Monday, October 17, 2011

Markets sell off on European debt worries

Dow dropped 140, decliners over advancers almost 4-1 & NAZ fell 27.  The Financial Index was down 3½ to the 166s, bank earnings reports have been only mediocre.

The MLP index was up a fraction in the 257s & the REIT index fell almost 4 to the 209s.  Junk bond funds did little while Treasuries rose on the declining stock market.  Oil also fell but gold gained fractionally, heading back towards 1700.



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CLX11.NYM...Crude Oil Nov 11...86.21 ....Down 0.59  (0.7%)

GCV11.CMX...Gold Oct 11......1,686.90 ...Up 5.10  (0.3%)

Click for the latest market update below:

El Paso Corp. LNG Storage Tanks

Photo:   Bloomberg

Kinder Morgan will buy El Paso Corp for $21B, to combine the 2 largest natural gas pipeline operators in North America in a huge bet on the fast-growing market for that fuel. The cash & stock deal comes as Exxon Mobil (XOM), a Dow stock & Dividend Aristocrat, & other oil majors are spending billions to develop & produce shale gas & crude oil in areas with poor infrastructure.  The combined company would own about 80K miles of pipe stretching from coast to coast, & could demand higher transport fees from oil & gas producers, which could then raise the prices that power companies & end users pay for gas.  Production of gas has been rising as energy companies pile into shale fields, underground formations rich in oil & gas.  EPB already owned the largest natural gas pipeline system in North America, with more than 43K miles of pipe.  The combined company would own 67K miles of natural gas pipe & another 13K miles of pipelines to move refined products and other fuels.  "We believe that natural gas is going to play an increasingly integral role in North America," KMP CEO Richard Kinder said.  "We are delighted to be able to significantly expand our natural gas transportation footprint at a time when it seems likely that domestic natural gas supply and demand will grow at attractive rates for years to come."  KMP rose 2.29 (3%) & EP was up $4.52 (23%) on the buyout.

Kinder Morgan to Buy El Paso for $21 Billion in Cash, Stock

Kinder Morgan Energy Partners, L.P. (KMP)

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El Paso Corporation (EP)

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Citigroup Profit Rises 74%, Beats Estimates

Photo:   Bloomberg

Citigroup earnings rose 74% in Q3 to $3.8B on an accounting gain & lower losses from loans (not a high quality earnings gain).  EPS was $1.23 on revenue of $20.8B.  But income included a $1.9B accounting gain related to its credit holdings.  Excluding the gain, EPS was 84¢, above 82¢ predicted.  Excluding the accounting gain, Citi's revenue fell 8% from the same period last year.  Losses from bad loans fell 41% to $4.5B as defaults fell from its credit card loans for Citi-branded cards, allowed Citi to add $1.4B to its earnings from credit reserves it set aside for deeper losses.  Intl consumer business increased 10% due to growth in Asia & Latin America.  Its North American consumer business fell 9% from a year ago due mainly to lower average balances on its credit cards.  Revenue in the card business also fell due to regulations that limit the ways banks can increase interest rates & fees.  Its stock & bond trading business was hurt by uncertainty in financial markets due to the debt crisis in Europe & a downgrade of the US gov credit rating in Aug. "Citi continues to navigate a challenging economic environment," Vikram Pandit, Citi's CEO, said.  The stock was up a dime.

Citigroup Profit Rises 74%, Beats Estimates

Citigroup Inc. (C)

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  • <p>               FILE - In this Jan. 18, 2011 file photo, a customer exits a Wells Fargo bank branch in Los Angeles. Wells Fargo & Co. said Monday, Oct. 17, 2011, its third-quarter profit jumped 21 percent, as write offs of bad loans dropped while deposits grew.(AP Photo/Reed Saxon, file)
Photo:   Yahoo

Wells Fargo Q3 profit jumped 21%, as write offs of bad loans dropped while deposits grew.  But it posted lower-than-expected revenue for the period.  EPS rose to 72¢, up from 60¢ last year, matching expectations of 72¢.  Revenue fell 4% to $19.6, below expectations of $20.2B reflecting a concern throughout the banking industry as a host of new regulations have taken effect, limiting charges like overdraft fees & making it harder to raise interest rates on credit cards.  Service charges on deposit accounts fell 3% to $1.1B & mortgage banking fees plunged 27% to $1.83B.  Total noninterest income, revenue earned from fees & charges, dropped 7% to $9.09B.  With interest rates remaining at record lows, interest income from loans fell 6% to $9.2B & net interest income fell 5% to $10.5B.  WFC reduced the amount set aside to cover uncollected loans by 47% to $1.8B, down from $3.5B last year, as consumer & commercial borrowers got better paying back debt.  The stock fell 1.68 on sluggish earnings.,

Wells Fargo Net Income Rises on Better Credit

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After last week's rally, overbought markets are pulling back.  A ton of earnings are coming this week & the bank earnings today were not spectacular.  Bad loans are straightening out but low interest rates hurt & accounting magic used to create earnings is not welcome.  European debts remain a mess, something which was ignored last week.  Different countries with different agendas are trying to come up with a coordinated plan to solve problems.  That won't be easy.  Greece will muddle by with bailout II, but there are still plenty of issues to resolve.  Meanwhile earnings will come fast & furious this week (so far not so good) & the goings on in DC will get more attention.

Dow Industrials (INDU)

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