Markets slide on weak Chinese economic data

Dow lost 2, decliners just ahead of advancers & NAZ fell 16.  The Financial Index was down a fraction, but remained above 210.  The MLP index fell a fraction to the 396s & the REIT index was off 1+ (from its 2012 high) to the 269s.  Junk bond funds were a little lower as were Treasuries.  Oil & gold pulled back after strength in the last month.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.101%
U.S. 2-year	0.246%
U.S. 10-year	1.659%

CLV12.NYM

....Crude Oil Oct 12

...95.73

... 0.69

(0.7%)

GCU12.CMX

...Gold Sep 12

...1,731.40

... 6.10

(0.4%)

Get the latest daily market update below:

Photo:   Bloomberg

China imports unexpectedly fell & industrial output rose the least in 3 years, signaling more stimulus may be needed after the gov last week said it approved subway & road projects across the nation.  Inbound shipments slid 2.6% in Aug from a year earlier as exports rose 2.7%, the customs bureau said.  Production increased 8.9%, the National Bureau of Statistics said yesterday & inflation accelerated for the first time in 5 months.  The data underscore risks that full-year growth will slide to the lowest in more than 2 decades, undermining support for the Communist Party before a once-in-a-decade leadership transition due later this year.  The rebound in inflation, excess capacity in some industries & banks’ bad debt risks from past monetary easing highlight the potential cost of ramping up stimulus efforts.  They have financial problems even though they are far different than those faced in Europe.

China Output Growth Slows as Leadership Handover Looms


Greece's prime minister started a new negotiations with representatives of the its bailout creditors, who are demanding a fresh set of controversial austerity cuts to release the next batch of rescue loans the country desperately needs to stay afloat.  Antonis Samaras' meeting with officials from the troika of the EU, IMF & ECB comes a day ahead of his talks in Frankfurt with ECB president Mario Draghi.  Troika officials are "evaluating" Greece's proposals for the €11.5B ($14.6B) austerity package for 2013-14, Finance Minister Yannis Stournaras said.  "It's a tough discussion, because the measures are tough," he told journalists.  Asked whether Greece's creditors are insisting on job cuts in the bloated, inefficient civil service, Stournaras only commented that: "We are trying to convince them that our arguments are correct."  In talks with Stournaras yesterday, troika officials rejected part of the Greek proposals.  That leaves Samaras battling on 2 fronts:  He has to satisfy Greece's creditors, or lose the vital bailout funds, & must also keep the peace with his center-left coalition partners, who publicly reject some of the cutbacks that will cause further widespread pain.  Without their support, the gov formed in Jun would collapse, leaving the way open for the radical left main opposition to seize power.  The opposition wants Greece to tear up its bailout commitments, even at risk of its leaving the euro. The situation remains fragile.

Greek PM meets austerity inspectors on new cuts AP

Photo:   Bloomberg

Hewlett-Packard, the largest PC company in the world & a Dow stock, is planning to cut 2K more jobs than it had previously announced, as CEO Meg Whitman tries to turn the company around.  It said it will cut 29K jobs by Oct 2014, up from the 27K cuts announced in May.  There was no  explanation for the revision.  As before, it expects some of the job cuts to come through an early retirement program.  HPQ also expects to record charges of $3.7B, mainly for the job cuts, up from the May estimate of $3.5B.  Last month, HPQ posted the largest loss in its 73-year history after being hit by the shift in technology spending from PCs & printers towards cellphones & tablets.  The stock rose 15¢ but remains near an 8 year low.

HP Says Expands Job Cuts From Reorganizing to 29,000

Hewlett-Packard (HPQ)

Stocks are wavering, trying to figure out what to do next.  The Chinese data was glum.  Its problems of slow growth are difficult to deal with.  Then there's Greece which looks like it may not get a passing grade for more bailout money.  But much of the attention in NY is on the FOMC meeting at midweek.  There is a lot of agreement that the Federal Reserve (FED) will be compelled to do something, but nobody (including FED officials) is clear on what can be done.  Markets may drift sideways while waiting to hear from the FED & Dow should remain above 13K.

