Markets waver as OPEC does not raise production quotas

Dow slipped 1, decliners ahead of advancers almost 2-1 & NAZ was  down a bigger 16.  Bank stocks continue under selling pressure, taking the Financial Index below 200, another 6 month low.

S&P 500 FINANCIALS INDEX

Value	199.88
Change	-0.26    (-0.1%)

The MLP index fell 1½ to the 354s & the REIT index was down a fraction in the 242s.  Junk bond funds were mixed & Treasuries rose bringing the yield on the 10 yeart Treasury under 3%.  Oil rose after OPEC ministers were unable to reach a decision on production quotas at their meeting. Gold fell for the 2nd straight day on speculation that the Federal Reserve won’t ease monetary policy further.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.036%
U.S. 2-year	0.391%
U.S. 10-year	2.968%

CLN11.NYM

....Crude Oil Jul 11

...100.95

... 1.86 (1.9%)

GCM11.CMX

...Gold Jun 11

......1,534.30.

... 9.00

(0.6%)

Photo:   Bloomberg

OPEC unexpectedly left its production levels unchanged, causing oil prices to jump, as their meeting ended in disarray.  Because of a policy deadlock, the group will maintain present output ceilings with the option of meeting within the next 3 months to consider a hike.  "We are unable to reach consensus to ... raise our production," OPEC Secretary General Abdullah Al-Badri said, reflecting unusual tensions in the 12-nations.  The future of OPEC is being called into question, partially because it represents less than 30% of oil output.

OPEC Can’t Find Consensus on Output Quota

Photo:   Bloomberg

Sales of McDonald's fruit & maple oatmeal and drinks like frozen strawberry lemonade pushed the fast-food chain's revenue at restaurants open at least 13 months up 3.1% in May, a slowdown from the 4.8% last year.  2 regions weakened: the US, whose share of revenue has shrunk over the past several years, & Europe, which led revenue growth a year ago.  Asia, the Middle East & Africa grew most quickly. Last week, CEO Jim Skinner was adamant that price isn't the restaurant's only virtue. "A lot of people talk about the fact that people are trading down," Skinner said. "They don't trade down to McDonald's; they're trading in to McDonald's."  But he also said the economy "remains less than ideal," citing a "slow and uneven" recovery, rising costs for ingredients, & fragile consumer confidence.  In the US, revenue at stores open at least 13 months grew 2.4%, compared with 3.4% last year.  Revenue in Europe grew 2.3%, down from 5.7% a year ago (France, Russia & the UK drove Europe's growth & Germany was weaker).  Revenue growth was strongest in Africa, the Middle East & Asia, which recorded 4.3% growth where customers there were drawn to affordable meals as well as the convenience of drive-thru locations, delivery & extended hours.  The US represents about 31% of revenue & Europe about 40%.  The stock was little changed.

McDonald’s Sales Rose 3.1% in May

McDonald's Corporation (MCD)

Markets are meandering again as economic problems are not being solved.  Even the Anthony Weiner debacle hurts, because attention is drawn away from solving enormous problems in DC.  The fiscal year for the federal gov only has 3+ months left, & a budget is not near.  Then comes the next fiscal budget which seems light years away.  If that wasn't enough, an agreement is needed on raising the debt ceiling.  Another negative is the MLP index is getting ready to test the important 350 floor & there is a good chance, it will go below.  This summer could be a very tough time for stocks.

Dow Industrials (INDU)

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Dow climbs back over 10,000

Buyers returned to the markets. Dow is up 87, advancers over decliners 3-1 & NAZ rose 25. Banks stocks are having another another winner day as the Financial Index has had a nice bounce off its 186 floor for the last 9 months.


S&P 500 FINANCIALS INDEX

Value 192.03

Change 1.84

% Change 1.0%

The MLP index is up 1+ to the 292s while the REIT is up 4½, recovering from a terrible 2 day period. Junk bond funds are up maybe 1% after recent selling. The VIX, volatility index, slipped 1 to the 32s. Treasuries dropped, taking the yield on the 10-year Treasury bond up 5 basis points to 3.22% (but still very low relative to the last 12 months).


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index -- 2 weeks




VIX --- 2 weeks





Oil is higher on China’s export numbers showing that global trade remains strong, the inventory report for oil released in a few hours is expected to show inventories dropped last week & the oil spill could bring a reduction in supplies. Gold is taking a breather after yesterday's record topping 1250. Its outlook remains bullish.

CLN10.NYM

C...rude Oil Jul 10

...74.46

... 2.47 .......(3.4%)

GCM10.CMX

G...old Jun 10

...1,230.00

... 14.00 .......(1.1%)

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OPEC revised slightly its forecast for world economic growth but left 2010 oil demand largely unchanged as Europe's debt crisis, an oversupply of crude in the market & a potential cooling in China's growth pointed to "economic signs that are not rosy." It said world economic growth this year was revised up to 3.8% in Jun from the previous month's 3.5% forecast, driven mainly by improved performance in the Japanese economy which is forecasted to grow 2.7% compared to last month's 1.5% projection. "With half of the year already passed, economic signs are not that rosy," OPEC said, adding however that increasing world economic growth rates offered hope that oil demand would be supported. It estimates world demand in 2010 at 85B barrels per day, 1.12% more than in 2009.

• OPEC: 2010 demand picture uncertain- AP

The IMF said that most advanced economies are experiencing a "subdued" recovery. As advanced economies suffer stunted recoveries, Asia will continue to lead the world economic rebound, bringing its own challenges of increasing capital inflows & the risk of overheating if policy makers fail to take "appropriate" actions. Asia’s rebound is outpacing the rest of the world.

•IMF Says Global Risks Are Rising, Policy Makers Have Limited Room to Act



The € rebounded to $1.20½ as traders got tired of selling, a least for the moment. Stocks have had a nice recovery this week, Dow bounced off 9.8K to 10K. The 10K floor is holding as it has for the last 7 months. But it has also been range-bound & it continues at the low end of the range.

Dow Jones Industrials -- 2 weeks

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