Tuesday, June 14, 2011

Higher stock markets on retail sales data

Dow started the day with a good gain & is holding at those levels. It rose 129, advancers ahead of decliners 4-1 & NAZ was up 39. This looks to be a relief kind of rally, tough to tell if it has legs to climb further. Bank stocks are leading the way higher, but the rally for the Financial Index is barely noticeable in the chart below.

S&P 500 Financials

Value	203.16
Change	1.89 (0.9%)

The MLP index gained a fraction in the 361s (after going nowhere in the last month) but the REIT was up 3½, recovering some of last week's losses. Junk bond funds were strong & Treasuries were little changed after the yield on the 10 year Treasury rose above 3%. Oil rose,trying to get back to $100 & gold also found buyers.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.428%
U.S. 10-year	3.064%

CLN11.NYM

....Crude Oil Jul 11

...98.18

...

0.88 (0.9%)

GCM11.CMX

...Gold Jun 11

.....1,521.20

...

6.20

(0.4%)

Photo: Bloomberg

Retail sales fell in May for the first time in 11 months as receipts at auto dealerships dropped sharply, but the decline was less than expected. Total retail sales slipped 0.2% according to the Commerce Dept after a 0.3% rise in Apr. Expectations had been for retail sales to fall 0.4%. Retail sales last month were depressed by a 2.9% drop in sales of motor vehicles, the largest decline in over a year, as a shortage of parts following left inventories lean & prompted manufacturers to raise prices. Excluding autos, retail sales rose 0.3%, the smallest gain since Jul, after rising 0.5% in Apr. Receipts at gas stations rose 0.3% after increasing 1.4% in the prior month. Excluding gas, retail sales fell 0.3% after gaining 0.1% in Apr. The economy started the year on a soft note beset by bad weather & rising oil prices, & a raft of surprisingly weak data recently has shown the lull in activity extending well into Q2. Much of the recent weakness was blamed on high gas prices & supply chain disruptions from the earthquake in Japan. Economists look for activity to pick up in H2 assuming gas prices continue to moderate & the situation in Japan improves. Of course, these were the same guys who revised their growth estimates upward 6 months ago.

U.S. Retail Sales Fall on Weak Auto Demand

Greece raise €1.62B ($2.3B) in a treasury bill sale after being accorded the lowest sovereign credit rating in the world on fears private investors will have to share the burden of a potential Greek debt restructuring. The yield for its 26-week bills was 4.96%, above the 4.88% on similar debt last month. Demand was also lower, with the issue oversubscribed 2.58 times. This follows the impact of S&P slashing the country's rating from B to CCC, amid an uncertain political climate ahead of a crucial vote in the Greek Parliament on new cutbacks & tax hikes. The country's public debt is expected to reach €350B ($502B) this year, or more than 150% of GDP,& it looks highly unlikely that Grece will be able to meet all of its obligations on time. Meanwhile, European finance chiefs began the final stage of hammering out a Greek rescue to prevent the euro area’s first sovereign default.

Greece sells euro1.62 billion in treasury bills AP

Hewlett-Packard, a Dow company, is streamlining its executive ranks to improve its focus on customers rather than administration & put more operations directly under CEO Leo Apotheker's control. HPQ is eliminating its chief administrative officer position, meaning that Pete Bocian is leaving HP immediately & Randy Mott, chief information officer, is also leaving. Additionally, 2 executive VPs in charge of businesses critical to customers will report directly to Apotheker. Ann Livermore, who had been managing the HP Enterprise business, will step down from that day-to-day role but she was elected to the company's board. This is how HPQ has responded to sluggish computer business in 2011. The stock was up 23¢ in an up market, although the chart looks dismal.

HP Revamps Management to Boost Growth

Hewlett-Packard Company (HPQ)

Not a lot has changed in the markets but buyers returned looking for bargains after the Dow fell almost 1K from its highs at the start of May. Treasury yields bounced up. MLPs continue to struggle after selling pressure last month. There is a sense of relief that stock prices have stopped falling.