Thursday, July 21, 2011

Markets rally on hopes for European debt bailouts

Dow shot up 150, advancers ahead of decliners almost 5-1 & NAZ gained 24.  Bank stocks continue as market leaders.  The Financial Index is up 10 from its lows last week

S&P 500 Financials Sector Index

Value 205.65 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    3.65    (1.8%)

The MLP index rose 1 to the 374s & the REIT index jumped 2 to the 252s, a new 2011 high. Junk bond funds gained while Treasuries sold off on hopes of more bailouts in Europe.  Oil is pushing on $100 as the program for industrial to sell oil is coming to an end.  Gold was little changed, essentially at its record highs.

JPMorgan Chase Capital XVI (AMJ)

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The latest daily market update below:

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU11.NYM....Crude Oil Sep 11...99.73 ...Up 1.33 (1.45%)

GCN11.CMX...Gold Jul 11........1,596.50 ...Down 0.20  (0.0%)

Jobless Claims in U.S. Rose 10,000 Last Week

Photo:  Bloomberg

New claims for unemployment benefits rose more than expected last week, pointing to a labor market that is struggling to regain momentum after job growth faltered in the last2  months.  Applications for benefits increased 10K to 418K according to the Labor Dept, above the forecast of 410K.Employers have been reluctant to hire more workers on concern the recovery was slowing & growing unease over stalled negotiations to extend the federal debt ceiling and reduce the budget deficit.  The 4-week moving average fell to 421K, a 3-month low, from 424K.  The number continuing to collect jobless benefits fell 50K to 3.7M which does not include workers receiving extended benefits under federal programs. Those who’ve used up traditional benefits & are now collecting emergency & extended payments decreased by about 133K to 3.7M. More dismal figures on the jobs front.

Jobless Claims in U.S. Rose 10,000 Last Week

Conference Board said its Leading Economic Index increased 0.3% to 115.3 after a 0.8% increase in May to a record 114.7 (which was revised upward to 114.9), slightly better than expectations of a 0.2% rise.  "The economy faced some recent unexpected headwinds," said Ken Goldstein, a Conference Board economist. "If these headwinds subside, the underlying trend of slow growth, as suggested by LEI, should be more apparent over the next few months." 

Economic Indicators Climbed 0.3% in U.S

Intel, a Dow stock, forecast Q3 sales that exceeded some estimates, bolstered by corp computer upgrades & first-time purchases by consumers in emerging markets. Revenue will be $14B (plus or minus $0.5B), above $13½B estimated & gross margin will be about 64%. Corp purchases of personal computers & servers, as well as sales to consumers in developing countries are outweighing stagnant sales of laptops in the US & Europe. Q2 EPS was 54¢, up from 51¢ last year & above estimates of 51¢. Sales increased 21% to a record $13B.  Gross margin was 60.6% in Q2.  The stock fell 25¢.

Intel Sees Quarterly Sales Beating Estimates on Company Computer Upgrades

Intel Corporation (INTC)

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The PepsiCo, a Dividend Aristocrat, Q2 earnings report told 2 familiar story lines: One was of a US company relying more heavily on customers in emerging markets & (2) of a company raising prices on those same customers because of higher ingredient costs.  Revenue for Asia, the Middle East & Africa grew 17%, & revenue for Latin American food grew 18%. Meanwhile, revenue for Frito-Lay snacks in North America grew just 3%, & revenue for Quaker oatmeal products in North America was flat.  In addition, PEP will raise prices as previously announced.  Q2 EPS was $1.17, up from 98¢ last year.  Excluding one-time items EPS matched the consensus forecast of $1.21.  Revenue rose 14% to $16.8.  PEP expects EPS to grow in the high single digits in 2011, reflecting uncertainty about how much its customers will spend & how much costs will rise.  The stock tumbled 3.42.

PepsiCo Net Income Rises 18% on Snack Sales

Pepsico, Inc. (PEP)

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Amid the confusion coming out of Europe regarding sovereign debts, it appears that successful countries will limit contagion by allowing Greece to temporarily default so the other risky countries can muddle by.  I think the idea is that avoiding a complete disaster is "good."  That's not what I call it, but markets are in rally mode taking the Dow to within 100 of its yearly highs.  Meanwhile the muddle in DC remains as all sides (there are more than 2 sides) are talking with nothing getting done.  But the clock is ticking & Sat is supposed to be the first big deadline (but there are other deadlines also).  It's difficult to understand that last minute solutions involving $B's are the way to solve fundamental financial problems.

Dow Industrials (INDU)

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