Stocks lifted by Microsoft's $8 billion purchase of Skype

Dow was higher all day & finished near its highs.  Dow rose 72, advancers over decliners 5-2 & NAZ gained 27.  Bank stocks finally were able to lead a rally.

S&P 500 FINANCIALS INDEX

Value	218.34
Change	2.04    (0.9%)

The MLP index fell & has been sluggish after last week's sell-off.   But the REIT gained 4 to nearly 248, taking it within 2 of its multi year high.  Junk bond funds were slightly higher & Treasuries fell after a weak auction for 3 year notes today.  The yield for 10 year Treasury bond fell to uinder 3.15% yesterday, a 5 month low, but shot up after the auction today.  Oil rose as concern increased that flooding of the Mississippi River will disrupt fuel output.  Buyers returned to gold & silver (the green lines in the charts are for prices today).

ALERIAN MLP INDEX

Value	371.37
Change	-0.63      (-0.2%)

Treasury yields:

U.S. 3-month		0.03%
U.S. 2-year		0.58%
U.S. 10-year		3.20%

CLM11.NYM

....Crude Oil Jun 11

....103.65

.... 1.10 (1.07%)

Citigroup became a $40 stock for the first time in 3½ years, but investors aren't any richer, because of a 1 for 10 reverse stock split (1000 shares of old stock were swapped for 100 shares of new stock).  The move instantly erased its single-digit stock price which is expected to allow fund managers who shun stocks under $10 or $5 to consider investing in Citi.  In addition, there will be a div, a measly penny, but good enough to allow it to be counted as a div paying stock so that it can be added to lists of div paying stocks.  The new stock was a few pennies higher.

• Citigroup instantly becomes a $40 stock- WSJ

Citigroup Inc. (C)

Photo:   Bloomberg

General Motors will invest $2B in US plants to boost production & market share.  The plans were announced at a transmission factory in Toledo, Ohio, where GM will invest $205M which potentially could add 250 jobs. The overall investment should create or save 4K jobs at 17 facilities.  GM's market share in the US increased to 19.6% in Apr from 18.7% in the same period last year.  GM has been spending on factories, since its bankruptcy, to add new models & technologies for an expected improvement in auto sales.  It forecasts that auto sales in the US will get back to 14-15M units eventually (near record levels in the last decade).  The stock was up 22¢ but hasn't strayed far from its $33 IPO last year.,

GM to Invest $2 Billion in U.S. Plants

General Motors Company (GM)

Gas fuels cars & the average price at the pump has eased back from just under $4.  But $3.95 is still very high, up substantially YTD & above last May.


Stock markets were feeling better as the bulls returned.  But MLPs did not join the rally, maybe on lingering worries about changing the tax laws for MLPs.  Tomorrow the Treasury will sell $24B of 10 year notes & another $16B of 30 year notes on Thurs.  These issues ask that investors accept the inflation risk over a much longer period of time & will be interesting to follow after today's sluggish demand of 3 year notes.  Euro debt problems are still overhanging the markets, but today they were forgotten.

Dow Industrials (INDU)

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Stock markets rise led by stronger commodity markets

Dow gained 58, advancers over decliners 3-1 & NAZ was up 16.  Bank stocks are leading the rising markets but the Financial Index is still struggling to find its footing for a longer term advance.

S&P 500 FINANCIALS INDEX

Value	218.02
Change	1.72   (0.8%)

The MLP index recovered another 2 to the 374s & the REIT index rose 2+ to the 246s.  Junk bond funds were strong, many rising 1+% but Treasuries were weak ahead of $72B being auctioned off this week.  Oil dropped after CME raised margins & on speculation US stockpiles increased to near the highest level in 2 years. Gold & silver rose for a 3rd day as concern about Europe debt woes spurred demand for precious metals as a protection of wealth.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.03%
U.S. 2-year		0.55%
U.S. 10-year		3.16%

CLM11.NYM

...Crude Oil Jun 11

...102.29

... 0.26

(0.3%)

GCK11.CMX

....Gold May 11

......1,508.40

...5.50

(0.4%)

SIK11.CMX

......Silver May 11

.........38.12

.. 1.01

(2.7%)

Photo:   Bloomberg

Microsoft, a Dow stock, has agreed to buy the internet telephone service Skype for $8½B, the biggest deal in its 36-year history.  Buying Skype gives MSFT access to a user base of 170M who log in to Skype every month, using the internet & Skype usernames as a complement to the traditional phone network with phone numbers.  MSFT will marry Skype's functions to its Xbox game console, Outlook email & Windows smartphones. All of these platforms already have other options for internet calling, but the addition of Skype users would expand their reach, making them more useful.  Skype users made 207B minutes of voice & video calls last year & most of that was free computer-to-computer calls  Skype lost $7M on revenue of $860M last year.  MSFT fell 25¢.


