Wednesday, August 15, 2012

Markets fluctuate, looking for direction

Dow slid 7, advancers ahead of decliners 3-2 & NAZ gained 13.  The Financial Index was up a fraction in the 201s. The MLP index was up 1+ to 393 & the REIT index rose 1 to the 263s.  Junk bond funds were mixed but Treasuries sank, with the yield on the 10 year Treasury soaring 8 basis points to 1.8% (a 3 month high).  Oil climbed to a 3 month high after the Energy Dept reported a decline in stockpiles & Saudi Arabia called on its citizens to leave Lebanon, adding to tension in the Middle East.  Gold rose a modest $5. 

AMJ (Alerian MLP Index tracking fund)

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CLU12.NYM...Crude Oil Sep 12....94.20 ...Up 0.77  (0.8%)

Live 24 hours gold chart [Kitco Inc.]

Chinese Premier Jiabao said easing inflation allows more room to adjust monetary policy & positive signs are emerging in the economy, expressing confidence after Jul data showed a further slowdown in growth.  “We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets,” Wen said.  He added that downward pressure on the economy remained “relatively large,” according to state radio, & state television reported him as saying there’s “growing room for monetary policy operation.”  The reports didn’t specify which targets China will meet, including the 7.5% goal for GDP growth set in Mar.  Expansion was 7.8% in H1, & Deutsche Bank last week lowered its Q3 forecast to 7.5% from 7.9%.  “In the recent months, especially since July, there are some positive changes in the economy,” said Wen, cited by state television.  Domestic demand is showing greater effect in supporting economic growth, industrial output in eastern Chinese regions is picking up & China’s job market remains stable, he said.

China Can Meet Growth Target on Positive Signs, Wen Says

  • <p>               In this April 2, 2012 photo, Derek Long uses a John Deere tractor to disk and cultivate a field in preparation for planting corn in Loami, Ill. A slowing global economy and the effects of a prolonged U.S. drought caught up to Deere & Co. in its fiscal third quarter, as its net income rose 11 percent but fell well short of Wall Street's expectations. (AP Photo/Seth Perlman)
Photo:   Yahoo

A slowing global economy & the effects of a prolonged US drought caught up to Deere in its fiscal Q3, as net income rose 11% but fell well short of expectations.  DE cut its revenue prediction for the year.  The ongoing drought in the Midwest, a stronger dollar & costs to introduce new products hurt the world's largest producer of agricultural equipment.  EPS was $1.98, compared with $1.69 last year.  Analysts were expecting $2.31.  Revenue rose 15% to $9.59B, slightly under analysts' prediction of $9.61B.  Sales of tractors & other farm equipment rose 14% to $7.27B.  Construction & forestry equipment sales jumped 23% to $1.66B.  However, growth has slowed.  In last year's Q3, sales of agricultural & turf equipment rose 22% & construction & forestry equipment revenue leaped 34%. The financial services segment sales rose 3% to $565M   It expects sales of $3.1B for the year ending Oct, down from $3.35B forecast 3 months ago. Analysts estimate $3.4B.  The stocks sank $5.14 (6%).

Deere Cuts Profit Forecast as Equipment Sales Slow in Asia, Latin America

Deere (DE)

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Intl demand for US financial assets fell in Jun from the previous month’s inflows, as investors saw Europe's leaders moving toward a resolution of their financial crisis.  Net buying of long-term equities, notes & bonds totaled $9.3B during the month, a drop from net purchases of $55.9B in May, according to the Treasury.  Expectations were for net buying of $40B.  Including short-term securities such as stock swaps, foreigners bought a net $16.7B in Jun, compared with net purchases of $121B in the previous month.  Net foreign purchases of Treasuries fell to $32.4B from $45.9B in the previous month.  Yields rose from record lows at the start of the month, backed up during the month only to decline again in the last week of Jun.  US assets have been attractive to investors this year as EU leaders face a worsening debt crisis.  The euro- area economy shrank in Q2 & tougher budget cuts forced at least 6 nations into recessions.  GDP in the 17-nation currency bloc fell 0.2% from Q1, when it stagnated, according to EU data.

International Demand for U.S. Assets Declined in June

Once again, there was little movement in the stock markets.  The earnings announcement from DE could be telling.  It felt the effect of a slowing global economy & reduced its guidance.  But many traders are away & there should be only modest changes in stock prices.  Dow hangs in there above 13K, but not quite high enough to break thru for a new 2012 high.  That's 6 months of flattish performance.

Dow Jones Industrials

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