Thursday, February 23, 2012

Limited gains for markets while waiting for news from Greece

Dow was up 46, advancers over decliners 5-2 & NAZ advanced 23.  From the AM lows, the Financial Index rose 2 to the 198s,

The MLP index was flat in the 407s & the index has been trading around this record level all week.  The REIT index gained 3 to the 245s (helped by the Sears announcement, see below), junk bond funds continued on their winning ways as investors seek their relatively high yields & Treasuries climbed after the successful auction.  Oil rose to the highest level in more than 9 months as jobless claims held at a 4-year low in the US & German business confidence surpassed forecasts.  Gold, flight to safety investment, continued at its highest levels in 3 months.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLJ12.NYM...Crude Oil Apr 12...107.93 ...Up 1.65  (1.6%)

Live 24 hours gold chart [Kitco Inc.]

Sears to Sell 11 Stores

Photo:   Bloomberg

Sears Holdings announced steps to reassure investors about its ability to pay down debt after announcing it intends to separate its Sears Hometown & Outlet businesses & certain hardware stores through a rights offering expected to raise $400-500M.  The rights will entitle stockholders to purchase shares in the combined Sears Hometown & Outlet Stores businesses & certain hardware stores & will be transferred to holders of Sears Holdings common stock.  SHLD also reached a deal to sell 11 stores to General Growth Properties (GPP).  The actions come at a time when business lenders such as CIT (CIT) are keeping SHLD on a tight leash.  The real estate deal is expected to generate $270M in the next 2 months.  SHLD stressed that it had substantial liquidity & strong assets even as it needs to improve its operating performance.  "It is important to note that we are an asset rich enterprise with multiple resources that dash at our disposal, which we believe provides us with ample financial flexibility," CFO Schriesheim said.  This announcement came after it reported a huge quarterly net loss from a poor showing during the holiday season.  The net loss was $22.47 per share, after a number of one-time charges, compared with a profit of $3.43 a share a year earlier.  Excluding one-time items, EPS was 54¢.  The stock recovered 9.72 (19%) after a dismal performance last year.

Sears to Raise Up to $770 Million With Store Sales After Quarterly Loss

Sears Holdings Corporation (SHLD)

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Treasuries rose after the sale of $29B in 7-year notes drew stronger-than-average demand amid concern Europe's sovereign-debt crisis hasn’t been contained.  The 10-year yields reached a one-week low as the European Commission said the region’s economy will shrink this year, dragged down by Italy & Spain.  At today’s auction, the bid-to-cover ratio was 3.11X compared with an average of 2.81X for the previous 10 sales.  The yield on the benchmark 10-year bond fell 3 basis points to 1.99% after touching 1.97%, the lowest in a week.  The 7-year notes drew a yield of 1.418%, compared with a forecast of 1.456%.  Indirect bidders, including foreign central banks, purchased 41.8% of the notes, compared with an average of 39.9% for the past 10 sales.  Direct bidders, non-primary dealer investors that place their bids directly with the Treasury, purchased 19.3%, the most since at least Feb 2009, compared with an average of 11.9% at the last 10 auctions.  Risk averse thinking is alive & well.

Treasuries Erase Losses After Seven-Year Note Demand Swells

In Q4, home prices fell 2.4% from a year earlier, as sales were boosted by investors seeking lower-cost distressed properties.  Prices dropped 0.1% from Q3 on a seasonally adjusted basis according to the FHA.  In Dec, prices retreated 0.8% from a year earlier but increased 0.7% from Nov.  Foreclosures are boosting the supply of properties & dragging down values for all houses.  Banks may seize more than 1M homes this year after legal scrutiny of their foreclosure practices slowed actions against delinquent property owners in 2011.  Distressed properties, comprising foreclosures & short sales in which the lender agrees to a transaction for less than the mortgage balance, accounted for 35% of all home purchases in Jan, according to the National Association of Realtors.   As measured by the National Association of Realtors, the median home price was $162K in Dec & fell to $154K in Jan.  More mixed news about housing.

Home Prices in U.S. Fell 2.4% in Fourth Quarter From Prior Year, FHFA Says

  • <p>               In this Feb. 20, 2012 photo, flat screen televisions  are displayed at Target in Methuen, Mass. Target Corp. is reporting a 5.2 percent drop in earnings for the fourth quarter, as the discounter pushed big discounts to get tight-fisted shoppers to buy during the holiday season.  (AP Photo/Elise Amendola)
Photo:   Yahoo

Target, a Dividend Aristocrat, Q4 income fell 52% due to sluggish holiday sales.  But business has rebounded since then, & the company offered a full-year profit outlook that was above expectations.  Revenue rose 3.3% to $20.94B, below $21.2B forecasted by analysts.  Revenue at stores opened at least a year rose 2.2%.  Profit margins slipped to 28.4 from 28.7% in the year-ago period.  "We're pleased with the pace of our sales since the holiday season," said CEO Steinhafel.  "Yet, we expect we'll continue to see mixed signals in the economy going forward."  TGT had EPS of $1.45 in Q4 ended Jan 28, similar to $1.45 per share, in the year-ago period.  Analysts had expected $1.40.  The company reiterated its annual goal to generate $8 per share on sales of $100B+ by 2017.  The stock gained 1.53 (3%).

Target Fourth-Quarter Earnings Exceed Analysts’ Estimates on Sales Growth

Target Corporation (TGT)

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Even in the confused muddle about European debts, the € climbed another penny, pushing on $1.34.  It's hard to make much sense of the markets with the Greek debt refinancing still in limbo.  The jobless data was welcomed by the markets & reports from retailers have been generally good.  But with these following winds, Dow was not able to crack 13K as has been the case all week.  It will ty again tomorrow after we learn more about the Greek bondholders' willingness to accept haircuts on their holdings.

Dow Industrials

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