Dow
rose 147, advancers barely ahead of decliners & NAZ added 35. The
MLP index was off 1+ to the 451s & the REIT index fell 1+ to the
277s. Junk bond funds continued 2-3% lower & Treasuries had one of
their worst days in history. Oil continued strong, going over 103.
Gold fell to a one-week low
as the dollar surged to the highest in almost 3 years on
speculation that the Federal Reserve (FED) will scale back stimulus.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif)
Photo: Bloomberg
Big Ben & friends have reason to maintain the timetable for a reduction in the monthly pace of bond purchases after today’s report showing payrolls growth that beat forecasts. Economics think the FOMC will begin tapering sooner than they had expected after today’s employment report, which showed employers added 195K workers to payrolls for a 2nd month in Jun, beating the forecast of 165K. Treasuries sank, sending the 10-year yield to the highest since Aug 2011, while the dollar rallied as the report fueled bets the FED will begin to reduce the bond buying intended to fuel growth & put more Americans back to work.
Bernanke Seen Holding to QE Tapering Plan After Payrolls Report
Photo: Bloomberg
China's finance companies predict central bank Governor Zhou Xiaochuan will extend a cash crunch, albeit without June’s dramatic swings, as he calls for the market to “discover and correct” excessive lending. The 7-day repurchase rate, which measures interbank funding availability, may average 4% in Q3, compared with 3.62% in the past year. But the rate surged to a record 10.8% on Jun 20, & averaged 4.49% in Q2, the highest since the National Interbank Funding Center started compiling the data in 2003. A similar rate in India fell 73 basis points. Shares of China’s 4 biggest banks plunged an average of 12% last month & yield premiums on their bonds soared as the cash crunch underscored concerns excessive lending to property projects & local govs will end in rising defaults. President Xi Jinping said last month that officials shouldn’t be judged solely on their record in boosting GDP, signaling that the new administration is prepared to tolerate slower economic expansion. The worst cash squeeze in at least a decade has eased after the central bank pumped capital into finance companies. The 7-day repo has plunged 694 basis points, or 6.94% points, since Jun 20 to 3.83% today. Zhou, in his first public comments since the cash crunch, said in a Jun 28 speech in Shanghai that “financial markets have always been very sensitive. They react very quickly to any signals. This helps discover and correct problems.” The cash crunch was a reminder to lenders to adjust their “asset businesses,” Zhou, the G-20’s longest-serving central bank chief, said in an interview last week. While the PBOC will step in if individual financial institutions are in extremely difficult situations, it doesn’t want banks to ignore the need for adjustments, he was cited as saying.
PBOC to Extend Cash Crunch as Zhou Discovers Flaws
Photo: Bloomberg
Dell said Carl Icahn's tender offer gives the PC maker a valuation more than twice that of its closest peer, Hewlett-Packard (HPQ, & isn’t based on a concrete cost-savings plan. DELL’s special committee, which has criticized the proposal previously, provided additional arguments for its case in a filing today as Institutional Shareholder Services (ISS) prepares to make a recommendation to shareholders on founder Michael Dell’s buyout proposal. It is believed that investor advisory firm is leaning against the deal. The offer by Icahn & Southeastern Asset Management implies “unrealistic multiples,” valuing Dell at 12 times earnings before interest, taxes, depreciation & amortization, compared with 4.6 times for HPQ, DELL said in the filing, & many of the categories of costs savings in the offer weren’t specifically identified. The odds have been mounting against Michael Dell's $24.4B bid to take DELL private. It has been leaked that a negative recommendation by ISS would increase the likelihood that investors will oppose the proposal, unless the Dell & his partners sweeten the $13.65-a-share bid. The stock fell 27¢ to $13.04.
