Tuesday, June 5, 2012

Higher markets on US service industry growth

Dow rose 26, advancers over decliners 5-2 & NAZ was up 8.  Bargain hunters bought bank stocks, taking the Financial Index up 3 to the 182s.  The MLP index recovered 6+ to the 358s & the REIT index was up almost 5 to the 245s.  Junk bond funds were mixed & Treasuries pulled back.  Oil rose for a 2nd day as a gauge of US service-industry growth unexpectedly increased, reducing worries that a slowing economic recovery will cut oil demand.  Gold inched higher.

JPMorgan Chase Capital XVI (AMJ)

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CLN12.NYM...Crude Oil Jul 12...84.21 ...Up 0.23  (0.3%)

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Finance ministers & central bank governors from the world’s leading economies agreed to coordinate their response to Europe’s financial crisis in Spain & Greece.  G-7 officials said they will work together to help both euro-area countries place their public finances on a sustainable footing,  Japan's Finance Minister said he urged European leaders to do more to address concerns about the region’s finances.  European representatives “said they will speed up their efforts to resolve those problems, which was encouraging to us,” he said.  “Japan is ready to provide support if there is anything we can do.”  Less than 2 weeks before a G-20 summit in Mexico that will take place as Greece holds its 2nd round of elections, German Chancellor Merkel is facing increasing pressure inside & outside the euro area to to do more to stem the crisis.  With the impact spilling over into the global economy, Spain today, for the first time, appealed for external funding for its banking system.  “The G-7 ministers and governors reviewed developments in the global economy and financial markets and the policy response under consideration, including the progress towards financial and fiscal union in Europe,” the US Treasury said.  President Obama said on Fri that Europe’s recession is weakening US growth after payrolls increased by the smallest amount in a year.  Obama toughened his language saying the bloc’s leaders haven’t done enough to dispel the “cloud that’s coming over from the Atlantic.”  Unemployment in the euro zone is at a record while the European Commission forecasts the euro-region economy will shrink 0.3% this year.  This is not a pretty story.

G-7 Leaders Pledge to Cooperate in Tackling Spain, Greece

Hewlett-Packard CEO Meg Whitman

Photo:   Bloomberg

Meg Whitman, Hewlett-Packard CEO, said after the “turmoil” from last year’s management upheaval, the company is working to differentiate itself with partnerships, a broad product base & an emphasis on engineering.  “HP is truly differentiated. Differentiated by the breadth of our portfolio,” Whitman said today.  70% of sales come from PCs, printers, storage, servers & networking gear, said Whitman, who took the reins in Sep.  HPQ is in the early stages of a turnaround after declining sales & a loss of investor confidence.  Last month she announced plans to cut 27K jobs (8% of the workforce), & said she’ll eschew big acquisitions to rebuild the balance sheet.  Sales this year may decline 3% to $123B, according to analyst estimates & net income may decline 36% to $4.5B.  The company has $21.8B in debt & $8.3B in cash after buying Autonomy last year for $10B.  Research & development is rising & she is directing spending toward products for cloud computing, data security & information management.  HPQ, a Dow stock, is on the mend & the stock gained 62¢. 

Hewlett-Packard CEO Whitman Focuses on Product ‘Breadth

Hewlett-Packard Company (HPQ)

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Markets managed a gain, but hardly impressive.  They remain vastly oversold as shown in the Dow chart.  The Euro debt mess continues to be a dark cloud hanging over the markets.  Speaking of dark clouds, the Facebook (FB) dreary IPO is casting another dark shadow over the market.  Many found out the hard way that making easy money with hot IPOs is not all that easy.  Stocks loosely related to FB are also seeing a lot of selling.  I continue to think that all the meetings aimed at solving Euro's ills will produce some kind of help & that can bring back buyers, at least for a day or 2.  The question then is, "How long will their enthusiasm last?"

Dow Industrials

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