Tuesday, October 16, 2012

Markets jump on Q3 profits

Dow rose 127 (finishing near its high), advancers ahead of decliners 3-1 & NAZ gained 36, helped by Apple (AAPL).  The Financial Index gained 1 to the 216s.  The MLP index rose 2 to 412, toying with a new record, & the REIT index was up a fraction in the 264s.  Junk bond funds were generally higher & Treasuries pulled back as stock rallied.  Oil inched higher.  Gold rebounded from a 4  week low as the dollar’s decline boosted demand for the metal as an alternative investment.

AMJ (Alerian MLP Index tracking fund)

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CLX12.NYM...Crude Oil Nov 12...91.71 ...Down 0.14  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

Intl purchases of US  financial assets rose in Aug as investors sought shelter from the debt crisis in Europe, boosted by purchases from France, the UK & China.  Net buying of long-term equities, notes & bonds totaled $90B, up from net purchases of $67.2B in Jul according to the Treasury.  The forecast projected net buying of $48B of long-term assets.  The IMF decision this month to cut its forecast for world economic growth to 3.3% this year & 3.6% for 2013 may further increase the lure of US assets as a safe-haven investment.  Including short-term securities such as stock swaps, foreigners bought a net $91.4B, compared with net purchases of $74B the previous month.  China remained the biggest foreign owner of US securities after its holdings rose $4.3B to $1.15T.  Hong Kong, counted separately from China, raised its holdings of Treasuries $2.9B to $139.6B.

International Demand for U.S. Assets Rises on Europe

Rajoy Delay Marks Bet Renewed Turmoil Makes Bailout Terms Easier

Photo:   Bloomberg

Spanish Prime Minister Rajoy’s equivocation on seeking a European bailout amounts to a bet that another bout of market turmoil will enable him to broker better terms over German resistance.  Heading into an EU summit in 2 days, Rajoy has brushed off pressure to reach for a lifeline from investors.  EU counterparts are divided.  Germany is pushing back against prodding by France & Italy to exploit bond buying by the ECB & counter a financial storm entering its 4rth year.  Defending Spain is crucial because its economy doubles the output of Greece, Ireland, Portugal & Cyprus combined, testing the capacity of aid mechanisms.  Its borrowing costs are a reference for Italy & even France, which has so far seen its yields contained even with unemployment at a euro-era record, the economy stagnant & its debt levels climbing.  Spanish 10-year bond yields rose 2 basis points to 5.84%.  The debt mess drones on. 

J&J’s Third-Quarter Profit Beats Estimates on Drug Sales

Photo:   Bloomberg

Johnson & Johnson, a Dow stock & Dividend Aristocrat, earnings beat estimates in Q3 on demand for new prescription medicines & medical tools acquired with the Synthes purchase.  The company raised its 2012 forecast.  EPS was $1.05 versus $1.15, a year earlier.  EPS excluding one-time items were $1.25 a share, topping the $1.22 estimate.  Sales of recently approved drugs, including Zytiga for prostate cancer, Xarelto for stroke prevention & Stelara for psoriasis helped push revenue up 6.5% to $17.1B from $16B last year.  The Jun purchase of Synthes with novel financing that used cash that had accumulated outside the US also bolstered earnings.  The company raised 2012 earnings forecast to $5.05-$5.10 excluding certain items, after trimming the forecast in Q3 by 5¢ to $5-$5.07 a share.  Analysts are estimating $5.08 for this year.  The company took a charge of $553M for the discontinuation of the experimental Alzheimer’s disease drug bapineuzumab, integration costs from the Synthes acquisition & costs related to the DePuy ASR hip.  Sales included the impact of the Synthes acquisition, which contributed 5.8% to worldwide operational sales growth, net of the divestiture of the DePuy trauma business.  But sales of consumer goods & OTC products like Tylenol & Motrin from the company’s McNeil unit, which haven’t all returned to the market after manufacturing problems, fell 4.3% to $3.6B.  The stock was up 72¢.

J&J’s Third-Quarter Profit Beats Analyst Estimates as 2012 Outlook Boosted

Johnson & Johnson (JNJ)

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This was the first day with a lot of corp earnings & the markets liked them.  AAPL, which had been a drag for more than a month, was up $15 after announcing its iPad launch next Tues.  So far so good, as far as the bulls are concerned.  But more earnings reports are coming in addition to the big meeting in Europe & further clarification about how well China is doing.  Dow is back over 15½K, where it was on Sep 14.

Dow Jones Industrials

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