Markets gain on economic data and hopes for Chinese stimulus

Dow shot up 92, advancers continued almost 4-1 over decliners & NAZ was up 21.  The Financial Index rose 2+ to the 192s. The MLP index rose an enormous nearly 8 to the 368s & the REIT index was up 1 to 253.  Junk bond funds were higher while Treasuries eased back.  Oil rose for a 2nd day on signs the US economy is recovering, easing concern that demand from the world’s biggest crude-consuming country will decline.  Gold advanced for the 2nd time in 3 days on speculation that China may take more steps to boost economic growth.

AMJ (Alerian MLP Index tracking fund)

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Treasur yields:

U.S. 3-month	0.081%
U.S. 2-year	0.309%
U.S. 10-year	1.616%

CLQ12.NYM

...Crude Oil Aug 12

...80.16

... 0.80 (

1.0%)

Photo:   Bloomberg

Speaking 3 hours after Spanish Prime Minister Rajoy made a plea for help from tomorrow’s European summit, Chancellor Merkel said that euro bonds, euro bills & debt redemption funds are unconstitutional in Germany & economically “wrong and counterproductive.”  “I fear that at the summit there will be much too much talk about mutual liability and far too little about improved oversight and structural measures,” Merkel said  “Oversight and liability have to go hand in hand. There can only be joint liability when adequate oversight is ensured.”  She is under growing pressure from European & global counterparts to soften opposition to debt sharing in the euro area & do more to cut borrowing costs for Spain & Italy.  Rajoy, outlining his goals for the 2-day EU summit starting tomorrow, said that Spain can’t go on financing itself at current borrowing rates for long.  “The most important thing today is being able to finance ourselves in the markets, that’s the main issue,” Rajoy said.  “And on that point Spain, Italy and other countries are going to push for reasonable decisions to be made,” using the “available instruments.”  Spanish 10-year bond yields were little changed at 6.86% after jumping 24 basis points yesterday, nudging the important 7% level that forced other countries to call for bailouts. The summit looks like it is going nowhere.

Merkel Rebuffs Rajoy Plea, Shuts Door to Euro Area Bonds

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Photo:   Yahoo

Google took the wraps off its first tablet computer, looking to replicate its smartphone success in the tablet market despite tough competition from Apple (AAPL), Microsoft (MSFT) & Amazon (AMZN).  The "Nexus 7" tablet, built by & co-branded with Asus, will begin selling for as low as $199 on the Google Play website & apps store from around mid-Jul.  At 7" & $199, the device takes aim initially at the Kindle model, which is considered a window into the trove of online content from AMZN.  GOOG can similarly use the Nexus 7 to connect to its own online offerings, which include video service YouTube & Google Play.  It will go after more cost-conscious users who might shun the loftier price tag of $499 and above for the iPad.  The Nexus will feature the new 4.1 "Jelly Bean" version of GOOG software, as well as a front-facing camera, a 1280x800 resolution screen, & an Nvidia Tegra 3 processor.  GOOG stock gained 4.62.

Google Unveils Nexus Tablet, Stepping Up Apple Challenge

Google (GOOG)

General Mills projected full-year profit that trailed estimates amid increased marketing & investments in its US yogurt business.  EPS for fiscal 2013, including a decrease from its acquisition of Yoki Alimentos, will total $2.65, below the analyst projection of $2.76.  CEO Ken Powell has boosted marketing & raised prices to counter rising costs for raw ingredients such as wheat & sugar.  Increased pension expenses & a higher tax rate may also reduce annual earnings growth.  The company expects 2013 net sales to grow at a “mid- single-digit rate.”  Fiscal Q4 rose to 49¢ from 48¢ a year earlier.  Sales rose 12% to $4.07B, falling short of the $4.11B estimate.  Excluding some items, EPS totaled 60¢, just above the 59¢ estimate.  Sales in the US retail business rose 2.9% to $2.4B, driven by the Snacks & Small Planet Foods divisions. The stock fell 60¢.

