Friday, March 22, 2013

Higher markets on earnings reports

Dow added 90 closing near its highs, advancers ahead of decliners 3-2 & NAZ was up 24.  The Financial Index went up 1 to the 244s.  The MLP index rose 4+ to the 446s, another record, & the REIT index was even in the 282s.  Junk bond funds were mixed & Treasuries slid back.  Oil drifted higher as traders waited to see what happens next in the Cyprus financial crisis.  Gold fell as lawmakers in Cyprus debated measures needed for a bailout, crimping demand for the precious metal as a store of value.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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CLK13.NYM...Crude Oil May 13...93.71 ...Up 1.26 (1.4%)

Live 24 hours gold chart [Kitco Inc.]

German Business Confidence Unexpectedly Declined in March

Photo:   Bloomberg

German business confidence unexpectedly fell from a 10-month high in Mar as Cyprus inflamed the euro region’s debt crisis.  The Ifo institute in Munich said its business climate index, based on a survey of 7000 executives, declined to 106.7 from 107.4 in Feb.  That’s the first drop in 5 months.  The prediction was for a gain to 107.8.  In France, industrial confidence was unchanged this month.  With the ECB threatening to cut off emergency funding for Cyprus’s banks unless it agrees to the terms of a EU led bailout, the island has re-ignited concerns about the € & roiled financial markets.  Still, German investor sentiment unexpectedly rose to a 3-year high this month & the Bundesbank said the nation’s economic recovery remains on track.  Ifo’s gauge of executives’ expectations fell to 103.6 from 104.6 last month, while a measure of current conditions eased to 109.9 from 110.2.  This data is unsettling.

German Business Confidence Unexpectedly Drops

PepsiCo, a Dividend Aristocrat, isn't interested in any big acquisitions after a report suggested a mega-snack food deal could bring its Doritos under the same roof as Oreos.  The company issued a short statement after a report that an activist investor could push it to merge with Mondelez Intl, which makes Cadbury & other Nabisco brands, in addition to the famous cream-filled cookies.  PEP has long been the subject of speculation that it would spin off its underperforming beverage business.  CEO Indra Nooyi tried to squash such talks last year with a marketing campaign that featured the company's sodas alongside its chips.  But PEP has nevertheless been reviewing options to restructure its North American beverage business & recently said it would provide more thoughts on the matter early next year.  In particular, the company said it wanted to see how a new sweetener system it's developing might help improve its soda business.  "We certainly wouldn't want to make a change in the business structure while there's still opportunities to unlock value that might be better unlocked while PepsiCo still owns the business," CFO Hugh Johnston said last month.  The stock rose 2.24 (3%) on hopes of something happening.  

PepsiCo says it's not hungry for a big snack deal AP

Pepsico (PEP)

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Nike shoes are displayed at a Niketown store in Beverly Hills, California, March 16, 2010. REUTERS/Lucy Nicholson

Photo:   Yahoo

Nike profit beat expectations, as margins increased & world-wide future demand for its apparel & shoes rose.  Global orders for delivery from Mar-Jul, known as futures orders, rose 6% compared to orders reported for the same period last year.  In North America, the biggest market, orders increased 11%.  The company also saw a turnaround in future demand in China, with orders rising 4%, after falling in the previous 2 qtrs.  "In China, we are seeing progress against our strategy to reset the marketplace but we still have more to do before we can capture its long-term growth potential," CEO Mark Parker said.  It had been stuck with excess inventory in China & was finding it difficult to tackle intense competition & frequent promotional sales by local brands.  Distributors & retailers were also wary of an uncertain global economy.  The company said, "Gross margin benefited from the combination of pricing actions and easing material costs, which more than offset higher labor costs."  For fiscal Q3, EPS was 73¢, compared with 61¢ last year.  Analysts expected 67¢.  Revenue rose 9% to $6.2B.  The stock jumped 5.81 (11%).

Nike profit tops Wall Street estimates, shares riseReuters

Nike (NKE)

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Despite rising stock prices, little was decided in today's markets as shown by modest breadth.  In the last 7 trading days, Dow has been going sideways, staying close to 14.5K.  YTD the Alerian MLP Index is up an eye-popping 61 to a new record high & the Dow Jones REIT Index is up 16 to a high since the market plunge in late 2008.  Tax advantaged high yields are in demand.  Next week is the end of the month & Q1.  Buyers should bid up prices to boost end of qtr values.  Then comes earnings season which could be dreary.

Dow Jones Industrials

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