Markets pare early gains after G20 meeting ends

Dow lost some of its early gains, finishing up 65, advancers over decliners 2-1 & NAZ fell 7 (led by a 14 drop to 573 at Apple).  Bank stocks sold off, taking the Financial Index down 1 to the 204s.  The MLP index rose 1+ to the 394s & the REIT index gained 3 to 255, flirting with its yearly highs.  Junk bond funds had a good day & Treasuries pared losses as the G-20 met to address the European sovereign-debt crisis.  Encouraging news about business confidence in Germany helped drive oil prices higher.  Gold continued to slosh around the mid 1600s.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.266%
U.S. 10-year	1.966%

CLK12.NYM

...Crude Oil May 12

...102.94

... 0.67  (0.7%)

Britain's top finance official said the IMF will exceed $400B in its drive to significantly bolster its resources to deal with the European debt crisis & other financial emergencies.  The Chancellor of the Exchequer George Osborne expects total pledges will surpass the $400B target set by IMF Managing Director Christine Lagarde.  That would more than double the resources the IMF has available to make new loans to roubled nations.  Britain was committing around $15B.  The effort to increase IMF resources was a key item as officials of the G-20 major countries convened in DC for talks that were part of the spring meetings of the IMF & its sister lending agency, the World Bank.  More money for more mischief.

IMF projected to top $400 billion in pledges AP

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Photo:   Yahoo

Microsoft, a Dow stock beat the profit forecast as personal computer sales held up better than expected.  Q1 EPS was 60¢ compared with 61¢ last year when it posted a one-time tax gain.  The forecast was for 57¢.  Sales rose 6% to $17.4B, driven by strong demand for its server software products & Office application & beat the forecast of $17.2B.  Worldwide personal computer sales rose a modest 1.9% according to tech research firm Gartner.  That was better than expected in a market facing hard-drive shortages from Thailand & the onslaught of the new iPad.  MSFT jumped $1.43.

Microsoft Shares Advance After Profit Exceeds Estimates on Business Sales

Microsoft Corporation (MSFT)

SanDisk EPS was 46¢ in Q1, dropping in half from 92¢ last year.  Excluding one-time items, EPS was 63¢ , down from $1.03 last year & shy of the 67¢ forecasted.  Revenue fell 7% to $1.2B (matching expectations).  License & royalty revenue rose, but product revenue fell.  Demand for flash memory was unexpectedly weak, while prices were depressed.  Demand is expected to rise, but not until H2.  The market for flash memory is a volatile one, & recovery is uncertain but prices remain lower which will cut into profits. The stock plunged $4.56 (11%) on the news.

SanDisk Drops After Sales Forecast Falls Short of Estimates

SanDisk Corporation (SNDK)

Rising markets early in the week were good enough to give Dow an almost 200 weekly gain, but its still down 180 in Apr.  Earnings season is not getting a warm reception by investors.  Markets have roared ahead from the lows in early Oct, but have hit overhead resistance.  Dow can't break thru 13K in a meaningful way.  MLPs have come back recently.  The index is up 13 in the last 9 days, helped by regulations on fracking which shouldn't hurt too much.  Apple (AAPL) is down 71 from its highs only last week, not a good sign for the markets,  Dow had a modest amount of selling in the PM & will probably be playing defense next week when the last round of big earnings reports are released. 

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Higher markets on improved earnings

Dow shot up 101, advancers over decliners 3-1 & NAZ added 19.  Banks did not participate in the rally.  The Financial Index was up only a fraction to 206.

