Monday, August 1, 2011

Markets waffle ahead of debt votes in DC

Stocks began the day with strong gains & then sank on uncertainties over getting the proposed debt deal approved in DC.  Buyers returned in the PM, reducing early losses.  Dow was off 10, decliners slightly ahead of advancers & NAZ fell 11.  The Financial Index fell but finished off its lows.

S&P 500 Financials Sector Index

Value198.52One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -0.66    (-0.3%)

The MLP index had a good day, although it closed 5 below its highs, while the REIT index fell almost 4 to 240.  Junk bond funds had a very good day, typically up 2-3% on the turmoil in DC about raising the debt ceiling.  Treasuries advanced, pushing the yields on 10-year notes to the lowest level since Nov, as an index showed US manufacturing expanded in Jul at the slowest pace in 2 years.  Oil declined to a one-month on prospects of slow manufacturing growth in the US.  Gold declined from a record on optimism that Congress will pass a compromise to raise the US debt limit & prevent a default, curbing demand for the metal as an investment heaven.  However, the chart below shows gold remains near its record highs.

Alerian MLP Index

Value363.58One-Year Chart for Alerian MLP Index (AMZ:IND)
Change   1.58    (0.4%)

Treasury yields:

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CLU11.NYM...Crude Oil Sep 11...95.00 ...Down 0.70  (0.7%)

Live 24 hours gold chart [Kitco Inc.]

Get the latest market update below:

Mercury General, an independent broker & agency writer of automobile insurance in California, reported profit for Q2 surged as revenue rose 8% & the company benefited from investment gains & lower expenses.  EPS was $1.04 compared with 32¢ last year.  The results included investment gains of 28¢ & a loss on investments of 33¢ last year.  Excluding the investment gains, EPS was 76¢, beating expectations of 62¢.  Revenue rose to $706M from $653M & net premiums written rose to $636M from $631M.  Expenses fell to $631M from $638M.  The 60¢ quarterly div was maintained & the stock jumped 1.54 to 38.68 providing a generous 6.2% yield.

Mercury General 2Q profit surges AP

Mercury General Corporation (MCY)

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Allstate reported a Q2 loss, hammered by $2.3B in catastrophe losses from waves of tornadoes, wildfires & storms.  Yet its numbers beat expectation as the ratio for claims paid out versus dollars taken in improved.  The loss per share amounted to $1.19 which compares with EPS of 27¢ last year.  The adjusted loss was $1.23, less than the expected loss of $1.46.  ALL provided coverage for 33 catastrophic events in Q2, including 5 tornadoes, 3 wildfires & 25 wind & hail storms. It was the deadliest year for tornadoes since 1950.  Homeowner premiums written increased 2.6% in Q2.  A 6% increase in average gross premium was partly offset by a 4% decline in policies in force.  The stock rose 62¢ & yields 3%.

Allstate 2Q weather beaten, but a silver lining AP

Allstate Corporation (The)

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This was a wild day.  Asian stock markets had gained on the announcement about the debt deal in DC.  US markets opened with good gains, but that did not last.  The dreary manufacturing news hit home.  For the rest of the day eyes were watching the goings on in DC.  There is a feeling that both houses will pass the compromise to raise the debt ceiling, but nobody really knows.  Both sides have militants who will vote against & the outcome is uncertain, especially in the House.  My gut feel is that it will pass.  The idea is that a committee will decide bigger issues in 3 months.  I don't think so!  Remember, a camel is a horse designed by a gov committee.  Even if passed, the threat of a debt reduction will not go away.  This could be a rough month for stocks.

Dow Industrials (INDU)

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