Tuesday, February 21, 2012

Markets give lukewarm reception to Greek bailout

Dow rose 44, advancer over decliners 2-1 & NAZ added 9.  The Financial Index was up a fraction, just short of 200, not seen in almost 7 months.  The MLP index slipped a tad to 407 & the REIT index was off 1½ to the 246s.  Junk bond funds edged higher while Treasuries fell, bringing higher yields, as Greek bailout eases demand for Treasuries.  Oil rose to the highest level in more than 9 months after the 2nd bailout for Greece was approved, reducing concern that the debt crisis may slow the economy & oil consumption.  In addition Iran is flexing its muscles, not good for oil prices.  Gold also rose on uncertainties about the Greek bailout.

JPMorgan Chase Capital XVI (AMJ)

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CLH12.NYM...Crude Oil Mar 12...104.56 ...Up 1.32  (1.3%)

GCG12.CMX...Gold Feb 12........1,726.30 ...Up 1.80  (0.1%)

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Greek premier rushes to Brussels to secure bailout

Photo:   Yahoo

  • <p>               Greek Finance Minister Evangelos Venizelos, left, shakes hands with German Finance Minister Wolfgang Schaeuble during a round table meeting of eurozone finance ministers at the EU Council building in Brussels on Monday, Feb. 20, 2012. Eurozone governments will likely approve on Monday a long-elusive rescue package for Greece, saving it from a potentially calamitous bankruptcy next month, senior officials said. But finance ministers meeting in Brussels will have a few last issues to wrangle over, such as tighter controls over Greece's spending and further cuts to the country's debt load. (AP Photo/Yves Logghe)
Photo:   Yahoo

The countries that use the € reached an agreement to hand Greece €130B ($170B) in extra bailout loans to save it from default next month. The € rose to $1.328.  However the details of the deal were not announced.  The deal is expected to bring Greece's debt down to 120.5% of GDP by 2020 (around the maximum that the IMF & the eurozone considered sustainable).  Last week, a new report from Greece's debt inspectors indicated that the country's debt would still be close to 129% of GDP by the end of the decade, despite massive new spending cuts planned & a tentative €100B debt relief deal with private investors.  It's unclear what the final deal with bondholder representatives looked like, but it's expected that they agreed to further losses. The big question will now be how many banks & other investment funds will actually agree to participate voluntarily & whether Greece will have to force some holdouts to sign up to make the deal effective.  The lower debt level also suggested that the ECB agreed to forego some profits on its Greek bondholdings to help close the funding gap in the new bailout package.   The debt mess is not over, just lumbering along with nothing new decided.

Greece Wins Second Bailout as Europe Picks Aid Over Default

  • <p>               FILE - In this May 16, 2011 file photo, the WalMart Supercenter signage is seen in Springfield, Ill.  Wal-Mart Stores Inc. is reporting Tuesday, Feb. 21, 2012, a 4.2 percent decline in fourth-quarter profits. But the world's largest retailer's U.S. namesake business continued its rebound as its grabbed shoppers over the critical holidays. (AP Photo/Seth Perlman, File)
Photo:   Yahoo

Wal-Mart, a Dow stock & Dividend Aristocrat, low-cost strategy during the holidays helped & hurt its performance in Q4:  Profit declined almost 15%, but its namesake US business continued to draw in more shoppers.  WMT guaranteed shoppers it would give them the lowest price on a given item, no matter when they bought it during the holiday season.  That resulted in its first gain in customer counts in several years, but that came at a cost.  Operating income growth for Q4 was slower than the rate of sales for US. business as gross profit margin declined.  "Core customers remain cautious about their finances," said Mike Duke, CEO of Wal-Mart Stores.  "They rely on Walmart's (everyday low price) promise to help them manage through today's economic challenges."  Q4 EPS was $1.50, below $1.70 in the prior year period.  Including results from benefits from certain tax matters & real estate transactions, EPS was $1.51.  The year earlier results included benefits from discontinued operations; excluding those benefits, earning were $1.41.  Sales, excluding membership fees from its Sam's Club division, rose 5.9% to $122.28B.  For the current year, WMT expects EPS of $4.72-$4.92 & analysts expect $4.90.  The stock fell 2.30 (4%).

Wal-Mart Profit Trails Estimates on Low Prices

Wal-Mart Stores, Inc. (WMT)

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Home Depot Profit Beats Analysts’ Estimates on Warm Weather

Photo:   Bloomberg

Home Depot Q4 profit exceeded estimates as warmer weather helped spur an increase in residential spending.  EPS was 50¢, up from 36¢ a year earlier.  Projections were for 42¢.  HD attracted customers who spent more as unemployment sank to a 3-year low & builders began work on more houses.  Warmer weather helped sales at stores open at least a year advance 5.7%, the biggest gain since a 7.7% increase 8 years ago & topped the 3% estimate.  The company projected full-year EPS of $2.79, with stock buybacks.of $3.5B.  Full-year revenue may increase about 4% to $73.2B, above an average estimate of $72.5B.  The stock was up 69¢.

Home Depot, Inc. (The) (HD)

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I expected the biggies in Europe would come up with something to bailout Greece.  But the details are hazy & it's not clear if bondholders will accept major haircuts.  Other countries in the southern part of Europe also have debt problems which may be getting more attention.  Earnings reports from retailers have been fairly good, bringing out stock buyers.  Dow is pushing on 13K.  If it's serious about breaking thru, that should happen today or tomorrow at the latest because higher oil prices are troubling.

Dow Industrials

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