Monday, July 30, 2012

Markets drift lower on Euro concerns

Dow slid 2, decliners just ahead of advancers & NAZ fell 12.  The Financial Index was down a fraction in the 198s.  The MLP index rose 1+ to the 394s & the REIT index was up a fraction in the 267s.  Junk bond funds were mixed to lower & Treasuries rebounded as investors await details from European leaders on how they plan to support struggling countries in the region like Spain.  Gold inched higher, helped by uncertainty coming from Europe.

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CLU12.NYM...Crude Oil Sep 12...89.75 ...Down 0.38  (0.4%)

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China plans to increase railway spending & the State Council called for private investment in utilities & health care as Premier Wen Jiabao tries to reverse an economic slowdown.  The Ministry of Railways, the nation’s largest corporate debt issuer, plans to spend 470B yuan ($74B) on railroads & bridges this year, the 2nd increase in Jul, for a combined gain of about 14% from the previous figure.  The new target exceeds last year’s 461B yuan in spending & follows Wen’s Jul 10 comments that promoting investment growth is the key now to stabilizing an expansion that decelerated to 7.6% in Q2, a 3-year low.  At the same time, officials are signaling the slowdown isn’t deep enough to warrant a return to the 700B-yuan level of railway-construction funds in 2010.  China’s State Council, or Cabinet, reiterated that downward pressure on the economy is intensifying.  The railways ministry will sell 22B yuan in 10-year bonds & 5B yuan in 15-year bonds. 

China Increases Railway Spending Plan for Second Time

  • <p>               FILE - In this Feb. 28, 2011 file photo, a new 2011 Dodge Caliber Mainstreet is shown to a customer at a Chrysler dealership in Burlingame, Calif. Chrysler rode big sales increases in the U.S. to a $436 million profit in the second quarter, the company announced Monday, July 30, 2012. (AP Photo/Paul Sakuma, File)
Photo:   Yahoo

Strong sales in the US & Canada powered Chrysler to a $436M Q2 profit, a big turnaround from a year earlier when Chrysler lost $370M mainly because it refinanced bailout loans.  Now majority owned by Italy's Fiat, the automaker also backed an earlier forecast that it would earn $1½B this year, unthinkable 3 years ago.  It's benefiting from a reliance on North America & limited exposure to overseas markets.  Other car companies are losing money in Europe & seeing sales slowdowns in China & South America.  More than 75% of Chrysler sales come from the US & Canada accounts for another 12%.  Q2 revenue rose 23% to $16.8B.  US sales rose 30% in Q2 while its share of the market went from 10.1% last year to 11.5%.  In Canada, sales rose 7% in H1 to just over 130K vehicles.

Chrysler Reports $436 Million Second-Quarter Profit

Loews net income plunged 78% in Q2 as the holding company took a large charge because it lowered the value of its natural gas & oil properties due to declining prices.  The company reported EPS of 14¢ compared with 61¢ last year.  Removing the impairment charge of $142M at its energy properties, earnings were $198M versus $250M last year.  Revenue slipped 4% to $3.39B from $3.54 B.  Earnings at Diamond Offshore (DO) fell because fewer rigs were used as more of them underwent special surveys. The division also dealt with higher contract drilling expenses.  The performance was somewhat offset by the sale of 5 rigs.  Boardwalk Pipeline (BWP), a major MLP, earnings rose mostly because of the 2011 acquisition of Boardwalk HP Storage.  The stock sold off $2.15 (5%).

Loews Plunges as Tisch Says ‘Very Concerned’ About Economy: New York Mover

Loews (L)

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Overbought markets need time to reassess the move up.  There are 2 big financial meetings this week, first the FMOC then the ECB will decide what bold moves to take on Thurs.  The Federal Reserve is not expected to do much beyond a few words of encouragement for the euro guys.  In this "we make it up as we go along world," nobody knows what will be decided in Europe.  But Dow is hanging in above 13K which is becoming an important support level.

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