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.

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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.

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Markets mixed on Greek debt worries

Dow slipped 14, advancers barely ahead of decliners & NAZ fell 2.  Banks were weak, taking the Financial Index to its lowest level since mid Mar.

S&P 500 FINANCIALS INDEX

Value	215.65
Change	-1.04    (-0.5%)

The MLP index was flat at 371 as investors roemain concrened about the threat of changing the tax advantage status for MLPs while the REIT index was down a fraction in the 242s.  Junk bond funds were flattish but Treasuries rose.  The yield on the 10 year Treasury bond edged down to its lowest level this year.  Oil is trying to get back over $100 after a brutal sell-ff last week & gold remains strong under the circumstances.  Silver found buyers & is back at $36.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.55%
U.S. 10-year		3.15%

CLM11.NYM

Crude Oil Jun 11

99.80

2.61 (2.7%)

GCK11.CMX

Gold May 11

1,504.50

13.30 (0.9%)

S&P cut Greece’s credit rating 2 levels to B from BB- & said further reductions are possible as the risk of default rises.  Another cut would make Greece the lowest-rated country in Europe. The yield on Greek 10- year bonds rose 12 basis points to 15.6%, more than twice the level of a year ago when Greece accepted a bailout following a major crisis over the quality of its debts.  The decision came on the first business day after an unannounced Fri evening meeting of European finance ministers at which they agreed Greece needed more help to avoid a restructuring. Extended repayment terms & demands for collateral may be part of a new aid plan.  A year after Greece received a bailout, the nation’s debt is rising & it faces record borrowing costs.  Its 2-year bonds yield more than 25%, indicating investors are betting Greece won’t be able to return to markets as planned under the bailout next year, when it is due to sell €25-30B of bonds.  The drama plays on & its consequences are serious

Greek Debt Rating Cut to B by S&P on Restructuring Concerns

Photo:   Bloomberg

Strong sales of McDonald's McCafe drinks & breakfast items in Apr drove a key revenue measurement up 6% worldwide.  McDonald's (MCD), a Dow stock & Dividend Aristocrat, reported that in the US revenue at company-owned & franchised restaurants open at least 13 months climbed 4% in Apr.  Same store sales figure rose 6.5% for Europe & Asia/Pacific, the Middle East & Africa.  The stock gained $1.05.

McDonald’s April Same-Store Sales Exceed Estimates as Drinks Lure Diners

McDonald's Corporation (MCD)

Not much going on in the markets, but eyes are on Europe to see if the Greek debt drama will play out again this year.  Considering the turmoil in markets last week, especially commodities, there should have been a relief rally today, but there wasn't.  Back in the US, Congress has to debate raising the debt limit &  time is getting short.  Then it will work on the FY2012 budget which begins in 5 months.  Economic worries have not been priced into the stock market

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Stock advances are trimmed on Greek debt worries

Dow rose 54 (but 120 off its AM highs), advancers still had an advantage at 2-1 over decliners & NAZ was up 12.  Bank stocks had similar volatility, losing much of the AM advances.

S&P 500 FINANCIALS INDEX

Value	216.69
Change	0.72   (0.3%)

This was a rebound day for MLPs, but some of the enthusiasm was lost in the PM.  At its high, the index reached almost 373.  The REIT index pulled back 2 to the 242s.  Junk bond funds were higher.  Treasuries ended a little higher (buying on Greek debt worries) after falling in the AM trading.  The yield on the 10 year Treasury bond was down a smidgen to under 3.16%, a 5 month low.  Oil had its worst week (closing below the important $100 level) since it plunged in Dec 2008 from its record highs.  Silver fell, capping the biggest weekly plunge on mounting sales by investors following increases in margin requirements at the Comex. Gold rebounded, halting a 3-day slide.  The green line in the chart shows today's tading.

ALERIAN MLP INDEX

Value	371.00
Change	7.10    (1.9%)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.55%
U.S. 10-year		3.16%

CLM11.NYM

...Crude Oil Jun 11...

97.50

... 2.30  (2.3%)

Consumers used their credit cards more in Mar, marking only the 2nd increase in more than 2 years since the height of the financial crisis.  The Federal Reserve said consumers increased their borrowing $6B in Mar. Consumers borrowed more to finance car loans for the 8th straight month & a category of borrowing that includes credit card use, rose for only the 2nd time since Aug 2008  The 3% overall increase pushed consumer borrowing to an annual level of $2.43T, just a 1.3% higher level than a nearly 4-year low of $2.39T hit in Sep.  More frequent credit card purchases could be a sign that consumers are feeling more confident about the economy.  However, when Apr data is released, it may show more credit card purchases were used to buy gas at the pump.

Consumer Credit in U.S. Increased $6 Billion on Auto Loans, Card Purchases


Greece denied a report that said it's considering abandoning the € after rumor caused the currency to tumble late on Fri.  "The report on an imminent Greek exit from the eurozone, as well as being untrue, has been written with incomprehensible levity despite the fact that this has been repeatedly denied by the Greek gov, & the govs of other EU member stated," the Finance Ministry said.  The report added that the eurozone's finance ministers were holding a secret crisis meeting Fri night to discuss the issue.  "Such reports are a provocation, undermine efforts by Greece and the euro and serve speculative games," the ministry said.  The € dropped late Fri to $1.447 from $1.4530 late Thurs after trading at $1.49+ on Wed, its highest level in 18 months.  Eurozone officials are denying any meeting with the usual double talk statements.  Last May, the Greek debt crisis led to significant selling of by stocks in an otherwise upward rally during 2010.

Euro Tumbles Most in a Year After Report Greece May Drop Common Currency


Price for gas at the pump remained at $3.98½ yesterday.

Source:   AAA


Stocks trimmed gains & the € extended losses after a strong rise by stocks in the AM.  This has been one tough week for stocks & especially commodities.  Dow fell 170, similar to declines in early Mar & Apr.  The MLP index started the week at 390 & finished at 371, one of its worst week ever!  It suffered like all other securities but thoughts about changing the tax status of distributions brought on most of the selling.   Memories of the selling in stocks last May are vivid.  There are other problems to worry about in the US.  Raising the debt ceiling has to be dealt with shortly & then working on a budget for FY2012, QE2 is winding down in a few weeks & high priced gas will suck enegy out of the economic recovery.  May might not be a happy month for investors.

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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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