Wednesday, October 10, 2012

Lower markets after disappointing Alcoa earnings

Dow dropped 67, decliners slightly ahead of advancers & NAZ fell 3.  The Financial Index was up pocket change in the 214s.  The MLP index was off fractionally to the 411s & the REIT index rose 1 to 262.  Junk bond funds & Treasuries slid lower.  Oil rose for a 2nd day on concern that escalating tension in the MidEast will disrupt supplies in a region responsible for more than a third of world output. Gold was marking time.

AMJ (Alerian MLP Index tracking fund)

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CLX12.NYM...Crude Oil Nov 12...92.59 ...Up 0.20 (0.2%)

GCV12.CMX......Gold Oct 12......1,759.70 ...Down 3.30  (0.2%)

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IMF Sees Euro Banks Facing $4.5 Trillion Sell-Off

Photo:   Bloomberg

The IMF said European banks may need to sell as much as $4.5T in assets thru 2013 if policy makers fall short of pledges to stem the fiscal crisis.  That's up 18% from its Apr estimate.  Failure to implement fiscal tightening or set up a single supervisory system in the timing agreed could force 58 EU banks to shrink assets.  That would hurt credit & crimp growth by 4 percentage points next year in Greece, Cyprus, Ireland, Italy, Portugal & Spain  The IMF doesn’t need to lend money to Spain to help the country tackle its fiscal crisis, Managing Director Christine Lagarde indicated today.  The IMF earlier this week cut its global growth forecasts & warned of even slower expansion if European officials don’t address threats to their economies.

IMF Sees European Banks Facing $4.5 Trillion Sell-Off

Alcoa Cuts Global Aluminum Demand Forecast on Slowdown in China

Photo:   Bloomberg

Alcoa, the first stock to report Q3 earnings, EPS lost 13¢ in Q3, largely due to one-time charges.  Adjusted EPS was 3¢, beating expectations, & revenue fell to $5.8B from $6.4B, but that still topped forecasts.  The company predicted aluminum demand would increase 6% in 2012, compared with its forecast of 7% in the last qtr.  “We do see a slight slowdown in some regions in end- markets, and the main driver for this is China,” CEO Kleinfeld said.  Chinese demand may pick up at the end of Q4 because of stimulus spending, he said.  AA has been challenged by a global economic slowdown that has weakened prices & created mixed demand for its products.  It produces aluminum for a wide range of businesses, from automobiles to energy companies.  Analysts say AA business of mining & processing a raw material called alumina used to make aluminum has been hurt by weaker prices, but most expect aluminum prices to improve gradually over the next 12 months.   The stock fell 35¢.

Alcoa Cuts Global Aluminum Forecast on China Slowdown

Alcoa (AA)

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Job openings in the US dropped for a 2nd month in Aug, indicating employment gains may be limited by the end of the year.  The number of positions waiting to be filled fell 32K to 3.56M from a revised 3.59M in the prior month.  That was less than previously estimated according to the Labor Dept.  Hiring increased at the same time layoffs rose to a 3 month high.  Companies are cutting back in the face of slowing global economies & the looming US fiscal cliff of automatic tax increases & gov cutbacks may be hesitant to add many workers.  Today’s report helps illuminate the dynamics behind the gov monthly employment figures showing in Sep, the jobless rate fell to 7.8%.  Private employment, excluding gov agencies, rose only 104K in Sep.  The number hired in Aug rose to 4.39M, pushing up the hiring rate to 3.3% from 3.2%, according to today’s report.  Job openings increased for workers in construction, professional & business services & retail trade, while manufacturing, accommodation & food services & the education & health services showed declines.  Total layoffs, which exclude retirements & those who left their job voluntarily, increased to a 3 month high of 1.85M from 1.58M a month before.

Job Openings in U.S. Decreased in August for a Second Month

Economic news continues to be gloomy.  Greece has to cope with more riots as that crisis is far from over.  Spain is stuck in neutral.  But most attention is on earnings & AA did not start earnings season with a positive report.  In the next few days the big banks will be reporting, giving more guidance about the health of the US & global economies.  With recent selling, Dow is back to where it was a month ago, although it is above the important 13K floor.

Dow Jones Industrials

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