Wednesday, June 8, 2011

Markets waver as OPEC does not raise production quotas

Dow slipped 1, decliners ahead of advancers almost 2-1 & NAZ was down a bigger 16. Bank stocks continue under selling pressure, taking the Financial Index below 200, another 6 month low.

S&P 500 FINANCIALS INDEX

Value	199.88
Change	-0.26 (-0.1%)

The MLP index fell 1½ to the 354s & the REIT index was down a fraction in the 242s. Junk bond funds were mixed & Treasuries rose bringing the yield on the 10 yeart Treasury under 3%. Oil rose after OPEC ministers were unable to reach a decision on production quotas at their meeting. Gold fell for the 2nd straight day on speculation that the Federal Reserve won’t ease monetary policy further.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.036%
U.S. 2-year	0.391%
U.S. 10-year	2.968%

CLN11.NYM

....Crude Oil Jul 11

...100.95

...

1.86 (1.9%)

GCM11.CMX

...Gold Jun 11

......1,534.30.

...

9.00

(0.6%)

Saudi Arabian Oil Minister Ali Ibrahim Al-Naimi

Photo: Bloomberg

OPEC unexpectedly left its production levels unchanged, causing oil prices to jump, as their meeting ended in disarray. Because of a policy deadlock, the group will maintain present output ceilings with the option of meeting within the next 3 months to consider a hike. "We are unable to reach consensus to ... raise our production," OPEC Secretary General Abdullah Al-Badri said, reflecting unusual tensions in the 12-nations. The future of OPEC is being called into question, partially because it represents less than 30% of oil output.

OPEC Can’t Find Consensus on Output Quota

McDonald’s May Sales Rise of 3.1% Misses Analysts’ Estimates

Photo: Bloomberg

Sales of McDonald's fruit & maple oatmeal and drinks like frozen strawberry lemonade pushed the fast-food chain's revenue at restaurants open at least 13 months up 3.1% in May, a slowdown from the 4.8% last year. 2 regions weakened: the US, whose share of revenue has shrunk over the past several years, & Europe, which led revenue growth a year ago. Asia, the Middle East & Africa grew most quickly. Last week, CEO Jim Skinner was adamant that price isn't the restaurant's only virtue. "A lot of people talk about the fact that people are trading down," Skinner said. "They don't trade down to McDonald's; they're trading in to McDonald's." But he also said the economy "remains less than ideal," citing a "slow and uneven" recovery, rising costs for ingredients, & fragile consumer confidence. In the US, revenue at stores open at least 13 months grew 2.4%, compared with 3.4% last year. Revenue in Europe grew 2.3%, down from 5.7% a year ago (France, Russia & the UK drove Europe's growth & Germany was weaker). Revenue growth was strongest in Africa, the Middle East & Asia, which recorded 4.3% growth where customers there were drawn to affordable meals as well as the convenience of drive-thru locations, delivery & extended hours. The US represents about 31% of revenue & Europe about 40%. The stock was little changed.

McDonald’s Sales Rose 3.1% in May

McDonald's Corporation (MCD)

Markets are meandering again as economic problems are not being solved. Even the Anthony Weiner debacle hurts, because attention is drawn away from solving enormous problems in DC. The fiscal year for the federal gov only has 3+ months left, & a budget is not near. Then comes the next fiscal budget which seems light years away. If that wasn't enough, an agreement is needed on raising the debt ceiling. Another negative is the MLP index is getting ready to test the important 350 floor & there is a good chance, it will go below. This summer could be a very tough time for stocks.