Higher markets on a technical bounce

Dow rose 38, advancers ahead of decliners 2-1  & NAZ was up 15.  Bank stocks keep lumbering along with the Financial Index at 5 month lows.

S&P 500 FINANCIALS INDEX

Value	208.35
Change	0.11   (0.1%)

While the MLP index was up today, it has really been treading water for 5 days following 2 days of recovery.  The REIT index was up 1+ to the 242s & is where it was 3 weeks ago.  Junk bond funds had a good day with many up 1% to new multi year highs & correspondingly low yields.  Treasury yields continue low as the yield on the 10 Year bond is near the important 3.1% resistance level.  Strength in treasuries is from unsettled financial conditions in Europe.  Oil climbed to a 2-week high after a report showed that US inventories of diesel & heating oil tumbled to the lowest level in more than 2 years. Gold rose for a 4th straight session, the longest rally in 3 weeks, as Europe's debt crisis increased investor demand for the precious metal.

ALERIAN MLP INDEX

Value	365.08
Change	2.59    (0.7%)

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.539%
U.S. 10-year	3.130%

CLN11.NYM

...Crude Oil Jul 11

...101.25

... 1.66

(1.7%)

Photo:   Bloomberg

Freescale Semiconductor Holdings is selling shares at a 47% discount to what private equity owners paid after cutting the price range in its IPO by 17%. The chipmaker is offering 43.5M shares for $18-$20 each, after lowering the range from $22-$24.  A $19 midpoint would value the unprofitable company at $4.6B, which compares with an average price of $36 that investors paid.  The private equity firms plan to raise upwards of $870M to help pay down Freescale’s $7.5B in debt accumulated in a 2006 LBO. Even though internet companies LinkedIn (LNKD) & Yandex (YNDX) surged after their IPOs, Freescale joined Spirit Airlines in reducing the size of its IPO today.  At the original $23 midpoint, Freescale would have been valued at 1.2X last year’s sales, less than the average 1.9X for the analog-chip industry.  Texas Instrument (TXN), the biggest analog-chip maker, trades at a multiple of 2.8X.  The IPO market is behaving like the wild west, at least all are not treated the same.

Freescale Seeks IPO at 47% Discount to Buyout Price After Stock-Price Cut

Photo:  Bloomberg

Spirit Airlines, the budget carrier, cut the amount of money it’s seeking in its IPO by 37%. The airline could raise $202M by selling 15.6M shares for $12 -$13, down from a previous goal of 20M shares at $14-$16.  Its symbol on the NAZ will be SAVE.

Spirit Airlines Pares IPO Size 37% to 15.6 Million Shares as Price Is Cut

Photo:   Bloomberg

Costco' s net income rose 6% in its fiscal Q3, with growing membership numbers pushing sales both at home & abroad.   EPS was 73¢ for the qtr ended May 8, up from 68¢ last year.  The current results included an inventory charge of 7¢.  Analysts expected 77¢.  Revenue climbed 16% to $20.6B, just edging out expectations.  Results included sales from its 50% owned Mexico joint venture, which accounted for 3 percentage points.  Sales at stores open at least a year increased 12%, with the figure up 10% in the US & 18% outside the US.  Removing the impact of rising gas prices & strengthening foreign currencies, sales at stores open at least a year gained 7%, climbing 6% in the US & 11% outside the US.  The stock was 1.03 lower.

Costco Third-Quarter Profit Trails Estimates as Costs Climb; Shares Fall

Costco Wholesale Corporation (COST)

Vice President Joe Biden set a goal of at least $1T in budget cuts with congressional leaders on the federal debt.  But Medicare came up & Dems ruled out concessions without agreement to raise tax revenue which has been rejected by Reps so far.  House Majority Leader Eric Cantor said he is “confident we can get to over $1 trillion in immediate cuts,” though he also said that “tax increases cannot pass the House.”  The Senate is preparing to vote this week on a House Republican budget crafted by Rep Paul Ryan that would privatize Medicare for people who turn 65 starting in 2022.  At least they're working on the massive budget cuts which need to be made.

