Mixed markets on mixed earnings and economic data

Dow fell 22, decliners barely ahead of advancers & NAZ was down 13.  Bank stocks also had a restful day.

S&P 500 Financials Sector Index

Value	189.62
Change	-1.72    (-0.9%)

MLPs took a breather after yesterday's record run & the REIT index was up 1+ to the 246s.  Junk bond funds inched higher & Treasuries had a good day.  Oil rose on hopes that low interest rates will drive more demand for oil.  Gold shot up 22, a 6 week high.

Alerian MLP Index

Value	400.74
Change	-0.83    (-0.2%)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.211%
U.S. 10-year	1.930%

CLH12.NYM

Crude Oil Mar 12

99.75 2:56PM EST

0.35 (0.35%)

Photo:   Bloomberg

Durable goods orders climbed more than forecast in Dec, pointing to a rebound in business investment that could help support the US economy in early 2012.  Bookings for long-lasting goods advanced 3% after rising 4.3% in Nov, the biggest back-to-back gains in almost a year, according to the Commerce Dept.  Growing demand for raw materials from emerging markets & the need to replenish depleted inventories & update equipment are swelling order backlogs.  Combined with fewer layoffs & added confidence, the gains may help shield the US from a slowdown in Europe caused by the region’s debt crisis.  Orders climbed 10 % last year after a 15.5% gain in 2010.  

Durable Goods Orders in U.S. Climb 3%, Stronger Than Economists Estimated

• 

Photo:   Yahoo

3M, a Dow stock & Dividend Aristocrat, profit inched up 3% in Q4 as more demand for products for the home, office & automobile offset declining sales of high-tech products.  Growth in developing countries, where MMM now derives more than half of its sales, is slowing.  But MMM believes rapid growth in China & other emerging nations will resume in H2.   MMM is maintaining its current profit forecast for 2012 for EPS of $6.25-$6.50.  Analysts are predicting EPS of $6.33.  Q4 EPS was $1.35 compared with $1.28 in the prior year.  Revenue rose 6% to $7.09B.  The stock gained 1.10.

3M posts small profit increase in 4Q AP

3M Company (MMM)

Photo:   Bloomberg

AT&T, another Dow stock & Dividend Aristocrat, predicted 2012 earnings that trailed expectations as record demand for smartphones such as the iPhone drive up subsidy costs, projecting “mid-single-digit or better earnings growth” for 2012.  Analysts are predicting 11%.  ATT reported a Q4 loss of $6.7B because of a pretax charge of about $4B for the failed takeover of T-Mobile & expenses for revaluing benefit plans & other assets.  Activations of the iPhone soared to 7.6M in Q4, boosted by the new 4S model & a previous version offered for free with a contract.  ATT gained 717K subscribers on monthly contracts, more than the 574K projected.  Sales rose 3.6% to $32.5B.  The net loss was $1.12 a share, compared with a profit of 18¢ in the prior year.  EPS, excluding some items, fell to 42¢, under the 43¢ predicted.  Revenue at the wireless business increased 10% to $16.7B, boosted by web browsing &-mailing by smartphone users.  Smartphone subsidies helped reduce operating profit to 15.2% of sales from 22.9%.  Making money in the phone business is getting tougher.  The stock was off 76¢,

AT&T Earnings Forecast Falls Short as IPhone Demand Boosts Subsidy Costs

AT&T Inc. (T)

This was another uneventful day in the markets, but Jan has been a good month.  Dow is up 270 this week & over 500 in Jan.  Meanwhile, long term Treasuries & gold (traditional safe havens) are also having a good run in Jan.  Back to reality, debt relief talks were restarted in Greece.  Duhh!!  I think we heard that a week ago (or was it a month ago).  MLPs took a day off after their rise to new record highs.  The index is up 13 in Jan, not bad.  New record highs bring correspondingly lower yields, the index yield is below 6%.  However, with a low interest rate environment projected to last for years, maybe "only 6%" will be less of a problem.

Dow Industrials

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Markets tumble on mediocre earnings and European debt worries

Dow dropped 122, decliners over advancers 4-1 & NAZ lost 32.  Bank stocks led the way lower although the Financial Index is overbought in Oct.

