Tuesday, July 24, 2012

Markets remain under fire

Dow dropped 86, decliners over advancers 2-1 & NAZ was off 13.  The Financial Index slipped 1 to 191, a 1 month low.  The MLP index fell 2 to the 395s & the REIT index was flat in the 262s.  Junk bond funds were mixed to lower & treasuries also eased back.  Oil rose for the first time in 3 days as clashes in Syria raised tension in the MidEast & as China’s manufacturing may contract at a slower pace in Jul.  Gold edged higher.

AMJ (AlerianMLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLV12.NYM....Crude Oil Oct 12...88.80 ...Up 0.37  (0.4%)

GCN12.CMX...Gold Jul 12.......1,581.90 ...Up 4.80  (0.3%)

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Germany, Juncker Push Back After Moody’s Rating Outlook Cuts

Photo:   Bloomberg

Angelea's Merkel's gov said Germany will remain Ejurope's haven during the financial crisis, pushing back against Moody’s decision to lower the outlook on the country’s top credit rating.  The risks in the euro zone are “not new” & Germany remains “in a very sound economic and financial situation,” the Finance Minister said.  In counterpoint to Moody’s, it cited the verdict of financial markets that have rewarded Germany with record low borrowing costs.  “Germany will, through solid economic and financial policy, defend its ‘safe haven’ status and continue to responsibly maintain its anchor role in the euro zone,” the Berlin-based ministry said.  “Together with its partners, it will do everything to overcome the sovereign debt crisis as rapidly as possible.”  German 10-year gov bond yields advanced 6 basis points to 1.23%, while equivalent Dutch yields climbed 8 basis points to 1.70%.  Meanwhile Spanish 10-year yields rose to a euro-era record of 7.569% before falling back to 7.53%.  Moody’s said risks Greece may leave the euro & an “increasing likelihood” of collective support for countries such as Spain & Italy were among the reasons for its decision.  “Given the greater ability to absorb the costs associated with this support, this burden will likely fall most heavily on more highly rated member states if the euro area is to be preserved in its current form,” Moody’s said.

Germany Pushes Back After Moody’s Lowers Rating Outlook

Home Values Post First Increase in U.S. Since 2007, Zillow Says

Photo:   Bloomberg

National home values have hit bottom & are on the rise, the real-estate website Zillow reported.  “After 4 months with rising home values & increasingly positive forecast data, it seems clear that the country has hit a bottom in home values,” Zillow Chief Economist said.  “The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own.”  Values of US homes rose 0.2% in Q2 over last year, marking the first annual increase in values since 2007.  Zillow predicted a 1.1% increase in home values over the next year, values are expected to rise in 67 of the 156 markets in Zillow’s Home Value Forecast.  “Of course, there is still some risk as we look down the foreclosure pipeline and see foreclosure starts picking up.  This will translate into more homes on the market by the end of the year, but we think demand will rise to absorb that, particularly in markets where there are acute inventory shortages now,” Zillow said.  “Looking forward, we expect home values to remain relatively flat as the market works through a backlog of foreclosures and high rates of negative equity.”  Zillow reported that 5.8 out of every 10K homes were lost to foreclosure in Jun, down from 7.9 of every 10K homes lost in Jan.  But the number of foreclosures is expected to increase, based on a pickup in foreclosure starts since the completion of the National Foreclosure Settlement, the company said.  Mildly good news for housing.

UPS Cuts Full-Year Forecast as Slowing Economy Presses Earnings

Photo:   Bloomberg

UPS lowered its earnings expectations for the year as economic weakness & uncertainty persist around the globe.  Full-year forecast was lowered 25¢ to $4.50-$4.75.  The world's largest package delivery company said customers are worried about the global economy weakening in H2.  Their skittishness was also felt in the Q2, where UPS missed expectations for both earnings & revenue.  "Increasing uncertainty in the United States, continuing weakness in Asia exports and the debt crisis in Europe are impacting projections of economic expansion,"  CEO Scott Davis said.  Q2 EPS was $1.15, compared with $1.09 per share, a year earlier.  Expectations were $1.17.  Revenue rose 1.2% to $13.35B.  US revenue rose 4% from a year earlier, driven by a higher volume of packages, the increase was mostly due to a higher number of packages ordered from internet retailers.  But overseas, revenue fell 4% on lower exports from Asia & falling revenue per package (an indication of lower prices).  Revenue in UPS' supply chain & freight business fell 1.7% (UPS' long haul trucking business & a unit that helps manufacturers make streamline & make their businesses more efficient).  But UPS sounded confident that it can ride out the economic slowdown.  "Throughout its history, UPS has maintained its strength in all economic cycles and we are making the adjustments necessary to respond to today's challenging conditions," Davis said.  The stock fell 3.36.

UPS Cuts 2012 Forecast as Slowing Economy Press Profit


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Markets are drifting with a downward bias, there is no news to inspire buying.  Tonight Apple (AAPL), with the world's largest market cap, reports & expectations are high (as usual).  The bigger question becomes, how can it top this qtr?  Dow is at the lower portion of its trading range since early Jun & I think will have to test the 12½K low end very soon.

Dow Jones Industrials

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