Tuesday, July 3, 2012

Markets rise on higher factory orders

Dow climbed 72, advancers over decliners almost 4-1 & NAZ was up 24.  The Financial Index gained 1 to the 199s.  The MLP index was up a fraction to 383 & the REIT index rose 1+ to 266, a new yearly high.  Junk bond funds were higher & Treasuries declined while stocks advanced.  Oil & gold had a good day on hopes for more stimulus by central banks.

AMJ (Alerian MLP Index tracking fund)

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CLQ12.NYM...Crude Oil Aug 12...87.34 ....Up 3.59  (4.3%)

GCN12.CMX...Gold Jul 12.......1,619.00 ...Up 21.80  (1.4%)

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Chrysler U.S. Sales Beat Estimates

Photo:   Bloomberg

The big 3  (remember that term?) reported US auto sales for Jun that topped estimates, helping the industry stay on pace for the best year since 2007.  Auto sales may have accelerated to faster than a 14M annualized rate, topping the 13.8M light-vehicle pace that was the average estimate of analysts.  The sales provide a bright spot in the US economy that has been hindered by persistent unemployment & weakening consumer confidence.   General Motors (GM) sales climbed 16%, beating the 7.6% increase forecasted.  Deliveries rose 20% at Chrysler & 7.1% for Ford (F), topping estimates for gains of 18% & 3.5% respectively.  Nissan sales rose 28%, exceeding the 21% estimate.  The auto industry has zoomed back since 2009 when GM & Chrysler restructured in gov-backed bankruptcies, threatening the viability of suppliers & thousands of jobs.  Light-vehicle sales this year may reach 14.3M, which would be 38% more than 10.4M in 2009.  Toyota (TM) & Honda led the industry with sales gains of 60% & 49% respectively.  The auto makers had another good month, but some are cautious about H2.

GM, Chrysler Sees June U.S. Auto Sales Beating Estimates

The ECB is expected to cut interest rates to a record low on Thurs, but may need to do more to satisfy financial markets already starting to wonder about the solidity of last week's summit measures.  Steady inflation & a dire batch of economic performance indicators, including signs of weakness in euro zone powerhouse Germany, give the ECB cover to back up the EU summit deal with a quarter-point cut in its benchmark rate to 0.75%.  The ECB has never cut its main refinancing rate below 1% but policymakers say there is nothing to stop them doing so & they may want to bolster euro zone leaders.  At the summit, ECB President Draghi declared his satisfaction with the agreement to speed up cross-border banking supervision & to allow the euro zone rescue fund to recapitalize banks directly thereafter.  Even with political backing, there are questions over the rescue fund's capacity to lower borrowing costs.  It has a maximum €500B capacity with €100B already earmarked for Spanish banks, a sum which could quickly dwindle.  Those limitations put a spotlight back on the ECB's readiness to take 'non-standard' measures - such as reactivating its own bond-buy program or offering banks fresh liquidity.  When we're in a make it up as we go along period, forecasting the future becomes tricky.

ECB expected to cut, may take more to sustain markets

Volume was low on the shortened trading session.  Hopes are running high the the ECB will throw gasoline on the meager fire of growth to reignite the stock markets.  But a rate cut is already baked into the markets, which could mute its effects on Thurs. 

Dow Jones Industrials

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Happy July  4 to ALL!!!

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