Friday, February 22, 2013

Markets rebound as the euro falls

Dow gained 44, advancers over decliners 2-1 & NAZ was up 9.  The Financial Index added 1+ to the 237s.  The MLP index was up 2+ to 429 & the REIT index rose 2+ to 280.  Junk bond funds were higher & Treasuries pulled back.  Oil did little but gold fell 6 to 1552, heading for the 3rd straight weekly drop, as signs of economic optimism eroded demand for the precious metal as a haven.

AMJ (Alerian MLP Index tracking fund)

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CLJ13.NYM....Crude Oil Apr 13...92.71 .....Down 0.13  (0.1%)

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ECB Says Banks to Repay 61.1 Billion Euros of Second 3-Year Loan

Photo:   Bloomberg

The ECB said banks will repay only half the amount of emergency loans economists forecast, indicating financial institutions remain wary of lending to each other.  356 banks will hand back €61.1B ($80.5B) of the ECB’s 2nd 3-year loan on Feb 27, the first opportunity for early repayment, the central bank said.  That compares with a forecast of €122.5B.  The € fell almost half a penny to $1.31½.  The ECB flooded banks with more than €1T in two 3-year loans after money markets froze because of Europe’s debt crisis.  Banks have the option of repaying the funds after a year & they returned more than forecast of the first loan in Jan.  ECB President Draghi has urged financial institutions to be responsible in determining repayment amounts.  They “must appropriately assess their funding situation, their ability to provide new loans to the economy and their resilience to shocks,” he said on Feb 7.  “We will closely monitor conditions in the money market and their potential impact on the stance of monetary policy.”

ECB Says Banks to Repay Less Than Forecast of Second Loan

Spain's Prime Minister Mariano Rajoy

Mariano Rajoy, Spain's prime minister,
Photo:   Bloomberg

Economic & Monetary Commissioner Rehn said Spanish Prime Minister Rajoy must convince EU officials he can stabilize public finances before gaining extra time to cut the budget deficit.  Spain’s budget gap widened to 10.2% of GDP in 2012, the most in 3 years, & will still be 7.2% in 2014, more than twice its 2.8% target, as temporary austerity measures expire, the EU forecast.  Rajoy’s bank rescue program added 3.2 percentage points to the shortfall last year.  When there is a “convincing and credible” plan to ensure financial stability, “then it is possible to have a longer time to do all of the correction, to have less impact, less short- term impact on economic growth,” Rehn said.  He urged Rajoy to deepen structural reforms.  “It seems the structural fiscal effort has been undertaken and that there has also been an unexpected shortfall of growth,” Rehn said today.  “We’ll have to verify this.”

Spain’s Deficit Widened to 10.2% on Bank-Rescue Cost: EU

A Hewlett-Packard logo is seen at the company's Executive Briefing Center in Palo Alto, California January 16, 2013. REUTERS/Stephen Lam/Files

Photo:   Yahoo

Hewlett-Packard, a Dow stock, quarterly revenue & forecasts beat expectations as it continued to cut costs under CEO Meg Whitman's turnaround plan.  She has launched a years-long turnaround to recapture some of the icon's former growth trajectory, saying that the company's efforts were gaining traction but "there's still a lot of work to do to generate the kind of growth we want to see."  "The turnaround is on track, and we did better than we expected that we would," she told analysts.  "The patient showed some signs of improvement, and I think we should be encouraged."  Whitman also said reiterated that HPQ has no plans for a break-up of the company & the PC business is one that the company needs to be in, but it needs to "reallocate resources from the core PC business to mobile" & other services.  Fiscal Q1 revenue shrank 6% to $28.4B in a flat to shrinking personal computing market, but it beat the $27.8B expected.  EPS fell to 63¢ from 73¢ a year earlier.  Revenue declined across all business divisions.  Networking was the sole bright spot, with sales rising 4%.  Sales in the personal systems division, which includes PCs, slid 8% to $8.2B, while printing revenue fell 5% to $5.92B.  HPQ estimated fiscal Q2  EPS of 80-82¢, higher than the average forecast of 77¢.  The stock jumped up 1.80 after a dismal run in the last year.
Hewlett-Packard (HPQ)

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Stocks continue in their sideways trading pattern.  Yesterday was a down day & today those losses have been recovered.  But they have hardly budged over the last month.  There is little going on in DC & few are paying attention to what that will bring when the gov cuts spending in a week.  Budget cuts will pinch the economy hard because politicos will cut spending the most where it causes the greatest pain to taxpayers.  Instead of setting new highs, the Dow is stuck in neutral which could easily drag on until Mar 1.

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