Friday, July 1, 2011

Markets higher on manufacturing report

Stocks jumped out of the gate,extending their week long gains. Dow rose 109, advancers ahead of decliners 3-1 & NAZ was up 21. Bank stocks led the advance again as the Financial Index has an 11 point bounce off its lows in mid May.

S&P 500 Financials Sector Index

Value	209.11
Change	2.24 (1.1%)

The MLP index only gained a fraction to 372 but the REIT index was up 2+ to 244 (short 6 of its yearly high). Junk bond funds were generally a little higher & Treasuries continued weak as the concept of their safety has been forgotten this week. Oil pulled back after gains earlier this week. Gold declined to a 6-week low as Greece progressed in staving off a default, curbing demand for the metal as a protection of wealth.

JPMorgan Chase Capital XVI (AMJ)

Below is the latest Daily update:

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.482%
U.S. 10-year	3.201%

CLQ11.NYM

....Crude Oil Aug 11

...94.69

......

0.73 (0.8%)

GCN11.CMX

...Gold Jul 11

........1,484.80

...

17.50

(1.2%)

Manufacturing in U.S. Probably Expanded Slower in June

Photo: Bloomberg

Manufacturing activity recovered somewhat in Jun from a sharp slowdown in May. The Institute for Supply Management said its index of manufacturing activity rose to 55.3 in Jun from 53.5 in May, the slowest growth in 20 months (a reading above 50 indicates that the sector is expanding). In Jun, new orders for goods & employment picked up again. Growth had slowed sharply in May as high gas prices cut into consumer spending & an auto parts shortage stemming from Japan's March earthquake. The factory sector has been the primary driver of the recovery, growing now for 23 straight months. The rest of the world is not doing so well. Other figures showed manufacturing growth is slowing from China to Europe. China’s factory index fell in Jun to the lowest level since Feb 2009, while in the euro area, a gauge slipped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months, as Italy, Ireland, Spain & Greece contracted. Good news for the US, but mixed at the bigger picture level.

Manufacturing Growth in U.S. Likely Slowed in June on Japan Parts Shortage

Consumer sentiment worsened in Jun on jitters about the economic outlook & spending is likely to remain lackluster in the long-term. Falling gas prices stabilized consumers' view of their current economic conditions, but expectations remained gloomy according to the Thomson Reuters/University of Michigan survey. The final reading for the consumer sentiment index came in at 71.5, down from 74.3 in May. While small spending gains can be expected in H2, the trend is more likely to vary between lackluster & zero than lackluster & robust over the next several years. "Resurgent spending is not on the horizon, nor is widespread retrenchment," survey director Richard Curtin said. "Importantly, the consumer no longer has the financial wherewithal to power the economy into overdrive." The survey's barometer of current economic conditions edged up to 82.0 from 81.9 in May but the gauge of consumer expectations fell to 64.8 from 69.5 & below forecasts for 66.6. Consumers one-year inflation outlook improved, falling to 3.8% from 4.1% & the 5-10 year inflation outlook inched up to 3.0% from 2.9%. Consumers are not supporting a robust recovery.

Consumer sentiment worsens as outlook sours- Reuters

Photo: Bloomberg

Greece could receive as much as €85B ($124B) in new financing (including a contribution from private investors) in a 2nd bailout aimed at preventing default & ending its debt crisis. Euro-area nations & private investors will contribute 70% of that aid, with the IMF offering the rest, Thomas Wieser, head of the AUstrian ministry’s economic policy & financial markets dept, said. “I’m certain we now have a sufficient consensus that we can take a decision during the weekend on the fifth tranche of the Greek loan package,” EU Economic & Monetary Commissioner Olli Rehn said today. Greek 2-year notes led market gains as speculation about an imminent Greek default eased. 2-year Greek note yields fell 115 basis points to 26.15% after topping 30% last month.

Greece to Receive Up to $124 Billion in New Aid

Dow is up almost 700 off its lows late last week. Amazing what the absence of a Greek default can do, especially when those problems are not completely over. Economies around the world are not showing vigorous growth & raising the debt ceiling in the US still looks to be a long way off. But markets fell good, although MLPs lost a little steam in the last 2 days. The constant threat of higher taxes on anything (especially energy) should keep this group from making significant progress for some time.