Thursday, May 16, 2013

Markets drift lower on weaker economic data

Dow dropped 42, decliners over advancers 3-2 & NAZ was off 6.  The MLP index lost 4+ to the 355s (after trading sideways at record levels since the start of Apr) & the REIT index fell 1+ to the 310s.  Junk bond funds were mixed at multi year highs & Treasuries rallied after recent selling.  Oil rose on speculation that central banks will bolster stimulus when more Americans than projected filed applications for unemployment benefits & US consumer prices decreased.  Gold fell, capping the longest slump in 16 months, on reports that showed George Soros & Blackrock (BLK) cut stakes in exchange-traded products backed by the metal, signaling waning investment demand.

AMJ (Alerian MLP Index tracking fund)

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CLM13.NYM...Crude Oil Jun 13....95.34 Up ...1.04 (1.1%)

Live 24 hours gold chart [Kitco Inc.]

Gas drillers using hydraulic fracturing on federal lands would be able to use an industry-sponsored website to disclose the chemicals they use & won’t need to perform cement tests on each well, according to a revised proposal from the Interior Dept.  Drillers will be permitted to use a variety of methods to test the integrity of their wells.  The proposal from the Bureau of Land Management would establish the first national regulations on federal lands for fracking, in which water, chemicals & sand are shot underground to free oil or gas from rock.  A draft rule last year was so heavily criticized by companies & Reps that the agency, part of the Interior Dept, went back to the drawing board.  The rule is being watched closely by the drilling industry because the standards will have a direct impact on production from federal lands & serve as a marker for states about how to regulate the process locally.  The Bureau of Land Management, the largest landowner in the US, oversees 700M subsurface acres of mineral rights, & 56M acres of Indian estates.  Farmers or ranchers own the surface rights on large tracts of federal land.  The MLP index fell following this news.

Fracking on Federal Lands Said to Get Scaled-Back Rule Proposal

<p> German Chancellor Angela Merkel attends a discussion panel on "making Europe strong" during the Europe forum conference, organized by German public-broadcaster WDR, in Berlin, Germany, Thursday, May 16, 2013. (AP Photo/Gero Breloer)

Photo:   Yahoo

Germany & France recognize that their cooperation is key to overcoming Europe's persistent economic crisis, but comments by the leaders of the continent's 2 largest economies suggested they still have diverging priorities.  French President Francois Hollande argued that eurozone should integrate more, calling for greater pooling in the long run of political & financial resources.  He favors easing back on debt reduction measures to help the economy grow.  Chancellor Merkel, who has rejected the idea of pooling European debt, says govs must first work on getting their finances in order & making their economies more competitive through reforms & stressed the importance of reforms in France.  "What we need above all is a common understanding in Europe — and there unfortunately isn't one yet — of what actually makes us strong and where growth comes from," Merkel said.  Merkel & Hollande spoke a day after new figures showed that the eurozone contracted for the 6th straight qtr in Q1, its longest-ever recession, with 9 of 17 member countries in recession.  France was the latest addition to that list & Germany barely grew.  Merkel's center-right gov has faced persistent criticism for favoring a crisis response that focuses on debt reduction.  German officials insist that budget austerity has to be part of the answer, & that doing so doesn't conflict with growth in the longer-term.  They also stress that structural reforms, for example to make labor markets more flexible, are just as important.  Hollande, a Socialist, said eurozone countries should combine their political & financial resources to eventually create a common gov with a budget & even the capacity to borrow.  Germany has so far dismissed pooling public finances for fear that it would end up paying for financially weaker countries' mistakes.

Merkel, Hollande at odds over Europe's way forward AP

Cisco Third-Quarter Profit Tops Estimates on Data-Traffic Demand

Photo:   Bloomberg

Cisco, a Dow stock, hit a multiyear high above $24 after reporting results & the company's forecast eased concerns about weak technology spending after many technology rivals had recently given much bleaker financial targets.  The last time the shares traded above $23 was in Nov 2010.  CSCO is a bellwether for the health of the tech sector, announced that it is seeing good signs in the US economy even as it acknowledged global economic challenges.  EPS excluding some items was 51¢, exceeding the analyst projection by 2 pennies.  It is benefiting as companies step up investments in data-traffic networks to accommodate users who are increasingly relying on smartphones & tablets to watch video & surf the web.  For fiscal Q4, which ends in Jul, CSCO forecast EPS excluding some items of 50-52¢, compared to the analyst estimate of 51¢.  Sales will rise 4-7% from a year earlier, indicating a range of $12.1-$12.5B.  Analysts are predicting $12.5B.  The stock shot up 2.68 (13%).

Cisco Surges After Profit Exceeds Estimates: San Francisco Mover

Cisco (CSCO)

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There was more selling today than the raw data shows.  CSCO & Hewlett-Parkard (HPQ) had a very good day.  But there were only 4 other winners in the Dow.  Of course a decline has to be expected in a vastly overbought Dow.  Since May1, Dow has had 3 down days for a total loss of only 55.  Net, its up a massive 533 at today's close.  While the US economy may be growing, it's recovery remains anemic & Q2 looks like it will be drab.  Dow is within spitting distance of yesterday's record close (although there was selling after Obama's press conference).
Dow Jones Industrials

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