Dell Says Icahn Offer Based on Unrealistic Valuation as ISS Readies Advice
Stocks had another good day, but breadth was weak. Yield sensitive stocks sold off, not a good sign. The jobs reports was fairly good. But there are problems. Retail & service firms drove job growth & those are lower paying jobs. During the weak recovery over the last 4 years, low paying jobs have seen the greatest growth. And the recovery has been the weakest in memory. Usually, the economy comes roaring back as it did in the 1980s. Next week earnings season begins with Alcoa (AA) after the market close on Mon.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month |
0.04% | |
U.S. 2-year |
0.39% | |
U.S. 10-year |
2.71% |
| CLQ13.NYM | ...Crude Oil Aug 13 | ...103.25 |  ...2.01 | (2.0%) |
Photo: Bloomberg
Big Ben & friends have reason to maintain the timetable for a reduction in the monthly pace of bond purchases after today’s report showing payrolls growth that beat forecasts. Economics think the FOMC will begin tapering sooner than they had expected after today’s employment report, which showed employers added 195K workers to payrolls for a 2nd month in Jun, beating the forecast of 165K. Treasuries sank, sending the 10-year yield to the highest since Aug 2011, while the dollar rallied as the report fueled bets the FED will begin to reduce the bond buying intended to fuel growth & put more Americans back to work.
Bernanke Seen Holding to QE Tapering Plan After Payrolls Report
Photo: Bloomberg
China's finance companies predict central bank Governor Zhou Xiaochuan will extend a cash crunch, albeit without June’s dramatic swings, as he calls for the market to “discover and correct” excessive lending. The 7-day repurchase rate, which measures interbank funding availability, may average 4% in Q3, compared with 3.62% in the past year. But the rate surged to a record 10.8% on Jun 20, & averaged 4.49% in Q2, the highest since the National Interbank Funding Center started compiling the data in 2003. A similar rate in India fell 73 basis points. Shares of China’s 4 biggest banks plunged an average of 12% last month & yield premiums on their bonds soared as the cash crunch underscored concerns excessive lending to property projects & local govs will end in rising defaults. President Xi Jinping said last month that officials shouldn’t be judged solely on their record in boosting GDP, signaling that the new administration is prepared to tolerate slower economic expansion. The worst cash squeeze in at least a decade has eased after the central bank pumped capital into finance companies. The 7-day repo has plunged 694 basis points, or 6.94% points, since Jun 20 to 3.83% today. Zhou, in his first public comments since the cash crunch, said in a Jun 28 speech in Shanghai that “financial markets have always been very sensitive. They react very quickly to any signals. This helps discover and correct problems.” The cash crunch was a reminder to lenders to adjust their “asset businesses,” Zhou, the G-20’s longest-serving central bank chief, said in an interview last week. While the PBOC will step in if individual financial institutions are in extremely difficult situations, it doesn’t want banks to ignore the need for adjustments, he was cited as saying.
PBOC to Extend Cash Crunch as Zhou Discovers Flaws
Photo: Bloomberg
Dell said Carl Icahn's tender offer gives the PC maker a valuation more than twice that of its closest peer, Hewlett-Packard (HPQ, & isn’t based on a concrete cost-savings plan. DELL’s special committee, which has criticized the proposal previously, provided additional arguments for its case in a filing today as Institutional Shareholder Services (ISS) prepares to make a recommendation to shareholders on founder Michael Dell’s buyout proposal. It is believed that investor advisory firm is leaning against the deal. The offer by Icahn & Southeastern Asset Management implies “unrealistic multiples,” valuing Dell at 12 times earnings before interest, taxes, depreciation & amortization, compared with 4.6 times for HPQ, DELL said in the filing, & many of the categories of costs savings in the offer weren’t specifically identified. The odds have been mounting against Michael Dell's $24.4B bid to take DELL private. It has been leaked that a negative recommendation by ISS would increase the likelihood that investors will oppose the proposal, unless the Dell & his partners sweeten the $13.65-a-share bid. The stock fell 27¢ to $13.04.
Dell Says Icahn Offer Based on Unrealistic Valuation as ISS Readies Advice
Dell (DELL)
Stocks had another good day, but breadth was weak. Yield sensitive stocks sold off, not a good sign. The jobs reports was fairly good. But there are problems. Retail & service firms drove job growth & those are lower paying jobs. During the weak recovery over the last 4 years, low paying jobs have seen the greatest growth. And the recovery has been the weakest in memory. Usually, the economy comes roaring back as it did in the 1980s. Next week earnings season begins with Alcoa (AA) after the market close on Mon.
Dow Jones Industrials
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