Tuesday, August 16, 2011

Lower markets as German ecnomy stalls

Dow fell 70 but is off the lows, decliners ahead of advancers 3-1 & NAZ fell 21.  After recent gains, profit taking should be expected.  Bank stocks are suffering a similar fate.

S&P 500 Financials Sector Index

Value 174.68 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change     -2.63    (-1.5%)

The MLP index fell 2+ to the 355s & the REIT index was off a fraction in the 225s.  Junk bond funds were slightly lower & Treasuries did little.  Oil fell after Germany’s economy almost stalled in Q2, bolstering concern that fuel consumption will diminish.  Gold gained for the 2nd straight day as the sagging European economy spurred demand for the precious metal..


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CLU11.NYM....Crude Oil Sep 11...86.60 .....Down 1.28  (1.5%)

GCQ11.CMX...Gold Aug 11.....1,777.80 ...Up 22.30  (1.3%)

Housing Starts in U.S. Fell in July as Construction Stagnate

Photo:   Bloomberg

Builders broke ground on fewer single-family houses in Jul, leaving home construction at depressed levels.  The Commerce Dept reported that builders began work on a 604K homes last month (annualized), a 1.5% decrease from Jun & half the 1.2M homes per year that should be built to sustain a healthy housing market.  Single-family homes, representing 70% of home construction, fell 5% & apartment building rose more than 6%.  Building permits, a gauge of future construction, declined 3.2%.  The number of homes under construction is the fewest in 40 years, just 413M homes are under construction.  A decade ago, roughly 1.6M homes were built.  Builders are struggling to compete with deeply discounted foreclosures & short sales (when a lender allows the owner to sell for less than what is owed on the mortgage).  Over the past year, the number of finished apartments has surged nearly 63%, the biggest percentage jump since 1996, as renting has become a preferred option for many Americans.  Home constructions remains stuck in them mud, going nowhere.

Housing Starts in U.S. Fell in July as Construction Stagnated

Industrial Production in U.S. Rose 0.9% in July

Photo:   Bloomberg

Automakers lifted overall factory output in Jul by the most since the Japan crisis, an indication that the economy may not be as weak as some had feared.  The Federal Reserve reported that factory output increased 0.6%, the biggest increase since the Mar earthquake in Japan which disrupted supply chains & limited output by some US auto plants.  The resurgent auto industry accounted for nearly all of the increase in factory production. Motor vehicles & parts jumped 5.2%.  Excluding that category, factory output grew only 0.2%.  Overall industrial production jumped 0.9%, the biggest increase this year.  Unusually hot weather drove demand for energy generated by utilities & mining output also increased.  Output by factories, mines & utilities has risen nearly 13% since a recession low in Jun 2009 but remains about 6.5% below its pre-recession peak from Sep 2007.  Some moderately good news although the bump at auto factories may involve one time catch up production.

Wal-Mart Boosts Profit Forecast

Photo:   Bloomberg

Wal-Mart, a Dow stock & Dividend  Aristocrat, Q2 profit rose 5.7%, due to intl sales growth & cost cutting. But it wasn't able to reverse a 2-year sales slump in the US.  "We remain concerned about the economic pressure on our customers and the uncertain impact on their shopping behavior," said CEO Bill Simon. "With this volatility, it is important as ever to deliver on Walmart's one-stop shopping promise for broad assortment and everyday low prices."  EPS was $1.09, above 97¢ last year.  Revenue, excluding Sam's Club, was up 5.5% to $108.6B.  Analysts expected $1.08 on revenue of $108.1B.  The intl business, which produces 26% of revenue, was up 16.2%.  Stores open at least a year in the US were flat, as a 5% increase at Sam's Club was partially offset by a 0.9% decline at Walmart stores (marking the 9th consecutive qtr that revenue at US stores declined compared with the same qtr the year before).  The company raised its full year outlook to $4.41-$4.51 & analysts are expecting $4.46.  The stock jumped $2

Wal-Mart Second-Quarter Profit Rises 5.7%

Wal-Mart Stores, Inc. (WMT)

stock chart

There is not too much going on the markets.  Fitch reaffirmed the AAA credit rating for US debt.  But that doesn't mean much & is not affecting demand for Treasuries.  The housing depression continues with no hope of a quick turnaround.  Dow has had a nice move off the lows last week & is looking at profit taking.

Dow Industrials (INDU)

stock chart

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