Wednesday, June 27, 2012

Markets gain on economic data and hopes for Chinese stimulus

Dow shot up 92, advancers continued almost 4-1 over decliners & NAZ was up 21.  The Financial Index rose 2+ to the 192s. The MLP index rose an enormous nearly 8 to the 368s & the REIT index was up 1 to 253.  Junk bond funds were higher while Treasuries eased back.  Oil rose for a 2nd day on signs the US economy is recovering, easing concern that demand from the world’s biggest crude-consuming country will decline.  Gold advanced for the 2nd time in 3 days on speculation that China may take more steps to boost economic growth.

AMJ (Alerian MLP Index tracking fund)

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CLQ12.NYM...Crude Oil Aug 12...80.16 ...Up 0.80 (1.0%)

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German Chancellor Angela Merkel

Photo:   Bloomberg

Speaking 3 hours after Spanish Prime Minister Rajoy made a plea for help from tomorrow’s European summit, Chancellor Merkel said that euro bonds, euro bills & debt redemption funds are unconstitutional in Germany & economically “wrong and counterproductive.”  “I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures,” Merkel said  “Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured.”  She is under growing pressure from European & global counterparts to soften opposition to debt sharing in the euro area & do more to cut borrowing costs for Spain & Italy.  Rajoy, outlining his goals for the 2-day EU summit starting tomorrow, said that Spain can’t go on financing itself at current borrowing rates for long.  “The most important thing today is being able to finance ourselves in the markets, that’s the main issue,” Rajoy said.  “And on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” using the “available instruments.”  Spanish 10-year bond yields were little changed at 6.86% after jumping 24 basis points yesterday, nudging the important 7% level that forced other countries to call for bailouts. The summit looks like it is going nowhere.

Merkel Rebuffs Rajoy Plea, Shuts Door to Euro Area Bonds

  • Hugo Barra, director of product management of Google, unveils Nexus 7 tablet during Google I/O 2012 Conference at Moscone Center in San Francisco, California June 27, 2012. REUTERS/Stephen Lam
Photo:   Yahoo

Google took the wraps off its first tablet computer, looking to replicate its smartphone success in the tablet market despite tough competition from Apple (AAPL), Microsoft (MSFT) & Amazon (AMZN).  The "Nexus 7" tablet, built by & co-branded with Asus, will begin selling for as low as $199 on the Google Play website & apps store from around mid-Jul.  At 7" & $199, the device takes aim initially at the Kindle model, which is considered a window into the trove of online content from AMZN.  GOOG can similarly use the Nexus 7 to connect to its own online offerings, which include video service YouTube & Google Play.  It will go after more cost-conscious users who might shun the loftier price tag of $499 and above for the iPad.  The Nexus will feature the new 4.1 "Jelly Bean" version of GOOG software, as well as a front-facing camera, a 1280x800 resolution screen, & an Nvidia Tegra 3 processor.  GOOG stock gained 4.62.

Google Unveils Nexus Tablet, Stepping Up Apple Challenge

Google (GOOG)

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General Mills projected full-year profit that trailed estimates amid increased marketing & investments in its US yogurt business.  EPS for fiscal 2013, including a decrease from its acquisition of Yoki Alimentos, will total $2.65, below the analyst projection of $2.76.  CEO Ken Powell has boosted marketing & raised prices to counter rising costs for raw ingredients such as wheat & sugar.  Increased pension expenses & a higher tax rate may also reduce annual earnings growth.  The company expects 2013 net sales to grow at a “mid- single-digit rate.”  Fiscal Q4 rose to 49¢ from 48¢ a year earlier.  Sales rose 12% to $4.07B, falling short of the $4.11B estimate.  Excluding some items, EPS totaled 60¢, just above the 59¢ estimate.  Sales in the US retail business rose 2.9% to $2.4B, driven by the Snacks & Small Planet Foods divisions. The stock fell 60¢.

General Mills Projects Full-Year Earnings That Trail Analysts’ Estimates

General Mills (GIS)

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Markets had a good day, but sure sure why.  The economic data was not all that great.  The euro debt mess drags on & the the big meeting in the next 2 days will not accomplish much (except for generating a lot of hot air).  The € is a proxy for what's going on in Europe & it slipped back to under $1.25 (near its $1.24 recent low).  Tomorrow the ruling on heath care should move markets, but it's unclear in which way.  Dow is up 225 in Jun, better than I figured but not all that great following heavy selling in May.  The big jobs report for Jun is coming in 8 days & expectations are low once again.  Then earnings season begins.

Dow Jones Industrials

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