Wednesday, October 24, 2012

Markets edge higher on improved earnings reports

Dow rose 42, advancers over decliners 5-4 but NAZ was up only 2.  The Financial Index gained 1+ to the 214s.  The MLP index was up 2 to go over 410 & the REIT index slipped a fraction in the 261s.  Junk bond funds were higher after already having a good year & Treasuries pulled back.  Oil fell for a 5th day, heading for the longest losing streak in 5 months, after the American Petroleum Institute said inventories rose for a 7th week.  Gold was flat.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ12.NYM...Crude Oil Dec 12...86.25 ...Down 0.42  (0.5%)

GCV12.CMX..Gold Oct 12.......1,708.20...Down 0.10 (0.0%)

Bernanke Seen Attacking Jobless Rate With QE Until His Term Ends

Photo:   Bloomberg

Big Ben says he’ll stoke the economy until the job market recovers “substantially.”  That promise may force him to keep buying bonds until the final months of his term ending in Jan 2014.  68% of economists in a survey said the Fed chairman’s QE3 easing will last until late next year or beyond.  Just 51% said the strategy will help boost employment, with a median estimate of 116K monthly jobs over the course of next year.  Bernanke said in Aug that new bond buying, while spurring growth & generating jobs, may erode confidence the Fed will exit smoothly from record accommodation, including the first 2 rounds of bond purchases totaling $2.3T.  Most surveyed believe Big Ben has gone too far with quantitative easing, with 55% saying policy is too easy, compared with 48% who said last month.  The FOMC resumed a 2 day meeting  today & plan to release a statement later on policy, including their current plan to buy $40B in mortgage-backed securities each month for an indefinite period.  By not buying bonds, the Fed would increase the risk of “structural damage” to the economy as skills atrophy among workers facing long-term unemployment, Big Ben said in Aug.

Photo:   Yahoo

AT&T, a Dow stock, earnings beat expectations on strong revenue from its wireless operations.  EPS rose to 63¢ compared to expectations of 60¢ though revenue was about flat at $31.5B which met estimates.  The company reported record cash from operations of $11.5B & free cash flow of $6.5B.  Wireless revenues rose 6.6% while wireless service revenues gained 4.5%.  Subscriber base including television & internet rose to 7.4M, representing a gain of 200K in TV & 613K in high-speed internet.  "We had another impressive quarter with strong earnings growth, record cash flows and solid returns to shareholders through dividends and share buybacks," Randall Stephenson CEO said.  On the downside, the flow of customers into AT&T's wireless stores slowed further, putting the company far behind rival Verizon Wireless (VZ), another Dow stock.  It added a net 151K new customers on contract-based plans in Q3, the lowest number for that period since at least 2003.  The company is blaming short supplies of the iPhone 5, but that didn't hold back VZ which last week reported adding 10 times as many contract-signing customers (from a smaller base).  The stock fell 34¢.

AT&T Profit Beats Analysts’ Estimates on Lower Discounts for Smartphones

AT&T (T)

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Photo:   Yahoo

Boeing, another Dow stock, earnings exceeded predictions & revenue matched forecasts, prompting the company to raise its forecast for the full year.  EPS fell to $1.35 from $1.46 in the year-earlier period.  It would have been higher by 18¢ if not for increased pension expenses that cost the company $194M.  Revenue rose 13% to $20B from $17.7B a year ago.  Analysts were expecting $1.13 on $20.03B in revenue.  BA raised its earnings forecast for the year, guiding for EPS of $4.80-$4.95.  Analysts were expecting EPS to be about $4.73. The company also raised its revenue guidance to $80.5-$82B.  "Strong core operating performance drove increased earnings in both our major businesses, along with higher overall revenues, improved cash flow, and solid earnings per share even as pension headwinds rose," said CEO Jim McNerney.  The stock was up 92¢.

Boeing Boosts 2012 Forecast Third Time as Deliveries Rise

Boeing (BA)

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This looks to be a relief rally.  The markets are relieved that there was some good news on the earnings front & a lack of ugly news from Europe.  But stocks remain on defense as the trend of disappointing earnings reports has not been reversed.   Lower oil prices are helpful.  Dow remains close to 13K & may test its strength soon, possibly this week.

Dow Jones Industrials

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