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Markets slide on nervousness over euro debts

Dow dropped 49, decliners over advancers 5-2 & NAZ fell 6 (a strong Apple stock is limiting the damage from selling in other stocks).  The Financial Index was off fractionally to 204.  The MLP index fell 1+ to the 393s & the REIT index was off 2 to the 262s.  Both have been flattish for a few months.  Junk bond funds were mixed & Treasuries rose as stocks.were sold.  Oil was little changed after the Energy Dept said stockpiles fell more than expected last week.  Gold also did little although it is at highs since early May.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.101%
U.S. 2-year	0.279%
U.S. 10-year	1.748%

CLU12.NYM

...Crude Oil Sep 12

...96.40

... 0.28

(0.3%)

GCQ12.CMX

...Gold Aug 12

....1,637.60

.... 2.30

(0.1%)

Get the latest daily market update below:

Photo:   Bloomberg

People’s Bank of China Governor Zhou Xiaochuan said adjustments to interest rates & banks’ reserve requirements are still possible after the central bank stepped up temporary cash injections this month.  “Use of either tool can’t be ruled out,” Zhou said.  But he didn’t elaborate.  The remarks leave the door open for further monetary stimulus after the PBOC added 220B yuan ($34.6B) to the banking system via reverse-repurchase agreements yesterday, tempering speculation the reserve-requirement ratio will be reduced.  China lowered interest rates in Jun & Jul for the first time since 2008 & has made 3 cuts in the ratio starting in Nov as economic growth slowed.  Chinese Premier Wen Jiabao said last week that easing inflation allows more room to adjust monetary policy & positive signs are emerging in the economy, expressing confidence after Jul data showed a further slowdown in growth.  State television reported Wen as saying there’s “growing room for monetary policy operation.”  Stay tuned, what China does affects the global economy.

Zhou Signals China Rate Cut Possible After Injecting Cas


Greek Prime Minister  Samaras called for "more time" to carry out policy changes to deal with his nation's debt crisis before receiving Luxembourg Prime Minister Juncker today.  What a surprise!!  "All we want is a little more air to breathe to get the economy going and increase government revenue," Samaras said.  "More time doesn't necessarily mean more money."  Limited concessions to Greece are possible as long as they are made within the framework of the 2nd aid program for the over-indebted country, a spokesman for Chancellor Angela Merkel's Christian Democratic Union, said yesterday.  Almost 3 years after the crisis started in Greece, the country remains at the heart of the turmoil even as contagion spreads to Italy & Spain, prompting ECB chief Mario Draghi to announce proposals to re-enter the bond market to help lower gov borrowing costs.  The € rose to 6-week highs yesterday before euro region leaders meet to discuss Greece's fiscal adjustment program amid optimism the European debt crisis is being contained.  French President Hollande is due in Berlin tomorrow for talks on the crisis with Merkel.  The Greek drama plays on.

Greece Asks for More Time as Juncker Meets Samaras in Athens

Photo:   Bloomberg

Dell cut this year’s profit forecast as revenue from corp customers fails to counter shrinking personal computer sales.  The company forecast Q3 revenue that missed estimates & cut its profit outlook by 20%, as competition from the iPad & an anemic global economic recovery drags down PC demand.  DELL’s strategy of using acquisitions to add software, storage & networking equipment has been slow to offset declining sales of desktops & laptops, which account for half of revenue.  Business customers are taking “a wait-and-see approach” on forthcoming tablets based on Windows 8, CFO Brian Gladden said.  Revenue in the current qtr that ends in Oct will decline 2-5% from the prior qtr.  That’s the equivalent of $13.8- $14.2B, less than the $14.9B average estimate.  Fiscal 2013 EPS (excluding some items) will be at least $1.70.  That’s less than the company’s Feb projection of at least $2.13, & below the average $1.90 estimate. The stock slumped 86¢.

Dell Forecast Misses Estimates as PC Sales Continue Slump

Dell (DELL)

This is another drab day of trading in late Aug.  Traditionally, little happens in these days.  The market's main attention is looking east towards Europe & all those meetings.  But this is the talking phase when little is expected.  With today's decline, Dow needs 250 to reach a new 2012 high.  News from Europe can give it a lift along with the announcement by Big Ben on Fri.

