Wednesday, July 27, 2011

Markets fall on debt stalemate

Stocks have been under water all day with the fiasco going on in DC. Dow fell 98, decliners over advancers a very big 6-1 & NAZ dropped 45 as Amazon surged on good earnings but Apple slumped after recent gains. Bank stocks are leading the way lower, the Financial Index has not been able to have a meaningful increase off its lows..

S&P 500 Financials Sector Index

Value	202.02
Change	-2.34 (-1.1%)

Sagging stocks are taking down MLPs & REITs. The MLP index dropped a very big 5 to the 361s while the REIT index fell almost 4 to the 246s (but only 6 below its 2011 highs). Junk bond funds were lower & Treasuries were flattish on the confusion over increaing the debt ceiling. Oil extended its losses after a gov report showed an unexpected increase in inventories. Gold surged to an all-time high as investors sought to protect their wealth against the possibility of a US default.

JPMorgan Chase Capital XVI (AMJ)

The latest daily market update below:

Treasury Yields:

U.S. 3-month	0.071%
U.S. 2-year	0.422%
U.S. 10-year	2.960%

CLU11.NYM

....Crude Oil Sep 11

...98.07

...

1.52

(1.5%)

GCN11.CMX

...Gold Jul 11

........1,619.30

....

2.70

(0.2%)

Photo: Yahoo

Businesses cut back on orders for aircraft, autos, heavy machinery & computers in Jun for the 2nd month in the past 3. Orders for durable goods fell 2.1%, with the weakness led by a big drop in orders for commercial aircraft, according to the Commerce Dept. Other categories also showed weakness including autos & auto parts. A key category that tracks business investment plans fell 0.4% in Jun. Manufacturing has been the stellar performer in the 2-year-old recovery but activity slowed in the spring, reflecting in part supply disruptions from Japan. Manufacturing was also hurt by the hit the overall economy took from higher energy prices which dampened consumer demand. The latest drop was a disappointment for those who thought that the disruptions caused by the Japanese quake & the surge in energy prices were beginning to wane. The decline pushed durable goods orders down to $192B (seasonally adjusted), but that's still 29.1% higher than the recession low hit 2 years ago & 21.6% below the high set in Dec 2007 when the recession began. The recovery is sputtering & the hangover of the federal debt crisis is not helping matters.

Orders for U.S. Durable Goods Fell in June

Photo: Bloomberg

Commercial airplane profits at Boeing, a Dow stock, surged in Q2, pushing net income up almost 20% & 2011 guidance was raised. BA also said that it will not deliver as many of its new 787s & 747-8s this year as previously hoped. EPS was $1.25 & revenue rose 6.2% to $16.5B, topping expectations of 98¢ on revenue of $16.4B. The 2011 outlook was raised to $3.90-$4.10, up by 10¢ on the high & low ends, but under expectations of $4.12. BA delivered 118 planes, up from 114 a year ago. Revenue in its commercial airplanes unit rose 19% to $8.8B & operating profits jumped 35% to $920M. BA benefited from a shift toward higher-priced planes. BA expects to deliver 485-495 planes this year, 5 fewer than previously predicted. Revenue in the defense, space, & security business fell 4% to $7.7B but operating profits rose 12% to $798M. Stockholders liked the news, the stock gained $2.48.

Boeing Raises Full-Year Forecast After Profit Tops Estimates

Boeing Company (The) (BA)

Photo: Yahoo

Amazon reported a jump in quarterly revenue on sales of its Kindle electronic reader & other electronics & forecast better-than-expected revenue for the Q3. It benefited from growth in e-commerce, though margins continued to be pressured by heavy spending on distribution, technology & digital content. Revenue rose 51% in Q2 to $9.9B, surpassing expectations for $9.4B. The company forecast Q3 sales of $10.3-$11.1B, compared with the average forecast for $10.35B. EPS was 41¢ versus 45¢ last year (beating expectations of 35¢). The stock jumped $10.41.

Amazon.com Jumps as Kindle Fuels Sales

Amazon.com, Inc. (AMZN)

Some are giving good grades for earnings reports, but they look more mixed to me. In addition, the economy is not recovering as much as was forecasted at the start of the year. Center stage remains in DC & nothing will be decided before next Mon, probably late at night. This is a sloppy way to handle enormous amounts of spending. Congress will throw money into the Treasury to avoid default, but the rating agencies may not like the way polliticos are dealing with this crisis (which should NOT be a crisis).