Wednesday, April 4, 2012

Markets fall on weak Spanish debt auction and stimulus doubts

Buying in the PM reduced losses.  Dow fell 124, decliners over advancers 4-1 & NAZ was off 45 in a weak tech sector.  Bank stocks led the selling, taking the Financial Index down 3+ to 210.

The MLP index fell a very big 4+ to just above 390 (about even YTD) & the REIT index was off 2½ to the 252s (still near its recent highs).  Junk bond funds were lower, but Treasuries gained as the stock market retreated.  Oil tumbled after the Energy Dept said US stockpiles surged the most since 2008 as domestic crude output climbed to the highest level in 12 years.  Gold had a very bad day, down $48, on a strong dollar.

JPMorgan Chase Capital XVI (AMJ)

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CLK12.NYM...Crude Oil May 12...101.77 ...Down 2.24  (2.2%)

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Best Buy May Be Cut to Junk at S&P as Closings Show Weakness

Photo:   Bloomberg

Best Buy, the world’s largest electronics retailer, may have its credit rating lowered to junk status by S&P as it plans to close stores to improve its performance.  Currently it has a BBB- rating, the lowest level of investment grade, & was placed on credit watch with negative implications.  BBY is closing 50 big-box stores & cutting staff jobs, generating savings to spend on promotions & training store employees. The company plans to add 100 smaller-format Best Buy Mobile stores in the US in the current fiscal year.  A downgrade would indicate how serious its problems are.  The stock fell 60¢ & has a dreary chart.

Best Buy May Be Cut to Junk at S&P as Closings Show Weakness

Best Buy Co., Inc. (BBY)

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SanDisk Declines Most Since January

Photo:   Bloomberg

SanDisk, a maker of memory chips, fell after it cut its revenue guidance for Q1.  It now expects to report revenue of $1.2B, down from an earlier forecast of $1.3-$1.35B which is also below the analyst forecast of $1.34B.  It lowered its forecast for gross margin to below 39%, rather than 39-42%.  Little detail was provided on what's behind the shortfall, beyond saying that demand was weaker than expected.  Several analysts cut full-year forecasts to match the Q1 outlook & reduced price targets.  However, some said they expect demand to come back in H2.  SanDisk's flash memory goes into smartphones & camera memory cards, & increasingly into laptops.  Flash memory prices are volatile although suppliers have been careful about adding capacity.  The stock sank $5.54 (11%).

SanDisk Declines Most Since January on Lower Sales Forecast

SanDisk Corporation (SNDK)

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Monsanto said that a strong & early US seed selling season drove its fiscal Q2 income up 19% & it raised its earnings outlook for the full year.  Increased corn seed sales in Latin America also boosted results.  EPS was $2.24, above $1.88 a year earlier.  Revenue rose 15% to $4.75B from $4.13B.  Results topped expectations for EPS of $2.11 on revenue of $4.53B.  Q2 is important because it sells seeds ahead of the planting season in the Northern hemisphere.  Sales of corn seeds, by far the biggest segment, rose 17% to $2.82B.  Soybean seeds, its next largest segment, rose 12% to $698M.  The company boosted expectations for full-year adjusted EPS by 10¢ to $3.49-$3.54.  Including all one-time gains & losses, it expects to report EPS of $3.45-$3.50, a little below expectations of $3.51. The Dept of Agriculture just said that corn supplies are down 6%, indicating supplies will remain tight & prices high in the near term.  The USDA predicted that farmers will plant more corn this spring, the highest level since 1937.  The stock dropped 1.22.

Monsanto Raises Forecast as Profit Tops Estimates on Corn

Monsanto Company (MON)

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The corp news was not good today.  MON is doing well as business from farmers is strong.  But BBY & SNDK disappointed with earnings season approaching.  Alcoa (AA), the first Dow stock to report, will announce on Tues with big banks right behind it.  Price for gas at the pump is just under $3.93, very troubling for the economy.  Sluggish stock action this week suggests markets are very nervous about earnings results.  Dow is down about 140 this week but has been able to hang in above the 13K floor & that floor has become very important to hold

Dow Industrials

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