Friday, March 22, 2013

Markets rise on Cyprus bailout hopes

Dow rose 84, advancers over decliners 2-1 & NAZ added 14.  The Financial Index went up 1+ to the 245s, near its multi year highs made in the last month.  The MLP index surged another 3 to 445 & the REIT index was up fractionally to 283 (pretty much flattish this year).  Junk bond funds gained & Treasuries sold off.  Oil went up with a rising stock market & gold fell, but remains above 1600.

AMJ (Alerian MLP Index tracking fund)

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CLK13.NYM...Crude Oil May 13...93.04 ...Up 0.59 (0.6%)

GCH13.CMX...Gold Mar 13......1,604.10 ...Down 9.70  (0.6%)

Protesters shout slogans during an anti-bailout rally by employees of Cyprus Popular Bank outside the parliament in Nicosia March 22, 2013. REUTERS/Andreas Manolis

Photo:   Yahoo

Russia rebuffed Cypriot entreaties for aid, leaving the increasingly isolated leaders scrambling to strike a bailout deal with the EU by next week or face the collapse of its financial system.  Its biggest bank urged politicians to make haste & cut a deal with EU partners as parliament considered proposals to nationalize pension funds, pool state assets & split the country's 2nd-largest bank in a desperate effort to satisfy those exasperated European allies.  The governor of the Central Bank warned political leaders the country would face a disorderly bankruptcy on Tues unless they approved the bills.  "The next few hours will determine the future of the country," a gov spokesman said.  "We must all assume our share of the responsibility."  Even if the measures are approved, there was no confirmation they would raise the €5.8B demanded by the EU in return for a €10B bailout to avoid a default.  The biggest local bank urged the gov to go back & make a deal from the EU, under which larger deposits over €100K would be taxed.  It was preferable, it said, to a collapse of the system & a return to the Cypriot pound which would wipe out assets.  "There must be no further delay," the bank said.  This conflict has the makings of an ugly financial scenario next week.

Russia Rejects Cyprus Financial Rescue Bid as Deadline Looms

Senator John McCain

Photo:   Bloomberg

Speaking of financial messes, Senator McCain said Reps should compromise on increased tax revenue as part of a “long-term grand bargain” on the budget, & praised the pres for reaching out to senators across the aisle.  “I’m open -- have always been open -- to closing loopholes, eliminating special deals for special interests,” McCain said (to be aired this week on Bloomberg television).   “If you call that, ‘raising revenues,’ I’ve been guilty all my political career” of trying to cut special-interest loopholes.  The gov could reap “tens of billions” of dollars by ending tax breaks for Hollywood & related companies, McCain said.  A little more hot air out of DC.  But the budget fiscal mess is not going away.

McCain Praising Obama Backs Revenue Compromise on Budget

<p>               FILE - In this Nov. 7, 2008 file photo, shoppers look in through a window at Tiffany & Co.'s new store at Easton Town Center in Columbus, Ohio. Jewelry retailer Tiffany & Co. said Friday, March 22, 2013, its fourth-quarter net income edged up less than 1 percent, but managed to beat Wall Street predictions. (AP Photo/Kiichiro Sato, File)

Photo:   Yahoo

Tiffany Q4 net income edged up less than 1% which beat predictions as strong customer demand in Asia for its pricey baubles offset weakness in the US.  The company also offered an annual sales outlook that topped estimates.  EPS was $1.40 & revenue rose 4% to $1.24B.  The forecast was for EPS of $1.36 on $1.25B in revenue.  "While financial results in fiscal 2012 were disappointing due to lower-than expected sales growth and pressures on gross margin, we continued to maintain a longer term focus on strengthening global awareness of the Tiffany & Co. brand," CEO Michael J. Kowalski said .  Total sales in the Americas region increased 2% to $620M & 2% to $1.8B in the full year.  The area represents 48% of revenue.  Revenue at stores open at least a year declined 2% in Q4 & for the full year.  Sales in the NY flagship store dropped 3% in Q4 & full year.  Sales in the Asia-Pacific region rose 13% to $254M in Q4 & 8% to $810M in the full year (representing 21% of worldwide sales).  Sales in China were strong but Japan sales were weak.  In Europe, total sales rose 3% to $146M in Q4 due to mixed performance by country & rose 3% to $432M in the full year.  TIF expects its fiscal Q1 EPS from operations will fall about 15-20% as a result of profitability pressures & higher marketing costs, but pick up later in the year.  For the current year, it expects sales growth of 6-8%, which means that sales are expected to be around $4B (in line with projections) & expects full-year EPS of $3.43-$3.53 versus the analyst forecast of $3.46.  The stock jumped 1.64.

Tiffany Profit Tops Estimates Led by Demand in Asia

Tiffany (TIF)

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While up today, Dow has been treading water for over a week.  Given its massive gains this year, it needs time to take a breather.  Of course, at record highs, it is not pricing in any problems going forward.  But the Cyprus situation is fuzzy as the eurozone is working thru a recession.  The US economy does not look to be in great shape.  Q1 GDP growth will be meager at best & earnings are cloudy.  FedEx (FDX) guidance this week does not suggest a strong global economy.  However Dow does not care, at least yet.

Dow Jones Industrials

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