Tuesday, November 22, 2011

Lower markets after GDP growth was reduced

Dow dropped 82, decliners over advancers 2-1 & NAZ fell 16.  Bank stocks led the selling with the Financial Index down 1½ to 162. 

The MLP idndex fell 1+ to 364 & the REIT index was off 1+ to 213.  Junk bond funds & Treasuries were also lower. Oil rose for the first time in 4 days as new sanctions against Iran & protests in Egypt raised concern that supplies will be disrupted.  Gold was little changed despite the debt chaos in Europe.

AMZ  Alerian MLP Index

DJR  Dow Jones Equity REIT Index

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year

CLF12.NYM....Crude Oil Jan 12...98.20 ...Up 1.28  (1.3%)

GCX11.CMX...Gold Nov 11....1,675.40 ...Down 2.90  (0.2%)

Get the latest market update below:

Hewlett-Packard Co Chief Executive Officer Meg Whitman

Photo:   Bloomberg

Hewlett-Packard, a Dow stock, first earnings report with Meg Whitman as CEO highlights the troubles she faces in setting a new course for the company.  The numbers beat subdued expectations, but the forecast for fiscal 2012 left something to be desired.  Net income fell 91%, mostly because of write-downs & charges for the decision to kill off HP's fledgling tablet & smartphone lines.  EPS was 12¢, down from $1.10 last year.  Excluding one-time items, EPS was $1.17, more than the $1.13 expected.  Revenue fell 3% to $32.1B, beating the $32B expected.   The profit decline in the latest qtr was caused in large part by $3.3B in charges for the decision to kill its tablet & smartphone businesses, as well as other write-downs & acquisition costs. But revenue in 3 of the biggest divisions, personal computers, printers & ink, & servers & networking — fell as well.  The stock fell about $1.

Hewlett-Packard’s Whitman Aims to Rebuild

HPQ   Hewlett-Packard Co

Germany's Chancellor Angela Merkel

Photo:   Bloomberg

German Chancellor Merkel slapped down a new European Union push for bonds issued jointly by the 17 euro nations, saying they wouldn't resolve the debt crisis & now is the wrong time to discuss them.  She dug in on her resistance to calls for an instant solution to the crisis hours after the EU's top economic official tried to sell a skeptical Germany a drive for so-called "eurobonds," which the EU's executive Commission is now calling "stability bonds."  Merkel has staunchly opposed anything resembling eurobonds, which the Commission's head argues would be an effective way to avoid disaster as many countries' borrowing costs spiral higher in the debt crisis.  The chancellor noted in a speech that eurobonds "have just come very much back into fashion."  But she was unbending in her opposition, saying that what's important is to address shortcomings in the construction of the eurozone.  "If at all, this discussion belongs at the end — so I don't find it particularly fitting that we are now once again conducting it in the middle of the crisis, as if it were the answer to this crisis," Merkel said. "In the long term, it isn't."  Germany, Europe's biggest economy, fears that pooling debt would drive up its own borrowing costs, expose its taxpayers to the bad debt of weaker countries, & remove incentives for struggling nations to get their finances in order.  The European debt mess is droning on, bad for the markets.

  • <p>               This Nov. 18, 2011 photo, shows Hormel food products, in Barre, Vt. Hormel Foods Corp.'s fiscal fourth-quarter net income fell 3 percent Tuesday, Nov. 22, 2011, as sales at its grocery products segment declined. (AP Photo/Toby Talbot)
Photo:   Yahoo

Hormel, a Dividend Aristocrat,  EPS was 43¢ for its Q4, down from 45¢ a year earlier but ahead of 42¢ expected (with one less week in the current qtr).  Revenue edged up 2% to $2.1B, slightly below the $2.13B estimate.  The biggest drag came from the refrigerated foods division, where operating profit fell 19% because of declining pork operating margins & increased commodity costs.  But other segments reported sales increases, the biggest at Hormel Foods International, with a 12% sales increase.  Full-year EPS was $1.74, above $1.46 in the prior year.  Revenue increased 9% to $7.9B from $7.2B. The company anticipates 2012 EPS of $1.79-$1.89 (analysts expect $1.77).  CEO Jeffrey Ettinger said that HRL expects its grocery products, specialty foods & the division with the intl business to drive fiscal 2012 profit growth.  He cautioned that comparisons will likely be more difficult in the first half of the year, getting more favorable later in the year.  The annual div was increased 18% to 60¢ from 51¢.  The stock gained 37¢.

Hormel Foods 4Q net income falls, revenue risesAP

HRL  Hormel Foods Corp.

The GDP growth rate for Q3 was reduced to 2%, lower than an initial 2.5% estimate made last month.  In addition, after-tax incomes fell by the largest amount in 2 years, reflecting high unemployment & lower pay raises.  This is more gloomy news, reinforcing that the economic recovery is sluggish at best.  Greece, Italy & Spain have new govs trying to deal with their debt messes.  Meanwhile, implications for looming federal budget cuts are adding to uncertainties for investors.  Dow is below 11½K & looks like it wants to test the recent low at 10½K with more selling.  It's increasingly difficult to make a bullish case for the market given the uninspiring macro economic factors.

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