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Markets fluctuate, looking for direction

Dow slid 7, advancers ahead of decliners 3-2 & NAZ gained 13.  The Financial Index was up a fraction in the 201s. The MLP index was up 1+ to 393 & the REIT index rose 1 to the 263s.  Junk bond funds were mixed but Treasuries sank, with the yield on the 10 year Treasury soaring 8 basis points to 1.8% (a 3 month high).  Oil climbed to a 3 month high after the Energy Dept reported a decline in stockpiles & Saudi Arabia called on its citizens to leave Lebanon, adding to tension in the Middle East.  Gold rose a modest $5. 

AMJ (Alerian MLP Index tracking fund)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.081%
U.S. 2-year	0.281%
U.S. 10-year	1.802%

CLU12.NYM

...Crude Oil Sep 12

....94.20

... 0.77  (0.8%)

Chinese Premier Jiabao said easing inflation allows more room to adjust monetary policy & positive signs are emerging in the economy, expressing confidence after Jul data showed a further slowdown in growth.  “We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets,” Wen said.  He added that downward pressure on the economy remained “relatively large,” according to state radio, & state television reported him as saying there’s “growing room for monetary policy operation.”  The reports didn’t specify which targets China will meet, including the 7.5% goal for GDP growth set in Mar.  Expansion was 7.8% in H1, & Deutsche Bank last week lowered its Q3 forecast to 7.5% from 7.9%.  “In the recent months, especially since July, there are some positive changes in the economy,” said Wen, cited by state television.  Domestic demand is showing greater effect in supporting economic growth, industrial output in eastern Chinese regions is picking up & China’s job market remains stable, he said.

China Can Meet Growth Target on Positive Signs, Wen Says

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Photo:   Yahoo

A slowing global economy & the effects of a prolonged US drought caught up to Deere in its fiscal Q3, as net income rose 11% but fell well short of expectations.  DE cut its revenue prediction for the year.  The ongoing drought in the Midwest, a stronger dollar & costs to introduce new products hurt the world's largest producer of agricultural equipment.  EPS was $1.98, compared with $1.69 last year.  Analysts were expecting $2.31.  Revenue rose 15% to $9.59B, slightly under analysts' prediction of $9.61B.  Sales of tractors & other farm equipment rose 14% to $7.27B.  Construction & forestry equipment sales jumped 23% to $1.66B.  However, growth has slowed.  In last year's Q3, sales of agricultural & turf equipment rose 22% & construction & forestry equipment revenue leaped 34%. The financial services segment sales rose 3% to $565M   It expects sales of $3.1B for the year ending Oct, down from $3.35B forecast 3 months ago. Analysts estimate $3.4B.  The stocks sank $5.14 (6%).

Deere Cuts Profit Forecast as Equipment Sales Slow in Asia, Latin America

Deere (DE)

Intl demand for US financial assets fell in Jun from the previous month’s inflows, as investors saw Europe's leaders moving toward a resolution of their financial crisis.  Net buying of long-term equities, notes & bonds totaled $9.3B during the month, a drop from net purchases of $55.9B in May, according to the Treasury.  Expectations were for net buying of $40B.  Including short-term securities such as stock swaps, foreigners bought a net $16.7B in Jun, compared with net purchases of $121B in the previous month.  Net foreign purchases of Treasuries fell to $32.4B from $45.9B in the previous month.  Yields rose from record lows at the start of the month, backed up during the month only to decline again in the last week of Jun.  US assets have been attractive to investors this year as EU leaders face a worsening debt crisis.  The euro- area economy shrank in Q2 & tougher budget cuts forced at least 6 nations into recessions.  GDP in the 17-nation currency bloc fell 0.2% from Q1, when it stagnated, according to EU data.

International Demand for U.S. Assets Declined in June


Once again, there was little movement in the stock markets.  The earnings announcement from DE could be telling.  It felt the effect of a slowing global economy & reduced its guidance.  But many traders are away & there should be only modest changes in stock prices.  Dow hangs in there above 13K, but not quite high enough to break thru for a new 2012 high.  That's 6 months of flattish performance.

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Markets slip lower while waiting FOMC decision tomorrow

Dow lost 64 (closing at the lows), decliners ahead of advancers 5-4 & NAZ was off 6 even though Apple (AAPL) shot up 15.  The Financial Index remained fractonally lower in the 197s.  The MLP index was off 1+ to the 393s & the REIT index fell a fraction in the 267s.  Junk bond funds were mixed near their yearly highs & Treasuries edged higher.  Oil tumbled below $90, giving up some its recent gains & gold pulled back modestly.

