Wednesday, February 15, 2012

Markets mixed on growing Greek debt concerns

Dow is down 30 after being underwater since the start of trading, advancers ahead of decliners 3-2 & NAZ rose 17 as Apple soared (17).  The Financial Index inched up a fraction in the 196s. close to its 8 month highs.  The MLP index eked out a tiny gain into the 401s (good enough for a new record) while the REIT index was even.  Junk bond funds & Treasuries were mixed.  Oil continues to show strength & gold shot up on the growing uncertainties about Greek's debt problems.  The € fell a fraction to under $1.31, down 2 pennies from its interim highs last week.

Treasury yields:

U.S. 3-month    0.112%
U.S. 2-year        0.286%
U.S. 10-year      1.928%

CLH12.NYM    Crude Oil Mar 12   101.32      0.58 (0.6%)

GCG12.CMX   Gold Feb 12         1,734.20    18.30 (1.07%)

Get the latest daily market update below:

Greece is complaining that Europe’s wealthier countries are “playing with fire” by toying with the idea of expelling it from the euro zone.  Finance Minister Venizelos leveled the accusation after a decision slated for tonight on €130B ($171B) aid was postponed until at least Feb 20 & possibly until after a full-time Greek gov emerges from elections later in the year.  “We are continually faced with new terms,” Venizelos said.  “In the euro area, there are plenty who don’t want us anymore.  There are some playing with fire, domestically and abroad. Some are playing with torches and some are playing with matches. But the risk is equally great.”  European leaders are torn between pouring more aid into the struggling economy or risking an unprecedented national bankruptcy that might force the country out of the euro area & prompt market tumult.  Tonight’s finance meeting was canceled late yesterday & replaced with a conference call.  Luxembourg Prime Minister Jean-Claude Juncker, chairman of the euro panel, now targets a Greek aid decision at the previously scheduled Feb 20 meeting.  The official loans, supplemented by about €100B of debt relief from private bondholders, have been in the works since Jul.  Each day lost brings Greece closer to a Mar 20 bond redemption deadline & the probability of default is climbing.

Europe ’Plays With Fire’ as Greek Rescue Hits Barrier

US factories boosted output last month & Dec ended up being the best month of growth in 5 years.  Strong auto sales & growing business investment in machinery & other equipment are keeping factories busy.  The Federal Reserve said that manufacturing production increased 0.7% in Jan & output soared 1.5% in Dec, after an upward revision (the biggest gain in 5 years).   Overall industrial production (mines & utilities as well as factories) was unchanged mostly because less energy was used to heat homes.  Factory output has risen 16.7% from its low point during the recession, but is still 7.1% below its Dec 2007 peak.  Auto production rose 6.8%, the biggest gain since Jul 2010.  Car sales rose by the most in more than 2 years in Jan, after posting healthy sales gains in the prior 2 months.  Industrial machinery production increased 2.2%, after an even larger gain in Dec.  Computer & electronics production moved up 1.4%.  This economic activity is helping reduce unemployment.

Deere said that strong equipment sales, particularly abroad, boosted its quarterly net income 4% & the company raised its outlook for 2012.  Fiscal Q1 EPS was $1.30, up from $1.20 in the prior year.  Revenue grew 11% to $6.8B from $6.1B.  The results topped expectations, but the 11% sales growth fell short of the 16-18% growth the company had predicted.   DE still expects sales to be up about 15% in fiscal 2012, but now predicts net income of $3.275B (up from last fall's forecast of $3.2).  CEO Samuel Allen said the company is investing in new products & 7 new factories around the world to make sure it is ready to meet growing demand for its heavy equipment as the economy improves & the developing world upgrades its infrastructure.  "Our substantial investment in new products and additional capacity puts Deere on a sound footing to respond to further improvement in key markets that are in the early stages of recovery," Allen said.  The stock fell $2.98 (3%).

Deere Declines After Cutting Its U.S. Farmer Revenue Forecast for 2012

Deere (DE)

The economic news from the US continues to be fairly good, but traders can not take their eyes off Europe & especially Greece.  There is talk that China (with very deep pockets) might want to help, but that's just talk.  Unclear thoughts  won't help Greece pay creditors.  The politicos in DC are spinning their wheels on extending tax cuts & unemployment benefits.  Don't expect any final decisions before the last day in Feb.  Iran is not getting a lot of attention even though it's a threat to oil supplies when it rattles its sabers.  That's disturbing with oil already near recent highs.  But Dow continues to take all this with a sense of equanimity. 

Dow Jones Industrial Average Index


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