Wednesday, May 16, 2012

Markets slump on increased Euro worries

After starting higher, selling came back to bring the averages into the red.  Dow fell 33 (closing at its lows), decliners over advancers 2-1 & NAZ lost 19.  More selling in bank stocks took the Financial Index down 3 to 191, a 3½ month low.  The MLP index was down a fraction to another new low in May (in the 377s) while the REIT index fell 3 to the 252s (13 below its recent yearly highs).  Junk bond funds edged higher & Treasuries were a little higher.  Oil & gold continued to see a lot of selling, both at multi monthly lows.

JPMorgan Chase Capital XVI (AMJ)

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CLM12.NYMCrude Oil Jun 1292.62 Down 1.36 (1.5%)

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The delinquency rate for mortgages declined in Q1 to the lowest level since 2008 as an improving job market helped more borrowers pay their bills & tighter lending standards resulted in fewer defaults. The share of home loans at least 30 days late dropped to 7.4 % from 7.58% in Q4 according to the Mortgage Bankers Assoc.  The rate peaked at 10.1% in Q1 of 2010 & was last lower in Q3 of 2008 (Lehman collapse), when it was 6.99%.  “Delinquencies are clearly continuing to improve,” Michael Fratantoni, the group’s vice president of research and economics, said. “Newer delinquencies, loans one payment past due as of March 31, are down to the lowest level since the middle of 2007, indicating fewer new problems we will need to deal with in the future.”  Falling delinquencies may help limit foreclosures, important for a recovery in the housing market as low interest rates combine with decreased prices to stimulate demand.  Housing affordability reached a new high in Q1 & sales of previously owned homes rose 5.3% from a year earlier, according to the National Association of Realtors.  Housing starts increased 2.6% to an annual pace of 717K in Apr, beating estimates.  Rates for 30-year fixed loans declined to a record 3.83% in the current week, according to Freddie Mac.  Of course, increases are measured off depressed levels, but at least they show the market is trending in the right direction.

Mortgage Delinquency Rate in U.S. Fall to 2008 Levels

Target, a Dividend Aristocrat, raised its profit outlook after reporting better-than-expected Q1 results that were boosted by increased spending on food & cheap chic fashions.  TGT, which mixes stylish clothes & trendy decor under the same roof as toothpaste & cereal, recently has had success drawing customers into stores with 2 growth initiatives. It has been offering a larger selection of foods & a program it started in 2010 that gives shoppers a 5% discount when they pay with Target-branded credit & debit cards.  EPS rose to $1.04, above 99¢ a year earlier.  Excluding costs associated with its expansion into Canada next year, EPS would have been $1.11.  Revenue increased 5.9% to $16.9B.  These results beat EPS of $1.02 on revenue of $16.8B expected.  Revenue at stores opened at least a year rose 5.3%, the strongest performance in 6 years for that period.  The strong showing came despite a weak finish to the quarter.  To boost sales, the company has teamed up with unique specialty shops to offer limited edition merchandise, from dog biscuits to platform shoes.  The shops were launched earlier this month.  The discounter plans to create mini shops of Apple (AAPL) products in 25 of its stores this year.  The company also preparing to expand into Canada next year, its first expansion outside the US & will open the first of 125-135 stores in Canada at former Zellers locations.  Based on better-than-expected Q1 results, TGT raised its full-year profit guidance by 5¢ & now expects EPS to be $4.60-$4.80, better than the average forecast of $4.28.  CEO Gregg Steinhafel said that company officials remain "confident in our strategy" despite that they expect "the current economic recovery will continue to be slow and uneven."  On a tough day in the markets, the stock was up 24¢.

Target's 1Q profits up 1.2 percent AP

Target Corporation (TGT)

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J.C. Penney Reports First-Quarter Loss Following Sales Slump

Photo:   Bloomberg

All retail news was not good.  JC Penney posted a Q1 loss & sales that fell more than expected.  Sales slumped 20% to $3.15B, trailing the $3.43B estimate.  The loss equaled 75¢ cents a share, compared with profit of 28¢ last year.  As a result, the div will be discontinued.  The $163M loss is a new challenge for CEO Ron Johnson, whose appointment in Jun caused the shares to surge amid buzz that he would bring some Apple (AAPL)- style magic to the ailing retailer.  He vowed to flip the traditional department-store strategy upside-down by turning stores into a collection of branded shops & simplifying pricing into three tiers to wean consumers off discounts.  “Sales and profitability have been tougher than anticipated during the first 13 weeks,” Johnson said.  “While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America’s favorite store.”  The company said discontinuing div will result in cash savings of about $175M annually.  In Q1, the company incurred $76M in restructuring & management-transition charges.  Excluding those items, the EPS loss was 25¢, below the estimate for a loss of 8¢.  There will be additional restructuring charges throughout 2012.  Q1 same-store sales tumbled 18.9%.  The stock plunged $6.57 (20%) to $26.75.

J.C. Penney Reports First-Quarter Loss Amid Sales Slump

J.C. Penney Company, Inc. Holding Company (JCP)

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Dow has fallen 615 from its close in Apr.  Today was a good example of good news can't get no respect.  One story after another was positive but the markets kept slipping & sliding.  Meanwhile Facebook (FB) is pumping the hype machine for a successful IPO on Fri.  Maybe the money raised from selling stocks will go into FB, but that should not be long lasting.  As bad as the Greek debt mess is, the Spanish debt mess keeps growing.  The effects of Euro uncertainties can be seen in bank stocks.  For example, Citi (C), which has had a nice recovery, is down $11 to $27 in 2 just months.  AAPL was down $12 today to the $541s ($102 below its highs last month).  The markets are hurting badly.

Dow Industrials

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