AMJ (Alerian MLP Index tracking fund)

Click below for the latest market update:

CLU12.NYM

Crude Oil Sep 12

88.07

1.71 (1.9%)

Treasury yields:

U.S. 3-month	0.101%
U.S. 2-year	0.215%
U.S. 10-year	1.495%

China will step up policy fine-tuning in H2 to support economic growth, although there are signs of stabilization in the economy, the official Xinhua news agency quoted Premier Wen Jiabao as saying.  Wen affirmed the gov's resolve to maintain its long-standing controls on the property sector.  The gov will take steps to improve the domestic investment environment & diversify its export market.  China would also increase fiscal & monetary policy support to the economy in H2.  The comments were made with business leaders & academics, including former World Bank chief economist Justin Lin.  These comments are broadly in line with official pro-growth statements made in the wake of H1 GDP data which showed the economy in Q2 had expanded at its slowest pace in more than 3 years.  The Chinese economy needs a little extra juice.

China Reiterates Growth Chief Priority

Photo:   Bloomberg

Pfizer, a Dow stock, posted a 25% jump in Q2 net income due to aggressive cost cutting & lower restructuring & other charges, shaking off the expected plunge in revenue from generic competition to cholesterol fighter Lipitor, the world's top-selling drug.  EPS was 43¢, up from 33¢ last year.  Excluding $2.1B in charges before taxes, adjusted EPS was 62¢, 8¢ above the forecast.  Charges included $1.2B for asset writedowns & $474M in legal charges, mainly for litigation over its hormone replacement medicines.  Revenue totaled $15.06B, down 9% but above expectations of $14.93B.  Generic competition reduced sales by about $1.8B, mainly because of lower Lipitor sales (which had peak annual global sales of $13B).  Early sales losses were slowed by the unprecedented strategy to keep patients on its brand as long as possible.  In Q2, US Lipitor sales nosedived to $296M from $1.4B a year ago & global sales slumped 53%to $1.2B.  Still, "We kept three times more (market) share than has traditionally occurred" after a big drug's patent expired, CEO Ian Read said.  "We added hundreds of millions of dollars of profitability to the company, as well as enabling patients to stay on the brand."  Newer drugs, particularly pain reliever Lyrica and Prevnar 13 saw sales jump just over 10%.  Total pharmaceutical sales fell 10%, to $13.1B.  Sales of veterinary medicines edged up 3% to $1.09B & sales of consumer health care products, such as ChapStick & Centrum vitamins, increased 8% to $768M.  PFE expects action from the FDA soon on 2 experimental drugs that have run into trouble.  PFE will file in mid-Aug to sell as much as 20% of its animal-health unit in an IPO.  The stock rose 38¢ & has a good chart over the last year.

Pfizer Plans August IPO Filing as Profits Top Estimates

Pfizer (PFE)

Enbridge Energy Partners, a major MLP, Q2 earnings fell 28% on lower selling prices for natural gas liquids.  Results were below expectations for adjusted earnings & revenue.  Earnings were 33¢ per unit compared with 51¢ a year earlier.  Excluding items such as hedging gains, it would have earned 23¢ per unit.  The forecast was for earnings of 31¢ per unit.  Revenue plunged 35% to $1.55B from $2.37B last year ago & well below the $1.77B forecast.  The recent price drop in natural gas liquids was partly offset by higher pipeline revenue.  EEP also announced that it will increase the quarterly distribution to 54.35¢ per unit, a 2.1% increase that was in line with its goal of raising annual distributions by 2-5%.  EEP also has a companion corp, EEQ, which tracks the price of the units & pays a stock div based on the distribution.  The units rose 79¢.

Enbridge 2Q profit, sales fall on lower gas prices AP

Enbridge Energy Partners (EEP)

This was another listless day as markets wait for the results of the Federal Reserve meeting tomorrow.  The following day, ECB will make a much bigger announcement.  Everybody is guessing what actions it can take to ease the euro debt mess.  Another round of bond buying is expected.  But it has just so much money, not to mention, when it ends, market forces will probably drag bond prices down, forcing yields up.  Dow gained 128 in Jul & remains above 13K, important for those watching technical signs.

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