Microsoft Agrees to Buy Skype for $8.5 Billion to Add Web Calls

Microsoft Corporation (MSFT)

Photo:   Bloomberg

Google will launch a new online music service which will be similar to a service recently started by Amazon (AMZN) according to The Wall Street Journal.  GOOG is likely to announce the service at its annual Google I/O developers conference in San Francisco, the service will operate in a testing mode initially & not be available to the public at large.  In Apr, AMZN unveiled a service that allows customers to store about 1000 songs on its Web servers for free instead of their own hard drives & play them over an internet connection directly from Web browsers.  Users could listen to songs they have uploaded to the service in a "streaming" mode, but will not be able to download the files. High priced GOOG was up 5.

Google Will Announce New Music Service at Developer Conference

Google Inc. (GOOG)

Enterprise Products Partners, the largest MLP, Q1 profit soared on production growth & higher demand for natural gas liquids from the US petrochemical industry & intl markets.  Net income rose to $420M, or 49¢ per unit, in Q1 versus $70M, or 33¢ last year.  Revenue rose 19% to $10.2B from $8.5B a year earlier. The company attributed the jump mostly to higher commodity prices & volumes.  Analysts expected earnings of 45¢ on revenue of $9.2B.  Its rig counts have increased in areas with reserves with natural gas liquids-rich natural gas & crude oil, many of which are near the company's integrated system.  Petrochemical companies, especially ethylene producers, are continuing to choose cheaper domestic suppliers, leading to further growth. Ethylene is the most produced organic compound in the world.  The units were up 31¢ on the news.

Enterprise Products Partners 1Q net income soars AP

Enterprise Products Partners L.P. (EPD)

Commodity & stock markets are having a good day.  Traders view the plunge in commodities provides a good time to buy at low prices.  Gold continues strong, with only modest selling in the last 2 weeks.  Corp buyouts (like MSFT is making) are encouraging for stock buyers.  But confusion over Greek debts & how to solve that problem, not to mention other European countries with similar financial problems, has not gone away.  Markets are betting the financial powers in Europe will work their magic again like they did last year.  I don't know.

Dow Industrials (INDU)

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Commodity rebound takes stock markets higher

Stocks were up on rebound Mon.  Dow gained 45, advancers over decliners 5-2 & NAZ was up 15.  But bank stocks slipped & have not been able to find traction this year.

S&P 500 FINANCIALS INDEX

Value	216.29
Change	-0.40    (-0.1%)

The Alerian MLP Index had a modest rise after last week's big sell-off while the REIT index rose 1½ to almost 244.  Junk bond funds were mixed & Treasuries inched higher.  The yield on the 10 year Treasury bond fell 2 basis points to its lowest level in months. Crude oil rose above $103, rebounding from the biggest weekly decline since 2008, on signals that the global economic recovery remains intact. Silver futures rebounded from the biggest weekly slump ever & gold gained on renewed demand for precious metals as alternative assets.

ALERIAN MLP INDEX

Value	372.00
Change	0.97    (0.3%)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.54%
U.S. 10-year		3.14%

CLM11.NYM

...Crude Oil Jun 11

...103.02

... 5.84

(6.0%)

US households expanded debt in Q1 for the first time in more than 2 years.  Mortgage balances rose according to the Federal Reserve Bank of New York.  Consumer indebtedness rose 0.3% to $11.5T on Mar 31.  Households have slashed debt by $1.03T (8.2%), since it peaked in Q3 of 2008 when the financial crisis was unfolding.  “We are beginning to see signs of credit markets healing gradually and evidence of greater willingness of consumers to borrow and banks to lend,” Andrew Haughwout, VP at the New York Fed said.   Throughout Q1, banks eased lending terms as they forecast improvement in the economy & firms sought more loans, according to a Fed survey of senior loan officers released last week.  Delinquency rates declined for the 5h straight qtr, with 10.5% of outstanding debt in “some stage of delinquency,” down from 10.8% 3 months earlier. That’s also down from 11.9% a year earlier.  New bankruptcies fell 13.3% to 434K, 6.4% below a year earlier. About 368K consumers showed new foreclosures on their credit reports in Q1, 17.7% less than in Q4 2010. Credit-card limits rose by $30B (1%), the first increase since Q3 of 2008.  Credit card balances declined by 4.6%. This is the type of data expected from an improving economy. 

Household Debt in U.S. Climbed 0.3% in First Quarter on Mortgage Balances



Coca-Cola (KO), a Dow stock & Dividend Aristocrat, plans to invest more than $25B over the next 5 years to help reach its $200B sales target in 2020.  Turkey is among the “tigers” of growth markets for the company, which also includes Brazil, Russia, India & China.  Yesterday, KO celebrated its 125 anniversary.  The stock was up a nickel & has done very well in the last year.

