Tuesday, May 15, 2012

Markets fall on new elections in Greece

Dow dropped 63, decliners over advancers 2-1 & NAZ fell 8.  The Financial Index fell 1+ to the 193s & down a whopping 16 this month.  The MLP index slipped a fraction to the 378s, another 5 month low, & the REIT index was down 1+ to 255.  Junk bond funds were mixed & the Treasury 10-year bond yield was at almost a 7-month low after talks to form a Greek gov failed, boosting demand for safe assets.  Oil fell near a 5-month low after a 2nd Greek election was called.  Gold should be attracting buyers, but it continues to slosh around below $1600 (down $17 today).

JPMorgan Chase Capital XVI (AMJ)

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CLM12.NYM...Crude Oil Jun 12...94.02 ...Down 0.76  (0.8%)

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Greece Makes Repayment on 435 Million Euro Bond Coming Due

Greek finance ministry
Photo:   Bloomberg

Greece will repay €435M ($556M) of bonds falling due today as the it faces new elections after leaders failed to form a government.  Greece will pay the principal & interest on foreign law notes which weren’t tendered into the country’s debt restructuring.  But the repayment won’t prejudice future decisions on other untendered bonds, the Greek finance ministry said.  Greece swapped about €200B of its sovereign debt in Mar & Apr in its debt restructuring, forcing holders of notes issued under domestic law to accept a 53.5% loss on the face value of the bonds.  The May 15 redemption is the first out of about €6.4B of notes issued under foreign law that investors refused to tender into the swap.  Prime Minister Papademos called for elections after completing the restructuring & securing a €130B Greek bailout from the EU & IMF.  The May 6 poll yielded no clear winner & the country will hold repeat elections after President Papoulias failed in a last-ditch attempt to broker an agreement on a new gov today.  The drama plays on.

Greece Makes Repayment on 435M Euro Bond Coming Due Today

Retail Sales Cool in U.S.

Photo:   Bloomberg

Retail sales rose in Apr at the slowest pace of the year as Americans took a break from a shopping spree induced by unseasonably warm weather in prior months & an earlier Easter holiday.  The modest 0.1% gain followed a 0.7% increase in Mar, according to the Commerce Dept.  The Apr advance matched what was expected by analysts.  Sales of clothing declined, while purchases excluding cars, building materials & service stations (the category used to calculate gross domestic product) rose more than forecast.  9 of 13 major categories showed gains last month, led by auto dealers, furniture stores & non-store retailers that include online merchants.  Purchases at restaurants rose 0.4% in Apr after a 0.9% gain the month before.  Part of the slowdown in retail sales for Apr may reflect seasonal events that pulled purchases into the previous month.  The average temperature in Mar was the warmest on record in the US & Easter fell on Apr 8 compared with Apr 24 the year before.

U.S. Retail Sales Cool After Warm-Weather Spree: Economy

Home Depot Sales Trail Estimates on Restrained Home Spending

Photo:   Bloomberg

Speaking of retail sales, Home Depot, a Dow stock, Q1 net income climbed 28 % as unseasonably warm winter & increased business from contractors & other professional customers boosted results.  While the company raised its 2012 net income guidance on the better-than-expected profit,  revenue fell short of expectations.  CEO Frank Blake said larger professional customers are coming back more quickly than smaller professional customers & do-it-yourselfers.  "This suggests a thawing process with the larger customers recovering first, with - hopefully - stronger recovery spreading," he said. "While there are some positive signs in the housing market, it is still under pressure."  With more than 2200 stores worldwide, it also benefited from mild weather in the US.  This spring, the 4th warmest in the company's history, led to strong sales of products like lawn mowers & lawn products, grills, planters & other gardening & outdoor products. Plumbing & kitchen products were weaker.  EPS was 68¢, up from 50¢ last year & beat expectations of  64¢.  Revenue rose 6% to $17.8B from $16.8B, but was below the estimate of $17.9B.  Revenue at stores open at least a year rose 5.8%, with the metric climbing 6.1% for US locations.  Total transactions rose 4% while the average ticket per customer rose 2%.  The number of people spending less than $50, about 20% of sales, rose 2.4%.  The number spending over $900, also 20% of sales, rose 6.7% during Q1.  The company expects fiscal 2012 EPS of $2.90, with revenue up 4.6% (implying revenue of $73.7B.  The previous prediction was for EPS of $2.79 & a 4% revenue increase.  Analysts were looking for EPS of $2.90 on revenue of $74.1B.  The stock slumped $1.21 on lower than expected revenues.

Home Depot Forecasts Profit Trailing Analysts’ Estimates

Home Depot, Inc. (The) (HD)

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The € fell to $1.27¼, its lowest in almost 4 months, as talks to form a Greek gov failed, fueling concern the nation may leave the shared currency.  The story remains the same.  Europe has enormous problems, China growth is slowing & there is growing recognition that the US recovery may be stumbling.  Soggy economic data in the US is having a dampening effect on Q2 earnings forecasts (not to to mention a lower contribution from European subsidiaries).  JPMorgan (JPM) gained 51¢ after the annual meeting on word that the div will be continued & only modest dissent at the Florida meeting.  In the last year, the Dow is up a measly 32 & has had a wild ride along the way.

Dow Industrials

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