Friday, May 17, 2013

Higher markets on rising consumer sentiment

Dow went up 64, advancers over decliners 5-2 & NAZ added 19.  The MLP index rose 3+ to the 359s & the REIT index was up 1+ to 312, a new high since 2007.  Junk bond funds gained & Treasuries pulled back.  Oil rose from the bullish sentiment in the stock market while gold is still struggling to find friends

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM13.NYM...Crude Oil Jun 13...96.04Up ......0.88 (0.9%)

GCK13.CMX...Gold May 13....1,375.80 Down ...11.30  (0.8%)

A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files

Photo:   Yahoo

Consumer sentiment rebounded in early May to the highest level in nearly 6 years as Americans felt better about their financial & economic prospects, particularly among upper-income households.  The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 from 76.4 in Apr, topping expectations for 78.  This was the highest level since Jul 2007.  The barometer of current economic conditions jumped to 97.5 from 89.9, the highest since Oct 2007, while the gauge of consumer expectations gained to 74.8 from 67.8.  More consumers gave a favorable view of their personal finances than in anytime since 2007, with the largest gains among households in the upper 1/3 of income levels.  More respondents also thought the economy would continue to improve in the year ahead.  Shopping plans were similarly encouraging, with the gauge of buying attitudes for durable goods rising to 148 from 137.  The survey's one-year inflation expectation was unchanged at 3.1%, while the survey's 5-10-year inflation outlook edged down to 2.8% from 2.9%.

Consumer Sentiment Index in U.S. Rose to 83.7 in May from 76.4

The ECB will keep its loose & growth-supportive monetary policy stance in place for "quite a long time", ECB executive board members said.  With the euro zone economy stuck in recession, the ECB cut its main refinancing rate to a record low of 0.5% & extended its provision of unlimited funds to banks by a year at its May policy meeting,  Inflation fell to a 3-year low of 1.2% in Apr, allowing some room for maneuver.  The ECB's Joerg Asmussen said the bank's monetary policy would remain expansive for as long as needed.  A colleague hit a similar tone when speaking at a conference in France, saying the ECB was committed to providing the euro zone with abundant liquidity for as long as necessary, adding  "We are saying that because we are well aware that rigidities and difficulties of transmission in the euro zone mean that the monetary policy will have to stay accommodative for quite a long time."  The ECB's record low interest rates do not reach euro zone countries evenly because funding costs for banks in the periphery are higher than in the core countries, making it more expensive to borrow.  Mario Draghi said last week the ECB would monitor incoming data closely & would be ready to cut rates again, including the deposit rate currently at zero, which would mean it would charge banks to keep their money overnight.

Dell Earnings Miss Estimates on PC Slump Amid Buyout Fight

Photo:   Bloomberg

Dell reported a 79% slide in profit as PC sales continued to shrink.  The disappointing results lend weight to Michael Dell's effort, arguing that its transformation into a provider of enterprise computing services, from mainly a computer maker in a shrinking market, is best done away from public scrutiny.  Revenue from enterprise solutions, services & software jumped 12% to $5.5B, while overall revenue slipped 2% & the "end-user computing division," linked to PC sales, slid 9%.  To augment its enterprise business, DELL is investing heavily on research & sales to retain customers.  Michael Dell's battle over what direction to take the company underscores the uncertainty in the PC industry, which enjoyed more than a decade of roaring growth until the advent of smartphones & tablets ended that era.  EPS excluding certain items was down to 21¢ from 43¢ a year earlier & lagged by far the 35¢ expected.  Revenue in its fiscal Q1 ended May 3 fell to $14.1B, higher than the estimate of $13.5B.  The stock hardly budged with competing bids to take over the company.

Dell Profit Missing Estimates Boosts CEO’s Buyout Plan

Dell (DELL)

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Once again, stocks can do no wrong.  Dow is in new record territory as it has a 450 advance just this month, not to mention 2160 YTD.  The best strategy this year has been to throw darts.  Maybe the buyers are encouraged by the pres having his worst week in almost 5 years.  MLPs have flattened out in Apr & May, but the index is entitled to a rest after soaring to new record highs.  Other yield securities, like REITs & junk bond funds, are also flying towards to heavens.  All this sounds good, until something goes wrong when this enthusiasm will vanish in a heartbeat.

Dow Jones Industrials

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