Friday, August 10, 2012

Lower markets on disapppointing China trade data

Dow lost 42, decliners over advancers 5-4 & NAZ fell 10.  The Financial Index slipped a fraction to just above 200.  The M:P index was up 1+ to 391 & the REIT index was flat at 262.  Junk bond funds were a tad lower & Treasuries gained after a 2 week decline.  Oil fell the most in a week, paring its weekly gain, as China's export growth slowed & the Intl Energy Agency cut global oil demand forecasts.  Gold keeps plodding along, just above $1600.

AMJ (Alerian MLP Index tracking fund)

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CLU12.NYM....Crude Oil Sep 12...92.13 ...Down 1.23  (1.3%)

GCQ12.CMX...Gold Aug 12.....1,609.00 .....Down 8.10  (0.5%)

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US import prices unexpectedly fell in Jul for the 4th straight month as costs declined for imported oil, industrial supplies & even many consumer goods.  Overall import prices dropped 0.6% according to the Labor Dept.  Import prices have only risen once in the last 8 months & were expected to rise 0.1% in Jul.  Much of the decline has been due to a drop in the cost of oil.  Prices fell for goods & services bought from most trading partners, including China, Mexico & the EU.  That could be a sign of the recent cooling in the global economy, which has been largely caused by Europe's debt crisis.  Prices of Chinese imports dropped 0.2% in Jul.  Prices for imported petroleum slipped 1.6% in Jul. Stripping out fuels & food, import prices were down 0.4%.  Many prices for consumer goods fell.  Excluding autos, prices for consumer goods were down 0.1%.

Import Prices in U.S. Unexpectedly Fell in July for Fourth Month

China July Exports Rise 1% Vs Economists’ Estimate for 8%

Photo:   Bloomberg

China's exports rose 1% in Jul from a year earlier while imports increased 4.7%, resulting in a trade surplus of $25.1B according to the customs bureau.  The growth in overseas shipments compares with the 8% estimate, an import gains of 7% & a trade surplus of $35.1B.  Gov reports showed industrial output growth was the slowest in 3 years, retail sales trailed estimates & the inflation rate fell to a 30-month low, adding pressure on the gov to increase stimulus.  The yuan's appreciation against the dollar has ground to a halt this year as the Chinese gov argues that the currency is near "equilibrium" & austerity measures in Europe weigh on export demand.  The currency had declined 1.02% this year.

  • <p>               FILE - Shoppers walk in a parking lot outside of a JC Penney story in Plano, Texas,  in this June 19, 2012 file photo. J.C. Penney Co. is reporting a bigger-than-expected loss and plummeting sales, as its customers continue to be turned off by a new pricing plan that gets rid of hundreds of sales in favor of every day lower prices.  (AP Photo/LM Otero, File)
Photo:   Yahoo

JC Penney reported a bigger-than-expected loss & plummeting sales during Q2, as its customers remain confused by the new pricing strategy that ditched hundreds of sales in favor of everyday lower prices, marking the 2nd straight qtr of steep sales declines since the plan was introduced in Feb.  The company also withdrew its profit guidance for the year.  But investors appeared to be encouraged by CEO Ron Johnson's soothing words that he's seeing some hopeful signs in the business since early Aug.  Johnson noted that customer counts have improved & that changes it made to the new pricing plan Aug 1 are starting to resonate with shoppers.  Under Johnson, JCP is transforming everything from the items it stocks to store design.  But the riskiest move has been its pricing, which is turning out to be an even tougher sale to shoppers than previously expected.  The loss per share was 67¢ in the qtr ended Jul 28 which  compares with EPS or 7¢ a year ago.  Revenue tumbled almost 23% to $3B.  Revenue at stores open at least a year fell 21.7%, worse than the 18.9% drop the prior qtr.   Excluding one-time items, the loss was 37¢ worse than the 26¢ loss expected on revenue of $3.2B.  The company said that its gross profit margins fell to 33.2%, down from 38.3% a year ago.  But Johnson described the balance sheet as "rock solid."  The company said it ended the qtr with about $888M in cash & cash equivalents. The stock gained $1.38 on those soothing words.

J.C. Penney Rises After CEO Johnson Says Business-Model Overhaul On Track

JC Penney (JCP)

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Markets continue to drift along.  Today there is a downward bias, but it's not that serious.  The chart below shows Dow has not been doing very much this week after the big gain on Mon.  Some traders probably started their weekend holidays early.  But fundamental problems (euro debt mess, stalling China growth & a sluggish US economy) remain.  Dow needs 300 to reach a new yearly high. 

Dow Jones Industrials

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