Biden Aims for $1 Trillion Budget Cuts


The average price for gas is stabilizing, down from $3.99 a couple of weeks ago.  But with oil over $100, this may be the limit on how far down it is going.  A report today showed that gas consumption was cut 2% with these rising prices.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.814	$3.958	$4.085	$4.041	$3.270	$4.303
Yesterday Avg.	$3.828	$3.972	$4.099	$4.049	$3.281	$4.317
Week Ago Avg.	$3.926	$4.068	$4.194	$4.105	$3.306	$4.351
Month Ago Avg.	$3.863	$4.004	$4.133	$4.141	$3.263	$4.295
Year Ago Avg.	$2.780	$2.952	$3.059	$3.040	$2.225	$2.928

Source:   AAA


Stocks keep drifting along on light volume, looking for direction.  While the Dow was up today, it's down over 400 in May as the European sovereign debt crisis shows no sign of resolution.  The IMF needs to elect a new leader.  French Finance Minister Christine Lagarde wants the job & says she should be judged on the basis of experience rather than nationality.  But Asia countries are pushing for one of theirs to take over.  Meanwhile Greece is talking about pulling out of the Eurozone, not sure what good that will do.  At least DC politicos are working on the monumental financial problems they face.  The remainder of the week should bring modest price changes on holiday like trading.

Dow Industrials (INDU)

Get your favorite symbols' Trend Analysis TODAY!  

Click Here

Find out what's inside Trend TV  

Click Here

Waffling but up Wednesday

Stocks had a difficult time making up their minds which way to go. Except for a brief surge & then pullback around midday, they hugged the flat line. By day's end, Dow was up 30, advancers over decliners 3-2 & NAZ was up a more impressive 22. Volume on NYSE was 1.6B, a little higher than on many other recent days. Banks continue to roar ahead. Bank of America (BAC) was up 1 to 33½, nearing double its low just a week ago. US Bancorp (USB) another one I like went from 20 to 30 in a week. Today the outstanding recovery performance by financials was overwhelmed by oil. Oil was down 4¼ at 124, a price last seen in June when it was going up. I've given up trying to come up with brilliant reasons for wild swings. It's easier to accept them as "normal" moves with little reason behind them. Of course, slowing economies in the US & to some extent around the world might be in back of the minds of traders. We are also going into main part of hurricane season, introducing more unknowns going forward.

The FED released their beige book report which told us what we already know. The economy is struggling, they have to balance the needs of raising interest rates to fight inflation vs lowering rates to help the economy. Amazon (AMZN) just reported strong sales & earnings for Q2. They were up 2.57 during the day but little changed after hours awaiting the conference call which will clean up details. Costco (COST) had a very gloomy report greeted with a big sell-off, down 8.57. Congress should be finalizing their plans today aimed at helping FNM/FRE, the pres will sign their bill. Stay tuned!

Retailers lead big market gains

This was one of those days all you had to do to find a winner was throw a dart. Dow was up 213, advancers over decliners almost 4-1 & NAZ was up 47. What was perceived as good retail sales numbers for May brought out buyers in droves. The sales figures were better than expected (beating lowered expectations), but not exceptional. Stores with higher priced merchandise did not do well, instead the discount types (like Wal-Mart) led the way up. Wal-Mart, (WMT), Macys (M) & COSTCO (COST) helped the lead the charge, each gaining 4%. Meanwhile, oil is back in the news. Oil rose 5.49 to 127.79 on a weaker dollar. Oil bears can not take command of oil!

Earlier in the day, a FED official said banks continue to face tough times. He predicted there will be more need for banks to raise added capital which means divs may get punished. An analyst from Goldman Sachs said Wachovia (WB) will halve the div. Wachovia was even as was Bank of America (BAC) on this strong rally day. Enjoy today's rally!