Thursday, May 3, 2012

Markets drift despite lower jobless claims

Dow fell 16, decliners over advancers 3-2 & NAZ was off 7.  The Financial index was off a fraction in the 207s.  The MLP index fell 2 to 397 after having a good run in the last 4 weeks & the REIT index was up a fraction in the 262s (its yearly high).  Junk bond funds slipped   Oil pulled back as did gold which has been flattish in the mid 1600s all year.

JPMorgan Chase Capital XVI (AMJ)

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CLM12.NYM...Crude Oil Jun 12...103.95 .....Down 1.27  (1.2%)

GCK12.CMX....Gold May 12......1,636.40 ...Down 17.00  (1.0%)

Get the latest daily market update below:

Jobless Claims in U.S. Fall More Than Forecast to One-Month Low

Photo:   Bloomberg

New claims for jobless aid fell more than expected last week, easing fears the labor market recovery was stalling.  Initial claims dropped 27K to 365K according to the Labor Dept, the biggest weekly drop in a year helped to lift some of the dark cloud cast over the labor market yesterday.  Expectations were for claims to  fall to 380K.  The 4-week average rose slightly to 384K - the highest level this year.   A separate report from Challenger, Gray & Christmas showed planned layoffs by employers rose 7.1% last month as cash-strapped state & local govs laid off teachers. 

Jobless Claims in U.S. Decline More Than Forecast

  • A General Motors logo is seen on a vehicle for sale at the GM dealership in Carlsbad, California January 4, 2012. REUTERS/Mike Blake
Photo:   Yahoo

General Motors Q1 profit surpassed forecasts due to improving results in the struggling regions of Europe & South America, but the company's outlook for Q2 & Q3 in North America disappointed the market & North American results in Q1 also fell short of expectations.  "We're clearly seeing some improvement in the (U.S.) economy," CFO Ammann said. "It's a modest underlying improvement, but it's patchy and it won't necessarily all go in a straight line."  GM expects its core North American results in Q2 & Q3 to largely match Q1 due to scheduled downtime at its large truck plants.  This implies adjusted earnings in North America in the first 9 months of $5.1B, well short of the $5.6B expected.  Excluding one-time items mostly related to pension accounting in Europe, EPS was 93¢, above the forecast of  85¢.  Revenue was $37.8B, up 4.4% from $36.2B last year.  The North American unit saw adjusted earnings jump 35% to $1.69B even as its share of the sales market fell to 16.7% from 18.3% last year.  The European unit posted a loss of $256M, smaller than expected & an improvement from $562M loss in Q4.  "Europe remains a work in progress," CEO Akerson said.  The intl operations, which includes China, saw profits slide about 10% from last year to $529M.  In South America, GM returned to a profit of $83M after a loss of $225M in Q4 as it has begun rolling out new vehicles in that region. The stock fell 45¢.

GM Quarterly Profit Declines Less Than Analysts Estimated on Rising Sales

General Motors Company (GM)

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European Central Bank President Mario Draghi

Photo:   Bloomberg

ECB President Draghi said interest rates remain supportive & policy makers still expect a gradual economic recovery this year even as latest data cloud the outlook.  Latest indicators “are not enough to change our baseline scenario, which foresees a gradual recovery in the course of the year,” Draghi said after the ECB held its benchmark interest rate at a record low 1%. “We didn’t discuss any specific move in interest rates but we did discuss our general monetary policy stance, which we found accommodative in view of an economic outlook that becomes more uncertain.”  But austerity measures aimed at stemming the debt crisis have pushed economies from Holland to Spain back into recession.  “Addressing divergences among individual euro-area countries is the task of national governments,” Draghi said.  “As concerns the monetary policy stance of the ECB, it has to be focused on the euro area. Our primary objective remains to maintain price stability over the medium term.”  After rising in Jan & Feb, a gauge of euro-area manufacturing plunged in Apr to the lowest in almost 3 years, according to Markit Economics. The index shows that manufacturing activity has contracted for 9 straight months.  Yes, Europe is in a recession & that affects the whole world.

Draghi Says Rates Accommodative as Economic Outlook Worsens

Markets are back to sloshing around as they await the big jobs report tomorrow.   The announcement by the ECB to keep interest rates low was no great surprise but it served as a reminder that Europe is in a recession while it tries to work thru sovereign debt issues.  Crude oil has been in a sideways pattern all year, but above $100 is worrisome for all consuming economies.  Markets should remain quite ahead of the big jobs.

Dow Industrials

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