General Mills Projects Full-Year Earnings That Trail Analysts’ Estimates

General Mills (GIS)

Markets had a good day, but sure sure why.  The economic data was not all that great.  The euro debt mess drags on & the the big meeting in the next 2 days will not accomplish much (except for generating a lot of hot air).  The € is a proxy for what's going on in Europe & it slipped back to under $1.25 (near its $1.24 recent low).  Tomorrow the ruling on heath care should move markets, but it's unclear in which way.  Dow is up 225 in Jun, better than I figured but not all that great following heavy selling in May.  The big jobs report for Jun is coming in 8 days & expectations are low once again.  Then earnings season begins.

Dow Jones Industrials

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Markets rise on improved pending home sales

Dow rose 81, advancers over decliners almost 4-1 & NAZ was up18.  The Financial Index added 1+ to the 191s (4 below its monthly high & this has been a good month for the index).  The MLP index gained 3+ to the 364s & the REIT index was up 1 to 253.  Junk bond funds rose & Treasuries were about even.  Oil increased after the Energy Dept said stockpiles fell less than expected, dropping 133K barrels to 387M barrels.  Gold prices hardly moved.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.096%
U.S. 2-year	0.305%
U.S. 10-year	1.626%

CLQ12.NYM

....Crude Oil Aug 12

...80.24

...... 0.88

(1.1%)

GCM12.CMX

...Gold Jun 12

.......1,564.00

... 10.00

(0.6%)

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Photo:   Yahoo

Demand for long-lasting US manufactured goods rebounded more than expected in May, but slowing global growth suggest the momentum might not be sustained.  Slower growth in China & a looming recession in the debt-crisis ridden euro zone have taken some of the shine off the domestic manufacturing sector, leaving the economy mired in a soft patch.  But the report from the Commerce Dept suggested the sector, which has shouldered the economy's recovery from the 2007-09 recession, was not falling apart.  Durable goods orders increased 1.1% after a revised 0.2% decrease in Apr, well above forecasts for a 0.4% increase.  Orders were lifted by a 2.7% jump in transportation equipment as aircraft bookings picked up & motor vehicles demand increased, though at a slower pace than in the prior month.  Excluding transportation, orders rose 0.4% after dropping 0.6% in Apr.  But May's strength, which came after 2 straight months of declines, could prove temporary.

Durable Goods Orders in U.S. Rise More Than Forecast

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Photo:   Yahoo

Chancellor Merkel has insisted that Europe can pool its debt only when govs' compliance with fiscal rules can be ensured.  She maintains that introducing so-called eurobonds now would be "economically wrong" after addressed the Parliament amid mounting pressure for her country to give up its fierce resistance to pooling debt.  She argues it makes no sense to share liability for debt before Europe has undergone a long process of integration & installed tough control mechanisms.  The chancellor said a quick move to eurobonds or other forms of joint liability would be constitutionally impossible in Germany and insisted that "supervision & liability must go hand in hand."  She said they could only be considered if & when "sufficient supervision is ensured."

Merkel Rebuffs Rajoy Plea, Shuts Door to Euro Area Bonds

Photo:   Yahoo

Contracts to purchase previously owned US homes matched a 2-year high in May, fueling optimism the housing market is poised for a recovery.  The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, rose 5.9% to 101.1, matched a 2-year high reached in Mar & the gain was the largest since Oct 2011.  Before Mar, the last time pending home sales were as high was Apr 2010 when buyers were rushing to beat the deadline for a home-buyer tax credit, which was about to expire, the NAR said.  "The housing market is clearly superior this year compared with the past four years," Lawrence Yun, NAR chief economist said.  "We're on track to see a 9 to 10 percent improvement in total sales for 2012."  Forecasts expected signed contracts, which lead home sales by a month or 2, to rise 1.0% after a previously reported 5.5% drop in Apr.  Housing is making a comeback, but it's remains tentative.

Pending Sales of U.S. Homes Climbed More Than Forecast in May


Markets are meandering again, with an upward bias.  The lack of horrible news out of Europe is bringing out the buyers.  However big intl problems have not gone away.  There are hopes China will add stimulus to its economy.  The US housing data sounds good.  We are also going into the end of the month/qtr when anything is possible as money managers even out positions.  Dow is down 20 this week, up 200 in Jun but down 600 in Q2.