The MLP index rose 1+ to the 394s & the REIT index was up 3+ to the 255s, a new yearly high.  Junk bond funds were higher & Treasuries saw selling.  Oil was up along with the rising stock market & even gold had a modest gain.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.270%
U.S. 10-year	1.984%

CLK12.NYM

...Crude Oil May 12

...103.90

... 1.63

(1.6%)

GCJ12.CMX

....Gold Apr 12

.........1,645.10

... 4.50

(0.3%)

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Christine Lagarde
Photo:   Bloomberg

European govs were told the burden for fixing debt woes lies with them as the Group of 20 warned the 2-year crisis still threatens global growth.  At the G-20 meeting in DC ministers from Canada, Australia & the US joined the IMF in pressing Europe to intensify efforts to quell the turmoil as it spreads to Spain.  The G-20 cited “the situation in Europe” first in a list of drags on the world economy.  Managing IMF Director Lagarde said the lender serves as an emergency backstop & that Europe must protect itself, boost economic growth by cutting debt.  Italian & Spanish bonds fell today as the G-20 noted “stress has increased as of late.”  “Countries have to take measures,” Lagarde said.  “I am in charge of improving the stability and I need to have the umbrella in case the clouds break into a nasty rain.”  Lagarde is looking to increase a lending capacity of about $380B & has so far raised more than $320B with Russia becoming the latest nation to chip in ($10B).  The lending amount will be lower than the total amount raised because the IMF must keep some cash on hand.  The lender wants the money to help insulate the intl economy from dangers such as European contagion, high unemployment and rising oil prices.  The European debt mess is far from over.

Europe Urged to Fix Crisis as G-20 Warns of More Stress

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Photo:   Yahoo

McDonald's, a Dow stock & Dividend Aristocrat, is still seeing its value meals & specialty drinks pay off with budget-conscious diners.  Net income rose 7% in Q1, in line with expectations.  Global sales rose 7.3% at restaurants that were open at least 13 months, driven by gains from all regions.  A big part of the success story in recent years has been the rollout of popular menu items such as coffee frappes & fruit smoothies, which have high profit margins & bring in customers throughout the day.  Customers also love them because it's a way to have a treat for a couple of bucks.  EPS in Q1 rose to $1.23, above $1.15 last year.  In the US, sales at restaurants open at least 13 months were up 8.9%, as new menu items like Chicken McBites, updated restaurants & warm weather drew customers.  Results also benefitted from an extra day in the Leap Year.  Sales in Europe, the biggest market, rose 5% despite economic turmoil & severe weather in many parts of the region.  Sales in Asia Pacific, Middle East & Africa rose 5.5%, led by China, Australia & Japan.  The stock rose $2.35.

McDonald’s Profit Climbs 4.8% as New Items Drive Sales

McDonald's Corporation (MCD)

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Photo:   Yahoo

General Electric, a Dow stock, Q1 profit & revenue topped forecasts, helped by strong demand for energy equipment & railroad locomotives.  Orders had risen 20% in Q1 & selling prices had improved in most of its businesses.  "Global markets are improving, but volatility remains," CEO Immelt said.  He confirmed the company's 2012 growth forecast, saying, "everything we see in the first quarter supports double-digit earnings growth."  GE's transportation unit, which makes locomotives, posted 41% sales growth, while revenue at the GE Capital arm it is cutting back declined 12%.  EPS was 29¢, down from 31¢ last year.  The results include a $200M charge for exiting its Irish mortgage business, as well as gains from the sale of NBC Universal & a finance unit.  Factoring out one-time items, EPS came to 34¢, topping the the forecast of 33¢.  Profit margins dipped to 13.8% of sales from 14.3% a year earlier, but GE said that higher selling prices would help the company reach its goal of boosting overall 2012 profit margins to a target of 15.4% of sales.  Revenue fell 8.2% to $35.2B, but was above the $34.7B expected.  The revenue decline reflects the continued scaling back of GE Capital & the sale of a majority stake of the NBC Universal entertainment business.  Revenue at industrial businesses was up 14% with the strongest growth from the energy & railroad locomotive units.  The stock was up 34¢.

General Electric Beats Estimates as Energy Sales Buoy Industrial Divisio

General Electric Company (GE)

Markets are ending the week an an up note & good earnings from Dow stocks are bringing out buyers.  Gas at the pump eased back to $3.88, still high enough to put the pinch on consumers.  Dow is back above 13K, but that doesn't mean much after it's been hugging that line for more than 2 months.  This is the middle of earnings season, but the big picture shows a mixture of results.  The reports should have been more impressive if the economy had a truly strong rebound.

