Wednesday, October 17, 2012

Mixed markets on mixed earnings

Dow slipped 11, but advancers ahead of decliners 2-1 & NAZ was up 2.  The Financial Index rose 1+ to the 218s, matching its yearly high.  The MLP went up 1+ to 414, a new record, & the REIT index slipped a fraction in the 274s where it has been for almost a month.  Junk bond funds rose but Treasuries pulled back.  Oil pared gains after the Energy Dept said supplies rose more than expected, climbing 2.8M barrels to 369.2M barrels last week.  Gold has a modest gain.

AMJ (Alerian MLP Index Tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLX12.NYM...Crude Oil Nov 12...92.34 ...Up 0.25 (0.3%)

GCX12.CMX...Gold Nov 12.....1,749.60 ....Up 4.30 (0.3%)

Housing Starts in U.S. Surged in September to Four-Year High

Photo:   Bloomberg

US builders started construction on single-family homes & apartments in Sep at the fastest rate since Jul 2008, a further indication that the housing recovery is strengthening.  The Commerce Dept said that builders broke ground on homes at an annual rate of 872K, an increase of 15% from the Aug level.  Applications for building permits, a good sign of future construction, jumped nearly 12% to an annual rate of 894K, also the highest since Jul 2008.  Strength in Sep came from both single-family construction, which rose 11%, & apartments, which increased 25.1%.  Construction activity is now 82.5% higher than the recession low hit in Apr 2009.  However activity is still well below the roughly 1.5M rate that is consistent with healthier markets.  Builder confidence reached at a 6 year high this month.  Sales of new & previously owned homes have been slowly improving this year, & home prices are starting to show consistent gains.  Record-low mortgage have encouraged more people to buy.  Housing is expected to keep improving next year.  But many say economic growth will stay muted until companies step up hiring & consumers start spending more.  More encouraging news on the housing front.

Housing Starts in U.S. Surged in September to Four-Year High

Intel Slumps With IBM on Weak Businesses-Consumer Demand

Photo:   Bloomberg

Intel, a Dow stock, forecast Q4 gross margins that missed estimates, while IBM, another Dow stock, reported Q3 revenue that fell short of projections.  IBM customers, hurt by anemic demand in home markets, put off software purchases & computer-maintenance contracts.  Budget-strapped consumers are shunning PCs to buy cheaper handheld devices such as the iPhone, while businesses are shying away from servers that run networks, sapping demand for Intel chips.  INTC profit is being crimped by expenses to slow factory output & combat rising inventories.  Corp customers are showing “caution” in placing orders & consumers in developed markets are curtailing PC purchases, CFO Stacy Smith said.  Gross margin, the only profit yardstick INTC forecasts, will be about 57%, less than the 61.4% average estimate.  As customers curbed orders, inventory rose to $5.3B, from $4.9B in Q3.  INTC fell 52¢ & IBM sank $9.09.

Intel Slumps With IBM as Weak Demand From Businesses to Consumers: Tech

Intel (INTC)

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Photo:   Yahoo

Bank of America, another Dow stock,  reported a $340M profit that was better than expected, but revenue missed expectations.  The company posted Q3 EPS that was essentially flat, down from 56¢ last year.  Revenue fell to $20.4B from $28.5B a year ago.  Analysts expected a loss excluding items of 7¢ on $21.9B in revenue.  A legal settlement & other previously disclosed charges dented the bottom line.  BAC last month agreed to pay $2.4 B to settle claims that it hid crucial information from shareholders when it bought investment bank Merrill Lynch at the height of the financial crisis.  BAC previously said the settlement, a UK tax charge & an accounting charge related to the value of its debt would reduce EPS by 28¢.  To boost profits, the bank last year launched a broad cost-cutting program that aims to eliminate $8B in annual expenses & 30K jobs.  The stock inched up 4 pennies.

Bank of America (BAC)

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Dow gained more than 200 in 3 days & needs time to take a rest.  Bank earnings have been sort of good, although it's difficult to tell what is really going on with so many numbers being reported.  The first wave of corp earnings are mixed & that's being kind.  The approaching fiscal cliff is lowering demand from US business & foreign markets are not a big help.  Dow remains near 13½K where it has been for more than a month. 

Dow  Jones Industrials

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