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Markets rise on more bailout hopes

Dow gained 65, advancers ahead of decliners 3-2 & NAZ rose 17.  The Financial Index was up a fraction to the 191s, a one month high (barely).  The MLP index fell 1 to the 362s while the REIT index was even in the 251s.  Junk bond funds eased back & Treasuries found strength, bringing the yield on the 10 year Treasury under 1.6%.  Oil & gold hardly budged.

AMJ (Alerian MLP index tracking fund)

Treasury Yields:

U.S. 3-month	0.091%
U.S. 2-year	0.282%
U.S. 10-year	1.581%

CLN12.NYM

....Crude Oil Jul 12

...83.90

.... 0.01

(0.0%)

GCM12.CMX

...Gold Jun 12

.....1,625.90

... 7.50

(0.5%)

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EU parliament building
Photo:   Bloomberg

EU leaders will press for new efforts to boost economic growth & improve lending conditions when they meet later in Jun.  I think that means "we'll try harder."  The 27-nation bloc will pursue growth measures at a time when, in the words of ECB President Draghi, “there is no inflation risk in any European country” & the ECB will continue to provide liquidity to the banking system.  Draghi is working with EU leaders on a blueprint for further integration of the 17-nation euro region.  This report will set out building blocks for strengthening the euro area & economic coordination in the broader EU.  “Recent developments” have shown the need to take monetary union “to a further stage,” according to the draft dated Jun 12.  Leaders will call for “more specific building blocks” to link budget & banking policies among the 17 nations that use the €, along with stronger governance of the €.  The heads of state  “will call for further urgent measures aimed at boosting growth and jobs in Europe and enhancing the financing of the economy in the short to medium term.”  These steps include introducing so-called project bonds, making better use of EU infrastructure funds & increasing the capital, & therefore lending power, of the European Investment Bank.  Good luck!

EU Leaders to Call for ‘Further Urgent Measures’ on Growth

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Photo:   Yahoo

German Chancellor Merkel has underlined her determination to reject pressure for quick solutions at the G-20 summit, saying Europe must tackle its problems "at the roots" by lowering debt & increasing economic competitiveness.  She said that fueling growth thru more gov spending "will rather increase the problems than decrease them."  She acknowledged that Germany, Europe's biggest economy, will be a focus of attention at next week's G-20 summit in Mexico.  Merkel said: "Germany will not be convinced by all the quick solutions," such as jointly issued eurobonds — favored by French President Francois Hollande & insisted "you can only resolve a crisis of confidence if you tackle things at the roots."  Tough words from a tough & important leader.

Merkel: Germany Won't be Swayed by Quick Fixes

Photo:   Bloomberg

US factories produced less in May than Apr, as automakers cut back on output for the first time in 6 months. The report indicates that manufacturing, a key driver of the economic growth, is slowing.  The Federal Reserve said that factory output declined 0.4% last month, after increasing 0.7% in Apr.  Auto production fell 1.5%, the first drop since Nov.  Overall industrial production, which includes mines and utilities, dipped 0.1%, after a solid 1% rise in Apr.  Both mines & utilities increased production.  The production of computers, machinery & aircraft all declined.  The output of appliances also fell, while home electronics was unchanged from Apr.  Automakers ramped up output over the winter, boosting overall factory production when production jumped at an annual rate of 41% in Q1.  Manufacturing, meanwhile, rose nearly 10% on an annual basis in the same period.  Car sales rose sharply earlier this year but slowed in May.  The European financial crisis & slower growth in China, India & other emerging markets is hurting US exports of factory goods.

Industrial Production in U.S. Unexpectedly Dropped in May


The Greek election is the next big event coming out of Europe & nobody has any idea of what will be the result.  But there is a fair chance Greece may take itself out of the Eurozone group of nations.  Meanwhile, all indications are that the US economy will report drab numbers for Q2.  There should be growth, but if the that figure is less than a 2½% annual rate, that will be a big disappointment for the markets.  Dow has recovered 600 from the lows at the start of Jun, making the bulls happy.  But I'm not sure how many more body blows it can absorb.

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