Coca-Cola Plans $25 Billion Investment in 5 Years, Hurriyet Says

Coca-Cola Company (The) (KO)

The price of gas at the pump eased back a couple of pennies, but remains close to $4, up substantially YTD & over last year.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.960	$4.104	$4.231	$4.155	$3.338	$4.393
Yesterday Avg.	$3.966	$4.110	$4.236	$4.159	$3.339	$4.395
Week Ago Avg.	$3.952	$4.092	$4.218	$4.155	$3.331	$4.384
Month Ago Avg.	$3.750	$3.885	$4.012	$4.038	$3.149	$4.144
Year Ago Avg.	$2.914	$3.094	$3.206	$3.128	$2.296	$3.021

This was really not a good day for those expecting a rebound .  Volume was very low, only ¾B shares on the NYSE floor.  There is plenty of turmoil out there & these markets are worried.  Greek debt is getting most attention & it's difficult to see how that can be solved quickly when last year's bailout is not working.  The lack of participation by bank stocks is bad sign for any bullish argument.  MLPs should have had a bigger recovery since the reason for last week's decline (changing the tax advantage for distributions) has been pretty much ruled out.  Dow has had to struggle harder for gains during the last 3 months.  Bulls will need to bring something to the table to get markets going again.

Dow Industrials (INDU)

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Stocks surge on strong jobs growth data

Dow shot up 161, advancers over decliners 4-1 & NAZ gained 41.  Banks stocks eagerly participated in this rally although the Financial Index continues to muddle along longer term.

S&P 500 FINANCIALS INDEX

Value	218.73
Change	2.76  (1.3%)

The Alerian MLP Index climbed back 8 to 372 after falling almost 30 in the previous 4 days.  It plunged (by its standards) on nervousness about changing the tax advantage rules for distributions.  Higher markets also contributed to the rise.  The REIT index was flat in the 244s.   Junk bond funds rose, some were up more than 1%.  Treasuries fell on the jobs report.  The yield on the 10 year Treasury bond rose 4 basis points to 3.20%, but remains near its lowest levels this year.  Note that 90 day T-bills are still yielding virtually nothing.  Oil fluctuated on a better-than- expected US jobs report after a 12% plunge in the past 4 days left futures poised for their biggest weekly decline in a year.  Bargain hunting in the last hour brought it back over $100.  Gold & silver are settling into their lower levels with silver rebounding to $36 after dipping below $35 earlier today. . 

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.58%
U.S. 10-year		3.20%

CLM11.NYM

...Crude Oil Jun 11

...102.05

... 2.25  (2.2%)

GCK11.CMX

Gold May 11

1,493.30

12.40 (0.84%)

Photo:   Bloomberg

Employers added more than 200K jobs in Apr for the 3rd straight month, the biggest hiring spree in 5 years.  The Labor Dept reported that the economy added 244K highlighted by private employers created 268K jobs.  Job gains were widespread: retailers, factories, financial companies, education & health care along with construction companies while federal, state & local govs were cutting.  However, the unemployment rate ticked up to 9% from 8.8% in Mar, the first increase since Nov.  The Labor Dept said job gains in Mar & Feb were even stronger than first reported.   All told, 13.7M were unemployed in Apr, still almost double since before the recession began in Dec 2007.  Including part-time workers who would rather be working full time, plus people who have given up looking altogether, the percentage of "underemployed" people rose to 15.9%, showing the harsh effects high unemployment still have on the economy & its recovery.

U.S. Payrolls Grew 244,000 in April; Unemployment at 9%

Bill Gross
Photo:   Bloomberg


Bill Gross, heads the world’s biggest mutual fund at Pacific Investment Management Co (PIMCO)., said US growth isn’t sufficient to support asset & labor markets nor enough to compensate for the nation’s growing debt level.  “The private economy is moving ahead as evidenced by today’s number but at a measured pace,” Gross said on “Bloomberg Surveillance.”  “Year- over-year real gross domestic product is holding at 2 percent, while nominal GDP is only 3.9 percent. That’s hardly sufficient to support both asset and labor markets in combination, nor is it sufficient to grow our way out of a steadily increasing debt to GDP ratio. It’s not enough.”  While employment growth will be probably be strong the next few months, investors will need to see whether that is sustainable once the Federal Reserve 's policy of quantitative easing ends in Jun, according to Gross.  The federal gov will debate on raising the debt ceiling for the Treasury.  By some measures, it needs to be raised within about 10 days, more liberal thinking is that it can be delayed until the end of next month (when QE2 ends).

Pimco’s Gross Says U.S. Economic Growth Isn’t Enough to Sustain Job Market


Some say the jobs report was a big surprise, but I saw guesses earlier this week calling for gains of around 200K.  The upward revision of prior months was well received by the markets.  But that is old information.  High priced gas (pushing $4 a gallon) will crimp gains.  MLPs had an unusually wild ride this week, especially when compared to REITs which suffered only a mild sell off.  Their trade association (NAPTP) issued a release that there was a proposal by the Treasury to tax pass-thru-entities (i.e. MLPs).  The House leadership rejected the idea, but nervousness in the markets was evident.  That eased today, as with commodities.

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