Wednesday, June 13, 2012

Markets fluctuate on lower retail sales

Dow slipped 17, advancers were a little ahead of decliners & NAZ was up 1.  The Financial Index was down a smidgen to 189.  The MLP index & the REIT index each were up fractionally.  Junk bond funds pulled back & Treasuries were flattish.  Oil was lower after the Energy Department said stockpiles decreased 191K barrels to 384M barrels. Gold has been crawling higher, taking it above $1600.

JPMorgan Chase Capital XVI (AMJ)

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CLN12.NYM....Crude Oil Jul 12...82.29....Down 1.03  (1.2%)

GCM12.CMX...Gold Jun 12.....1,620.90 ...Up 8.20  (0.5%)

Get the latest daily market update below:

Retail Sales in U.S. Fall for Second Month, Signaling Slowdown

Photo:   Bloomberg

Americans barely increased spending at retail in Apr & May, constrained by weak job creation & scrimpy wage increases.  The sharp drop in gas prices pulled down overall sales in both months by 0.2% according to the Commerce Dept.  Excluding volatile gas station sales, retail sales grew only modestly in May after dipping in Apr.  As a result, outlooks for Q2 economic growth may be lowered.  However spending on big purchases increased.  Auto sales rose sharply, & sales of furniture & appliances also were up, suggesting consumers may already be seeing some benefit from lower gas prices.  Total retail sales fell in May to $404.6B, slightly below the Mar record of $406.2B & 21.6% higher than the recession low in Mar 2009.  Gas station sales fell 2.2%, accounting for most of the decline in retail sales.  Excluding gas station sales, retail spending inched up 0.1% in May.  Sales at building supply stores fell 1.7% & general merchandise stores fell for the 2nd straight month.  Part of the decline in those categories may be payback for stronger spending at the start of the year.  A mild winter encouraged some homeowners to get a head start on remodeling & landscaping projects, which normally take place in spring.  Another sign that the recovery is sputtering.

Retail Sales in U.S. Declined for Second Month in May

Spanish Prime Minister Mariano Rajoy

Photo:   Bloomberg

Spain & Italy appealed to European policy makers to step up their response to the financial crisis after the lifeline for Spanish banks failed to calm markets.  Spanish Prime Minister Rajoy said that he’ll “battle” central bankers refusing to buy debt from peripheral nations.  He published a letter to EU leaders calling for the ECB to buy debt from the countries struggling to shore up their finances.  “That is the battle we have to wage in Europe,” Rajoy said.  “I am waging it.”  His Italian counterpart, Mario Monti, told lawmakers in Rome that Europe faces a “crucial” moment.  They went on the offensive as bond yields jumped following the announcement of a bailout for Spanish banks that was intended to quell concern over the finances.  Monti said in parliament that the EU hasn’t time to wait for austerity plans to stabilize borrowing costs & officials must act to support economic growth as the Italian economy slides deeper into recession.  The economy shrank 0.8% in Q1 compared with 0.7% in Q4 & a 0.3% contraction in Q1 for Spain.   “Above all, Europe needs more growth,” said Monti, who will travel to Berlin today.  The euro area is “in a particularly intense and particularly crucial” situation.  Spiraling borrowing costs & shrinking output are opening divisions among EU leaders who face a series of hurdles in the coming days as bond investors question their ability to hold the euro area together.  Italy is due to sell another €3B of bonds tomorrow while intl consultants are due to report on the extent of Spanish banking losses by Jun 21.  Euro problems are far form over.

Dell will focus on data-center gear as well as computing software & services while seeking to cut costs by more than $2B over the next 3 years.  “As you think about our industry it’s constantly in transition,” CEO Michael Dell said.  Costs can be trimmed from the supply chain & sales support, the company said.  DELL initiated an 8¢ quarterly div yesterday amid an uneven turnaround effort.  While PC sales growth is slowing, the company said that the unit is driving sales of software, accessories & services.  DELL has been acquiring makers of data storage, networking equipment & business software to diversify beyond PCs & will continue to use deals to boost revenue.  “We have a modest software business and that’s an area where we can grow rapidly,” Dell said, adding that he plans to work with partners rather than owning products in every category.  “We’ve had some nice acquisitions which are off to a good start.”  Thru the div & stock buybacks, DELL said it plans to return 20-35% of free cash flow to investors, up from a prior projection of 10-30%.  In the last 12 months, DELL has generated $4.9B in cash flow from operations, the company said.  The stock gained 24¢.

Dell Inc. (DELL)

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There is not a lot going on in the markets.  The news is on the dreary side with weaker sales & euro debt mess droning on.  Jamie Dimon, CEO of JPMorgan (JPM), told Congress that he was sorry about losing $Bs.  I don't think Congress is happy to hear that story.  What makes this more troubling is that JPM has been considered the best run big bank.  But it's run by mortals who make mistakes which can be enormous.  Now Italy is getting more attention, but the € has been climbing from around $1.24 towards $1.26.  More uncertainty in DC & Europe spells problems for stocks.

Dow Industrials (INDU)

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