Friday, January 27, 2012

MIxed markets on uneven earnings and economic data

Dow dropped 74, advancers ahead of decliners 2-1 & NAZ gained 11.  Limited strength in bank stocks pushed the Financial Index higher. 

S&P 500 Financials Sector Index

Value 190.34 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    0.72     (0.4%)

The MLP index had a massive decline, down 6+ to the 394s, while the REIT index was flattish at 247.  Junk bond funds were a little higher & Treasuries continued in demand, taking the yield on the 10 year Treasury below 1.9%.  Oil was about even & gold continued on its winning ways, up almost 10.

JPMorgan Chase Capital XVI (AMJ)

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CLH12.NYM...Crude Oil Mar 12...99.61 ...Down 0.09  (0.1%)

Live 24 hours gold chart [Kitco Inc.]

Fitch cut the credit ratings for Italy, Spain & 3 other euro countries, saying they lack financing flexibility in the face of the regional debt crisis.  Italy's ratng was cut 2 levels to A- from A+.  The rating on Spain was also lowered 2 notches, to A from AA-.  Ratings on Belgium, Slovenia & Cyprus were also reduced, while Ireland’s rating was maintained.  “The divergence in monetary and credit conditions across the euro zone and near-term economic outlook highlight the greater vulnerability” these nations face in the event of financing shocks, Fitch said.  All the countries were removed from “ratings watch negative,” though they retain a “negative outlook,” which implies the possibility of a downgrade within 2 years.  No great surprise, but hearing the news is always painful.

Fitch Cuts Italian, Spanish Ratings by Two Notches

Greece is locked in a twin effort to placate its creditors, seeking to secure a crucial debt relief deal with private investors while also tackling pressing demands from its European partners & the IMF for deeper reforms.  Failure on either front would force the country to default by Mar, adding to Europe's debt crisis.  If Greece left the eurozone, it could bring disaster on the country & destabilize the rest of the eurozone.  Sources said there was progress on legal & technical issues withthe IMF (whatever that means).  A Greek gov spokesman said it was "obvious" that progress has been made.  "We hope to conclude as soon as possible."  The  lack of progress in  the talks is mainly due to disagreements on the interest rate cut private investors must accept on the new lower-value Greek bonds with longer maturities that will replace the ones they own.  The writedown is meant to reduce the country's debt-to-GDP ratio from 160% last year to 120% in 2020.  The Greek drama just drags on.

Greece locked in parallel talks over debt AP

  • A man pumps fuel into his truck at a Chevron gas station in Buckeye, Arizona October 27, 2011. REUTERS/Joshua Lott
Photo:   Yahoo

Chevron, a Dow stock, reported lower Q4 earnings, as rising spending on oil & gas projects, & losses at its US refinery business offset gains from higher crude oil prices.  Oil & gas production at the #2 US energy company declined to 2.6M barrels per day (BPD) from 2.8M BPD a year-before, while average oil prices rose about 25%.  The major factors behind the output shortfall were the effect of higher prices on production sharing contracts, lower-than-expected performance at large new offshore projects in the Gulf of Mexico & Angola, & a 3rd-party pipeline rupture & decreased demand in Thailand.  Still, CVX added 1.7B barrels of oil equivalent to its reserves last year,almost double its 2011 output.  Q4 EPS slipped to $2.58 from $2.64 a year earlier & fell short of the $2.84 expected.  Its $9B Angola LNG project is due to start up later this year.  The stock dropped 2.63.

Chevron profit falls as refineries, output sufferReuters

Chevron Corporation (CVX)

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DR Horton, the top US homebuilder, posted a Q1 profit that beat expectations, helped by a surge in orders indicating & said it was looking at spring selling season with "cautious optimism."  The meltdown in the housing market triggered the 2007-09 recession, but home building has seen growth in the last few qtrs & building permits jumped to a 1 year high in Nov.  DHI, which focuses on lower-end homes for first-time homebuyers, had been hurt as a massive overhang of used & foreclosed homes.  Orders, a leading indicator for builders, rose 17% to $706M.  Q1 EPS was 9¢, compared with a net loss of 6¢ in the prior year period.  Revenue rose 15% to $886M.  Forecasts were for EPS of 4¢ on revenue of $897M.  The stock was up 27¢.

D.R. Horton Reports First-Quarter Profit as Homebuilding Revenue Increases

D.R. Horton, Inc. (DHI)

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The € is over $1.32, up a nickel form the lows earlier this month, on hopes that bondholders of Geek debts can agree on a fair haircut for their investments.  That could have been said last month or the prior month.  Maybe, who knows?  But that kind of thinking is not encouraging for the markets.  Earnings reports are inconsistent, some better than others.  The idea is that higher sales are supposed to bring higher profits.  That is blurred with multi-nationals giving excusees why earnings are not as healthy as they should be.  We hear a lot about the Rep race in FL, but almost nothing about extending lower taxes next month for workers.  That will be a nasty fight, something the markets do not like.  Facebook is said to be coming out with its IPO next week.  Perhaps that will encourage buyers to return.

Dow Industrials

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