Tuesday, July 19, 2011

Markets rise on strong earnings reports

Dow gained 202, advancers ahead of decliners almost 4-1 (could have been better) & NAZ added a very big 61 on high hopes for Apple. Bank stocks had a respectable gain, but the chart shows the Financial Index has been bogged down for months.

S&P 500 Financials Sector Index

Value	199.85
Change	2.68 (1.4%)

MLPs had a good day, but the index has been trading sideways since it toppled from its 390 peak in early May. The REIT index shot up 4+ to the 248s, 4 short of its 2011 highs. Junk bond funds were generally higher as were Treasuries, taking the yield on the 10 year Treasury below 2.9%. Oil rose as US housing starts surged & better-than-estimated earnings sent equities higher, bolstering optimism that the economy will grow. Gold fell from a record $1610 after the metal’s longest rally in 31 years.

Alerian MLP Index

Value	374.00
Change	2.02 (0.5%)

Get the latest daily market update below:

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.367%
U.S. 10-year	2.888%

CLQ11.NYM

...Crude Oil Aug 11...

97.68

...

1.75 (1.8%)

Photo: Yahoo

Builders broke ground on more single-family homes & apartments in Jun, helping the battered construction industry gain a little life after a dismal spring. The Commerce Dept said that builders began work on 629K homes (annualized pace) last month, a 14.6% increase from May. Still, that's roughly half the 1.2M homes per year that should be built to sustain a healthy housing market. Renting has become a preferred option for many who lost their jobs during the recession & were forced to leave their rapidly depreciating homes. Since 1992, apartments have typically made up just 20% of home construction. Now, they make up closer to 30%. Single-family home construction rose 9.4%, the biggest increase since Jun 2009, when the recession officially ended. However, a pace of 453K homes is still too depressed to signal a turnaround. Building permits, a gauge of future construction, increased 2.5%. While the new is good, housing remains in the dumps.

U.S. Housing Starts Hit Five-Month High in June U.S. Housing Starts Hit Five-Month High in June

With all the attention on DC, don't lose sight of Greece's debt problems. They haven't gone away. European leaders are struggling to convince investors that they will agree on a 2nd Greek bailout at a summit this weekend. But record bond yields boosted financing costs at sales of Spanish & Greek debt. EU gov minsters plan to meet for the 2nd time in a month on Jul 21, aiming to break a deadlock over a new Greek rescue that has spooked investors. Spanish & Italian bond yields surged yesterday, putting on pressure to end the turmoil. Spain & Greece sold €6B ($8.6B) of bills today. Greece may be a lost cause & Italy is very shaky. The € was up a smidgen today at just above $1.41 (but near a 4 month low).

EU Struggles to Convince on Greek Deal at Summit as Borrowing Costs Rise

Photo: Yahoo

Peabody Energy said Q2 profit surged 38% on higher prices & improved demand for steelmaking coal. The world's biggest private-sector coal producer predicted even stronger results for the rest of 2011, as it undertakes on its biggest global expansion in its 128-year history. BTU expects full-year EPS of $4.20-$4.60, up from $3.50-$4.50 forecast given 3 months ago. Q3 EPS should be $1.05-$1.25. In Q2, revenue rose 21% to $2.01B. Analysts were predicting EPS of $1.04 on revenue of $2.02B. This comes at a time when it's aggressively trying to bolster its global footprint in Australia & Asia, underscored by its latest push to buy Australia-based Macarthur Coal. The stock rose 77¢.

Peabody's 2Q earnings rise, raises 2011 outlook AP

Peabody Energy Corporation (BTU)

This was the first day of solid gains in earnings season. Apple (AAPL), with the 2nd largest market cap in the world, reports after the close. Expectations are for blowout numbers & chances AAPL fans will be happy. But drugs were soggy today & bank stocks remain in the doldrums, not good for the overall markets. DC is trying to juggle financial considerations to get the debt ceiling raised. Solving enormous problems at the last minute, dominated by political considerations, is not the way to make fundamental changes!! Greece (& other European countries) are also hanging on by their fingernails. Maybe earnings will give the markets a quick lift but that fix may not last long.