Tuesday, July 12, 2011

Markets waver on looming European debt crisis

Asian markets had a bad day during our overnight, but US markets recovered to near breakeven, awaiting developments on debt problems in Europe & DC. Dow fell 13, decliners barely ahead of advancers & NAZ was off 9. Bank stocks edged higher after recent selling.

S&P 500 Financials Sector Index

Value	203.30
Change	1.08 (0.5%)

The MLP index fell 1+ to the 371s while the REIT gained 3 to 250 (just below its 2011 highs). Junk bond funds were mixed & Treasury inched higher with the yield on the 10 year Treasury approaching 2.9%. Oil declined for a 3rd day in on speculation that Europe's spreading debt crisis will curb demand for raw materials. Gold pulled back on profit taking, but has a good looking chart.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.030%
U.S. 2-year	0.381%
U.S. 10-year	2.910%

CLQ11.NYM

....Crude Oil Aug 11

...95.03

...

0.12

(0.1%)

GCN11.CMX

...Gold Jul 11

........1,542.00

...

6.80

(0.4%)

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Photo: Yahoo

The US trade deficit surged in May to the highest level in more than 2½ years, driven upward by a big increase in oil imports. The Commerce Dept said that the deficit increased 15% to $50B, the largest imbalance since Oct 2008 when the financial crisis was being felt. Exports declined 0.5% to $175B & imports rose 2.6% to $225B. Oil prices have fallen since May, so the effect of higher prices should ease some in the coming months. The deficit is running at an annual rate of $563B, 12.6% higher than the 2010 imbalance. A higher trade deficit subtracts from overall economic growth with consumers purchasing more foreign-made goods & fewer products made in the US. Petroleum imports rose 10.3% to $39.8B, partly because of higher prices. The average price of a barrel of imported crude oil increased from $103.18 in Apr to $108.70 in May, the highest level since Aug 2008. The deficit with China jumped to $25B, the largest monthly gap since Nov & the deficit with Japan fell 26% to $2.6B from further supply-chain disruptions caused by the Mar earthquake.

U.S. Trade Deficit Unexpectedly Surges on Oil

Campbell Soup raised its fiscal 2011 earnings outlook, but provided a somewhat disappointing forecast for next year. CPB anticipates fiscal 2011 adjusted EPS will rise about 1% from adjusted results of $2.47 last year. Its prior guidance was for adjusted EPS to fall 1-3%. Revenue is still expected to be essentially flat. Analysts are predicting 2011 EPS of $2.45 on revenue of $7.7B. For 2012, Campbell foresees adjusted EPS will decline 4-6%, with revenue flat to up 2%. Expectations were for EPS of $2.49 on revenue of $7.9B. The soup maker gave a long-term outlook for adjusted EPS growth of 5-7% & a revenue increase in the range of 3-4%. Its new business strategy will include concentrating on expanding its simple meals, baked snacks & healthy beverage segments as well as boosting its presence in emerging markets. The stock liked the news, gaining 54¢.

Campbell Soup lifts 2011 profit outlook AP

Campbell Soup Company (CPB)

News Corp raised its stock repurchase program to $5B, up from the $1.8B that's still left in the existing program. It plans to repurchase $5B of its Class A & Class B common stock over the next 12 months. The stock had taken a hit this month (losing $7B in market value) amid a deepening phone-hacking scandal involving its now-shuttered News of the World tabloid. The stock rose 9¢.

News Corp. Boosts Stock Buyback to $5 Billion Amid Phone-Hacking Probe

News Corporation (NWS)

Financial problems are breaking out all over the world. Moody’s cited 5 Chinese companies as having more “red flags” on corporate governance than others it examined & Chinese stock markets had a bad day. European finance ministers are trying to figure out how to fix Greek debt problems & not have them to spread to other countries like Italy. Then there's the budget mess in DC. Both sides are digging in & some of the Reps are talking about letting the US default if that what it takes for reduce deficits in a meaningful way. AA earnings were sort of "good enough," but not quite as good as some were hoping for & the stock is flat. With growing uncertainty, gold & Treasuries should benefit.