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Markets decline ahead of confidence vote in Greece

Dow fell declined 61, (closing above its lows & near 12K), decliners over advancers 3-2 & NAZ was off 11.  Bank stocks had a rough day, the Financial Index dropped 2+ to the 178s. 

The MLP index rose 2+ to 370 while the REIT index fell 2+ to the 229s.  Junk bond funds & Treasuries were a little lower.  Oil fluctuated near a 3-month high after the jobs report & the G-20 failed to agree to boost IMF resources to fight Europe’s debt   Gold traders are the most bullish in 3 weeks after hedge funds boosted their wagers on higher prices on speculation Europe's debt crisis & slow US growth will spur demand for gold as a protection of wealth.

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Treasury yields:

U.S. 3-month	-0.005%
U.S. 2-year	0.222%
U.S. 10-year	2.042%

CLZ11.NYM

...Crude Oil Dec 11

...94.28

.... 0.21

(0.2%)

Photo:   Bloomberg

Party lawmakers urged Prime Minister Papandreou to step aside & allow the formation of a new gov that can approve an EU aid package needed to avert default.  A deputy in the Pasok party, said a confidence vote tonight signaled the end of the administration & a colleague said the motion would support the formation of an administration of national consensus (i.e. new gov).  The vote of confidence will take place tonight.  “The issue is how to keep the country going and then evolve the current government into a broader government that takes on board other political forces,” the Energy Minister said.  “We need broader support and approval for the kind of measures that were taken.”  I remember saying 3 months ago, the Greek drama plays on.  And on & on & on.   Nothing has been resolved.

Greek Ruling Party Lawmakers Desert Papandreou Before Confidence Vote Held

Photo:   Bloomberg

Bershire Hathaway may post its first quarterly decline in book value in more than a year on drops in Wells Fargo (WFC) , American Express (AMX & a Dow stock) & equity-derivative bets.  Book value is estimated to have slipped to under $98K per Class A share on Sep 30 from $98.7K on Jun 30.  Warren Buffett, is adding investments after a market slump pressured the $65B stock portfolio & its equity derivatives (which have about $35B at risk).  The S&P 500 had its biggest quarterly decline since 2008, as Buffett spent $18B on common-stock bets, Bank of America (BAC & a Dow stock) preferred stock & the takeover of Lubrizol.  On Sep. 26, BRK.A announced a plan to repurchase shares.   The stock fell $2428 (2%).

Berkshire May Post First Book-Value Drop in Five Quarters on Equity Bets

Berkshire Hathaway Inc. (BRK/A)

 

Photo:   Bloomberg

Sony, the largest exporter of consumer electronics from Japan, fell the most in almost 8 months in Tokyo after forecasting a full-year loss because of a strong ¥, waning TV sales & flooding damage in Thailand.  The company, based in Tokyo, said it will lose ¥90B ($1.2B) this year, compared with a previous projection for a ¥60B profit.  The loss will be its 4th in a row.  The world’s #3 TV maker slashed TV sales targets after the ¥ reached a postwar high & floods in Thailand cut production.  Its annual sales projection were lowered to 20M TVs from 22M.  SNE cut annual sales targets for PCs, compact cameras & Blu-ray DVD players.  While many of its troubles are internal, a less than rebust global economic recovery is aggravating those problems.  The US shares fell 39¢ (2%).

Sony Falls Most in Eight Months After Forecasting Fourth Annual Net Loss

Sony Corp Ord (SNE)

After the super rally in Oct, stocks can be excused for taking a breather this week, Dow fell 250.  There was a lot of gloomy news which was taken fairly well.  An anemic jobs recovery was reaffirmed today & the G-20 failed to agree on how to aid ailing economies.  There are numerous signs that the European & US economies are not having strong recoveries.  When companies report Q3 earnings, common themes are higher earnings come from overseas growth & belt tightening in the US (as a way of dealing with a sluggish recovery).  Heat is starting to increase in DC on findings by the supercommitte which is charged with reducing massive gov deficits.  That will get ugly because both sides are standing by their principals.  There is a lot riding on the confidence vote in Greece tonight.  But there is so much disarray in Europe, that it is just one of many uncertainties.  

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