Wednesday, July 20, 2011

Markets undecided, weighed down by government debt concerns

Dow slid 5, advancers 5-4 ahead of decliners & NAZ was off 4 despite Apple surging after reporting another blowout qtr. Bank stocks rose, as the Financial Index remains near its 2 month lows.

S&P 500 Financials Sector Index

Value	202.73
Change	2.88 (1.4%)

The MLP & REIT indices were each up fractionally while junk bond funds were mixed. Treasuries fell, taking the yield on the 10 year Treasury back over 2.9%. oil rose for a 2nd day as US inventories tumbled & on speculation that European leaders will agree on steps to address the region’s debt crisis. Gold was hit with profit taking. But just 6 months ago, 1400 was the objective for the bulls.

JPMorgan Chase Capital XVI (AMJ)

Click below to get the latest daily market update:

Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.371%
U.S. 10-year	2.922%

CLQ11.NYM

....Crude Oil Aug 11

...98.01

....

0.58

(0.6%)

GCN11.CMX

...Gold Jul 11

........1,585.30

...

15.60

(1.0%)

European officials are considering what to do about the European debt mess, including steps previously rejected by Germany to prevent the spread of the region’s debt crisis. Other options up for discussion at tomorrow’s Brussels summit include enabling the main €440B ($626B) rescue fund to lend to recapitalize banks. Together with a 2nd Greek aid package, the goal is to prove to markets that Europe has the will & tools to prevent the 21-month sovereign debt crisis from engulfing Spain & Italy. The € rose (to nearly $1.42) for a 2nd day. Spanish & Italian bonds also gained on optimism that policy makers are moving toward a deal. The Greek situation is “very serious” & requires a response, “Otherwise, the negative consequences will be felt in all corners of Europe and beyond.” said Jose Barroso, European Commission President. This is a work in progress & the outcome is fuzzy.

EU Said to Weigh Bailout Fund Use for Emergency Credit to Thwart Contagion

Photo: Bloomberg

Apple, with the 2nd largest market cap in the world, reported excellent sales & earnings growth in its Q3. EPS was $7.79, well ahead of its conservative guidance of $5.03, & earnings shot up 122% from last year. Sales surged 82% above last year to $28.6B, representing the highest sales in the company’s history. The growth was primarily driven by strong sales of the iPhone & the iPad & beat the estimate of $24.9B. Intl sales accounted for 62% of the total revenue. Gross margin expanded 170 basis points year over year to 41.7% & operating margin increased to 32.8% from 27.0% last year. AAPL shipped 3.95M Macs (14.0% above last year), attributable to strong demand across all geographic regions. iPhone unit sales were 20.3M, 142% above last year. iPad units sales were 9.2M, sharply ahead of 3.3M in Q2. The tablet is available in 64 countries. The stock had been doing little this year, but shot up in the last month. Today it's up $11 to another record.

Apple Shares Jump After Record Sales

Apple Inc. (AAPL)

Photo: Yahoo

Fewer people bought previously occupied homes in Jun, putting this year on pace to be the worst for sales since the housing bust. Home sales fell 0.8% to an annual rate of 4.77M, according to the National Association of Realtors, far below the 6M homes that represents a healthy housing market. The YTD sales pace is behind last year's 4.91M, the weakest sales in 13 years. A record number who signed contracts canceled deals last month & first-time buyers fell to a smaller share of the market. Bigger down payments, tougher lending rules, high debt & a shortage of desirable starter homes are keeping many would-be buyers away. Even some with good credit & enough money for a down payment are holding off because they are worried home prices will keep falling. Housing remains stuck in the mud.

Existing-Home Sales in U.S. Fell 0.8% in June

The AAPL earnings were impressive to say the least. But more is going on in the financial markets & solving gov debt problems is getting most of the attention by investors. Last minute patching to solve the monumental US debt problems is sloppy & this careless handling will haunt the markets. Uncertainties about solving European debts are growing. Earnings season may bring decent reports, but macro debt issues remain on center stage.