Monday, July 25, 2011

The inability to raise debt ceiling unnerves investors

Stocks were under water all day & finished near the lows. Dow fell 88, decliners over advancers more than 3-1 & NAZ dropped 16 despite another good day for its largest component, Apple. Weakness in bank stocks led the selling, as they have a lot riding on the probable default of Greek debts & the uncertain future for US Treasuries.

S&P 500 Financials Sector Index

Value	204.71
Change	-1.74 (-0.8%)

Lower stock markets took down MLPs & REITs, although MLPs have been flattish since May & the REIT index just reached a new 2011 high. Junk bond funds were soft & Treasuries lost ground in the PM, bringing the yield on the 10 year Treasury back to 3%. Oil retreated but remains near $100. Gold was strong, as expected, but did not surge on the uncertainties about US debt ceiling.

Alerian MLP Index

Value	370.89
Change	-2.74 (-0.7%)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.035%
U.S. 2-year	0.403%
U.S. 10-year	2.999%

CLU11.NYM

...Crude Oil Sep 11

...99.12

...

0.75

(0.8%)

India Panel Said to Advise Easing Limits on Wal-Mart

WalMart store in India
Photo: Bloomberg

WalMart, a Dividend Aristocrat, & Carrefour may gain access to the retail market of India with the world’s 2nd most-populous country after a gov panel was said to have recommended easing restrictions on the industry. Overseas companies could be allowed to own as much as 51% of stores that sell more than one brand if they invest a minimum of $100M. India currently allows overseas companies 51% ownership in retail shops selling only one brand & 100% in wholesale stores. The world’s 2 biggest retailers Wal-Mart & Carrefour, which already operate wholesale outlets in India, seek to sell in a market that could be worth $396B this year & may double to $785B in 2015. WMT is expected to open hundreds of retail shops in the country if the rules are changed but the stock fell 55¢.

Wal-Mart May Open India Retail Stores as Panel Said to Advise Easing Laws

Wal-Mart Stores, Inc. (WMT)

Apple briefly touched $400 mark for the first time, nearly a week after the company reported record earnings & revenue on the popularity of its iPhone & iPad. This comes after competitor Research in Motion (RIMM) announced it would cut 2K jobs & reshuffle executives to fix its struggling smartphone business. Last week AAPL said its fiscal Q3 EPS more than doubled to $7.79 as revenue climbed 82% to $28.6B. Results were bolstered by stronger sales of iPhones & iPads (20.3M iPhones & 9.25M iPads). APPL ended with a $5+ gain to the 398s while RIMM slipped another $1.24 to the 26s.

Apple Shares Touch $400 Mark

Apple Inc. (AAPL)

Research in Motion Limited (RIMM)

RPM, a Dividend Aristocrat, which makes Rust-Oleum & other industrial coatings, said fiscal Q4 profit rose 15% from higher global demand for its industrial products. EPS in its Q4 was 54¢, up from a pro forma 47¢ last year. Revenue rose 11% to $981M. Analysts expected EPS of 53¢ on $994M in revenue. The pro forma year-ago figures assume that the deconsolidation of RPM's Specialty Products Holding business occurred before fiscal 2010. For the full fiscal year 2011, EPS was $1.45 versus pro forma $1.26 per share last year as revenue rose 8.5% to $3.38B. RPM expects industrial sales to continue to improve & projected growth in the "upper single-digit to low double-digit levels" for the segment, but said growth rates at its consumer segment would be more modest. As a result, RPM expects EPS for FY 2012 to rise 10-15% & sales to grow 8-10%. The guidance implies EPS of $1.60-$1.67 on $3.65-$3.72. The stock was up 43¢.

RPM fiscal 4Q profit rises on industrial sales AP

RPM International Inc. (RPM)

The goings on in DC will be center stage all week. The earliest vote on anything will be Wed & who knows what that will decide (if anything)? Chances are final word about the status of US debts won't be known until this weekend at the earliest. There are 2 huge problems out there. The first is default. Since all Congress has to do is pass any kind of bill, chances are that will be averted one way or the other. But how they do that could affect the 2nd issue which is a credit downgrade involving many issues that are not clear. If there is a downgrade, it will be based the politicos getting an unsatisfactory grade in dealing with the enormous deficits responsible for having to increase the debt ceiling. So far, stock markets have been hardly disturbed by these problems.