Wednesday, May 16, 2012

Higher markets on increased factory output

Dow gained 35 (but well off the highs), advancers ahead of decliners 3-2 & NAZ was up 8.  The Financial Index was little changed at 194 while it digests the large decline in May.

The MLP index rose 1+ to 380, following a slide of more than 20 in May, & the REIT index was about even in the 255s.  Junk bond funds were higher & Treasuries pulled back after the recent rally.  Crude oil pared losses after the Energy Dept said stockpiles climbed 2.1M barrels to a 22-year high of 381M barrels.  Gold declined for a 4th straight session & entered a so-called bear market as concern that Greece will leave the eurozone boosted the dollar & cut the metal’s appeal as an alternative asset.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLM12.NYM....Crude Oil Jun 12...93.01 .....Down 0.97  (1.0%)

GCK12.CMX....Gold May 12....1,537.50 ...Down 19.30  (1.2%)

Get the latest daily market update below:

Greek Leaders Meet on New Election After European Stocks Fall

Photo:   Bloomberg

A caretaker gov for Greece agreed to prepare for new elections, probably on Jun 17, amid concern the country will abandon the € currency.  Panagiotis Pikrammenos, head of Greece’s Council of State, the highest administrative court, will head the caretaker administration but the transitional gov won’t pass laws.  “The days between now and the new elections, which unfortunately, we were unable to avoid, are days of responsibility,” said Evangelos Venizelos, the head of the socialist Pasok party. “Responsibility because Greece must be kept upright. The situation for Greeks can’t worsen and this isn’t easy or simple.”  Public opinion polls say that the Syriza party may come in first next time, complicating Greece’s efforts to avoid running out of cash by early Jul.  President Karolos Papoulias failed to broker a coalition in meetings yesterday with Venizelos & other party leaders.  The standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its 2 bailouts worth €240B ($306B) negotiated in May 2010, &, ultimately, leave the 17-nation euro area.  That means for another month the country will be stuck in the mud.

Greek Leaders Meet on Election After European Stocks Drop

Industrial Production in U.S. Climbs 1.1%

Photo:   Bloomberg

US factory output increased in Apr, helped by a gain in auto production.  Busier factories have driven stronger hiring this year & helped the economy grow.  The Federal Reserve said that factory production rose 0.6%, erasing a 0.5% decline in Mar.  Half of the increase reflected a 3.9% jump in the production of motor vehicles & parts, the 5th consecutive gain at auto plants & the biggest rise since Jan.  Overall industrial production increased 1.1% in Apr.  In addition to the big gain at factories, output at mines & utilities showed strong gains.  Factory output has risen 18.3% since the low in Jun 2009 when the recession ended.  The 1.1% rise in overall industrial production was the largest one-month gain since Dec 2010.  However, much of the increase reflected a 4.5% jump in utility production, which was influenced by mild weather earlier this year.  The warmer winter had lowered Mar utility output.  Heating demands returned to more normal levels in Apr, driving utility output higher.  The manufacturing gains were broad-based.  In addition to increases in auto output, production rose at a wide range of companies, from makers of computers & electronics to aerospace & furniture factories.  This is the kind of news markets like to hear, but the global market is not doing as well (& unemployment in the US remains at troubling levels)..

Industrial Production in U.S. Climbs 1.1%, More Than Economists Forecast

Deere posted a 17% rise in fiscal Q2 profit & boosted its outlook for the year, predicting record-high global demand for its tractors, harvesters & seeders.  DE said that it expects sales for fiscal Q3 to rise 25%, easily outpacing predictions.  The world's largest producer of agricultural equipment had EPS of $2.61, up from $2.12 a year earlier.  Revenue jumped 12% to $10B, from $8.9B.  "Our results are a reflection of positive conditions in the global farm economy, which is continuing to show impressive strength and endurance," CEO Samuel Allen said.  Last week, the Agriculture Department predicted this year's corn production will hit a record 14.8B bushels with corn exports between Sep-Aug 2013 are expected to hit 1.9B bushels, due to increasing demand from China which became the top market for US agricultural goods last year (purchasing $20B).  US farm production manifests itself in DE numbers.  Sales in the US & Canada rose 18%, while overseas sales increased 6%.  The strong earnings came even as unfavorable exchange rates reduced intl sales growth by 4 percentage points.  For the current qtr ending in Jul, the company expects equipment sales to jump 25% from a year earlier, indicating a forecast of $9.65B (beating forecasts of total sales for $9.1B.  DE raised its full-year profit prediction to about $3.35B & said it still expects equipment sales to increase about 15% this year, implying sales of $9.1B.  Stockholders were not happy & sold the stock, down $1.25.

Deere Tops Estimates as Earnings Rise 17%

Deere & Company (DE)

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While markets are having a good day, there has been a lot of selling in the last hour when Dow plunged almost 100.  The factory output data was helpful, but it doesn't have legs to carry the market forward.  I like the keep an eye on high flying Apple (AAPL).  It's down 90 from its record high reached a month ago.  Not a good sign for the markets & may be a factor in the Facebook (FB) IPO which just increased its size almost 25% to around a staggering $16B because demand is there.  I think the bull market for FB may last a day or 2.

Dow Industrials

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