S&P 500 Financials Sector Index

Value	176.76
Change	-3.66     (-2.0%)

The MLP index fell 1½ to the 367s & the REIT index was off 3+ to the 222s.  But the charts show both are having an outstanding month.  Junk bond funds were a little lower & Treasuries rose on increased worries over European debt issues.  Gold also benefited from those thoughts.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.005%
U.S. 2-year	0.275%
U.S. 10-year	2.184%

CLZ11.NYM

....Crude Oil Dec 11

...93.51

..... 2.24

(2.5%)

GCV11.CMX

...Gold Oct 11

......1,667.00

... 15.50

(0.9%)

Get the latest daily market update  below:

Photo:   Bloomberg

Consumer confidence unexpectedly dropped to its lowest level in 2½ years in Oct as consumers fretted about job & income prospects.  The Conference Board said its index of consumer attitudes fell to 39.8 from a upwardly revised 46.4 the month before, the lowest level since Mar 2009 (when a dreary stock market was weighing on the minds the public).  Expectations were for the index to rise to 46.0.  The present situation index slipped to 26.3 from 33.3, while the expectations index declined to 48.7 from 55.1.  The expectations gauge was also at its lowest since Mar 2009.  "Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased," Lynn Franco, director of the Conference Board Consumer Research Center, said.  Consumers' view of the labor market was mixed. The number who said they found "jobs plentiful" fell to 3.4% from 5.6%.  However, the "jobs hard to get" category eased to 47.1% from 49.4%. Later this week, when GDP is released, it should show growth at a 2½% rate.  While that's not recession data, it feels like one to many.

Consumer Confidence Falls to Two-Year Low




Photo:   Yahoo

3M, a Dow stock & Dividend Aristocrat, lowered its earnings expectations for the year on slowing imports from overseas, especially in products like LCD TVs & other electronics from Asia that drive its business.  MMM expects EPS of $5.85-5.95 compared with $6.10-6.25 in previously guidance.  Core sales are expected to grow 3-4%, compared with a previous forecast of 6-7½% growth. 3M issued the outlook as it reported Q3 EPS fell to $1.52 from $1.53 last year.  Revenue rose 10% to $7.5M, mostly driven by acquisitions & gains in foreign exchange.  Analysts expected $1.61 on revenue of $7.8B.  A number of its customers reduced inventories during Q3, expecting slowing demand.  The stock slumped $3.92 (5%).

• 3M lowers view on slowing growth- AP

3M Company (MMM)

Photo:   Bloomberg


UPS reported higher quarterly profits as increased pricing, cost cutting & technology improvements helped compensate for domestic shipping volume dulled by a sluggish economy.  Iit affirmed its outlook for record 2011 results.  The US economy appears to have stabilized & is growing slowly, after concern about a possible double-dip recession stifled consumer demand earlier this year, UPS said.  The final 2 weeks before Christmas could have a meaningful effect on Q4 results if consumer demand picks up & retailers low on inventory need fast shipment of goods, CEO Scott Davis said.  "Over the last month or so, we are starting to see, I could say, better economic numbers, so there is more optimism out there, and that could turn things around," Davis said. "We are still expecting a slow-growth economy, but I don't think it is as negative as people were thinking two and three months ago."  UPS has forecast record EPS of $4.15-4.40 this year as it cut costs & raised shipping rates in the face of a slowly expanding global economy.  UPS & FedEx (FDX) are considered economic bellwethers because of the sheer volume of packages they handle.  The value of packages handled by UPS trucks & planes each year is equivalent to about 6% of US GDP & 2% of global GDP.  Domestic shipping volume averaged 12.74M packages a day, little changed from 12.73M last year.  Operating margins improved on higher yields, as well as on more efficient networks.  Intl shipping volume averaged 2.34M a day, up from 2.24M.  Revenue in this segment rose more than 14%, twice the rate in the domestic segment, driven by 6.5% growth in export volume.  Q3 EPS rose to $1.06 from 99¢ a year earlier, slightly ahead of expectations for $1.05.  Revenue rose 18% to $13.17B.  The stock fell 1.72 (2%).

UPS Profit Tops Estimates on Higher Rates

United Parcel Service, Inc. (UPS)

A meeting of European finance ministers was cancelled,adding nervousness to the fragile situation with sovereign debts. This month the stock market has soared largely on hopes that these guys would solve complicated debt issues with magic tricks.  But the issues are complicated & it will take a lot to get this divided group to agree to major solutions. The earnings picture is a mixed bag, although some view it in a more positive light.  The US economy is sputtering & that is shown in many of the reports from the multi-nationals.  After rising 1K in Oct, Dow is entitled to a rest.  Today's sell off may be nothing more than that.  But I see the undercurrent as being darker. 

Dow Industrials (INDU)

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Mixed earnings is confusing the markets

Uninspiring economic news & earnings data is taking stocks lower.  Dow dropped 24, advancers ahead of decliners by 10% & NAZ fell 4. Bank stocks are doling very little.


