slows when imports outpace exports because more jobs go to foreign workers. The trade deficit with China, meanwhile, decreased to $18.1B. That's down slightly from Feb, but is still running at a $200+B annualized.pace .

Trade Deficit in U.S. Widened in March on Oil Imports

Macy’s Jumps After Raising Profit Forecast

Photo: Bloomberg

Macy's Q1 earnings soared, beating predictions, on rising revenue, tight expense controls & its efforts to tailor merchandise by region. The department store chain also is doubling its quarterly dividend & raising full-year earnings & sales outlook. EPS was 30¢ in the qtr ended Apr 30, far above 5¢ last year, & revenue reached $5.88B, up 5.7%. Analysts expected earnings of 18¢ on revenue of $5.89B, Revenue at stores open at least a year rose 5.4%, a key indicator of a retailer's health. Online revenue for Macy's & Bloomingdale's surged 38.3%, helping to boost revenue at stores open at least a year by 1.3%. "We are building a culture of growth at Macy's," Terry J. Lundgren, CEO . "Our performance cannot be attributed to a single factor, but rather to the coordinated execution of a series of complementary ... strategies." Macy's expects revenue at stores open at least a year to be up in the range of about 4% for the rest of FY2011. Combined with actual first-quarter figures, that would calculate to growth of about 4.3%. The previous outlook called for 3%. The company expects EPS of $2.40-2.45, compared with $2.25-2.30 previously given. Analysts had expected $2.34. Based on "the strength, momentum and confidence in our business," it's doubling its quarterly dividend to 10¢. The stock jumped 2.31 after having a drab performance YTD.

Macy’s Jumps After Raising Profit Forecast

Macy's Inc (M)

Stock markets are looking for direction. Earnings season was very successful but the follow thru by stocks has been anemic. There are no shortage of dark clouds overhead (i.e. Greece's financial future continues to be fuzzy), but Dow has been able to hang in near its multi year highs. MLPs continue under pressure with the index pulling back to where it was 2 months ago. That has taken its yield to 6.2% (from a 5.8% low) but remains in very low territory, especially with murmurs about changing the tax structure.