S&P 500 FINANCIALS INDEX

Value	196.06
Change	-0.18  (-0.1%)

The MLP index fell 1 to the 349s & the REIT index dropped ½ in the 220s.  Junk bond funds were a little higher as were Treasuries.  The yield on the 10 year Treasury bond fell 3 basis points off its interim high to 2.68%

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.38%
U.S. 10-year		2.67%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil rose after initial jobless claims declined to a 3-month low, signaling increased fuel demand, & the dollar dropped against the €.  Gold gained on a weaker dollar

CLZ10.NYM

...Crude Oil Dec 10

...82.15

....... 0.21

(0.3%)

GCX10.CMX

...Gold Nov 10

......1,332.20

.... 10.00

(0.8%)

Gold Super Cycle Link! Click Here

Photo:  Yahoo


The Labor Dept reported that initial claims for jobless benefits dropped 21K to 434K last week, the 2nd-lowest number this year. But this figure was favorably influenced by the season adjustment.  The only time it was lower was during the Jul 10 week & that week was affected by the Independence Day holiday when unemployment offices were closed.  Claims have fluctuated around 450K for most of this year & have fallen below that level 7 times after which they rose & haven't been able to remain below 450K for longer than 2 weeks.  The 4-week average fell 5K to 453K, the lowest level since Jul 24.  Economists expect that the Commerce Dept on Fri will report slightly better GDP growth of 2% for Q3, but that's still sluggish after a deep recession.  The economy needs to grow by at least 5% annually to bring down the unemployment rate by a percentage point.  This data is slightly encouraging but the graphs remain dreary.

Jobless Claims in U.S. Unexpectedly Drop To Three-Month Low

Jobless claims  --  1 year



# continuing to receive benefits - 1 year






Royal Dutch Shell (RDS.A), Europe's largest oil company, reported Q3 net profit rose 6.5% on increased production & higher oil prices more than offset a billion dollar charge on the value of oil sand assets in Canada.  Net profit of $3.46B was up from $3.25B last year as revenues rose to $90.7B from $75B.  "Our results have rebounded substantially from year-ago levels, with improved earnings and cash flow, underpinned by a 5 percent increase in oil and gas production," said Chief Executive Peter Voser. "This is a better performance from Shell, achieved despite continued difficult industry conditions in refining and natural gas markets."  Shell said that after stripping out one-time items in both years, earnings would have risen 88% to $4.93B from $2.62B.  The stock rose 66¢ (1%) but has not participated in the stock market rally over the last 2 years.

Shell Reports Increase in Profit as Oil Prices Climb



Royal Dutch Shell   ---  2 years




ExxonMobil (XOM), a Dow stock & Dividend Aristocrat, had a better than expected Q3 as profits grew 55%.  XOM earned $7.35B, or $1.44 a share, compared with a profit of $4.73B (98¢) last year, beating expectations of 1.38.  But revenue jumped 16% to $95.3B, below $98.1B forecasted.  “Despite continuing economic uncertainty, we had strong quarterly results and continued to advance our robust investment opportunities,” CEO Rex Tillerson said.  The stock gained 66¢.

Exxon 3Q Profit Jumps 55%at Fox Business

ExxonMobil   ---   2 years




3M (MMM), a Dow stock & Dividend Aristocrat, reported record Q3 EPS of $1.53 (up 11%) on sales of $6.9B (up 13%).  Operating income was a Q3 record of $1.6B & operating margins were 22.9%.  Sales in emerging markets grew by 25% & now comprise 34% of global sales. Sales grew by 48% in Korea, 39% in India, 32% in Russia, 31% in the China/Hong Kong region & 25% in Brazil.  “The 3M team posted yet another outstanding quarter, with 11 percent organic volume growth and 23 percent margins,” said George W. Buckley, 3M CEO. “We drove growth throughout the portfolio, with more than 80 percent of our operating divisions posting year-on-year sales increases. New products are fueling market share gains and filling adjacent spaces everywhere, but particularly in emerging markets, the fastest-growing area of our company. My thanks to the many 3Mers around the world who continue to make this happen.”  3M expects that full-year organic sales volume growth will be 13.5-14% & operating margins will be approximately 22.5% in 2010.  Full-year EPS are expected at (excluding the Medicare Part D-related charge recorded in Q1), $5.70-5.74. But the high end of this range is down 6¢ per share versus prior expectations, due solely to anticipated earnings dilution related to the company’s Oct 2010 purchases of Attenti Holdings & Arizant along with a controlling interest in Cogent. GAAP earnings are expected to be $5.59-5.63 for 2010. The reduction in EPS guidance cost the stock dearly, down 4.85 (5%) but has a nice run off its lows 2 years ago.

3M Achieves Record Sales of $6.9 Billion on 11 Percent Organic Volume Growth


3M   ---   2 years




Modestly favorable jobless figures should have been a more positive influence on the markets.  But mixed messages from company earnings is hurting.  The Dow chart below is showing that it's stalling out at the yearly highs of 11.2K.  Q3 GDP data may not bring back the bulls tomorrow.

Dow Jones Industrials   ---   2 weeks

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