Markets trim morning losses

Stocks recovered in the PM with Dow down only 14 (80 above its lows), decliners ahead of advancers 3-2 & NAZ off a bigger 25 from a weak tech sector.  Bank stocks also recovered, limiting the loss to 1 for the Financial Index from Fri's interim high of 200.

The MLP index fell 1 to the 408s while the REIT index rose 2 to the 246s (near its yearly highs).  Junk bond funds slipped as did Treasuries.  Oil edged higher as Obama & Israeli PM Netanyahu met to discuss how to confront Iran over its nuclear program & after China cut its economic growth target.  Gold slipped $3.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month	0.061%
U.S. 2-year	0.291%
U.S. 10-year	1.993%

CLJ12.NYM

...Crude Oil Apr 12

...106.82

... 0.12

(0.1%)

Christine Lagarde from the IMF & Greek Finance Minister Evangelos
Photo:   Bloomberg

European leaders are facing the first test of their attempt to turn the page on the 2-year debt crisis as the private creditors decide whether to sign off on the biggest sovereign- debt restructuring in history. The success of the €106B swap, confirmed on the eve of last week’s European summit, depends on how many investors agree to the writedown by the Mar 8 deadline.  12 banks & investors negotiated the swap with the gov, saying today that they planned to take up the offer.  However, one steering-committee member has still to back the offer.  Germany's DSW investor protection group meanwhile advised private-sector bondholders to reject the offer.  The Greek gov has set a 75% participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5% of their principal & exchange their remaining holdings for new Greek bonds & notes from the European Financial Stability Facility.  Euro- area finance ministers last week authorized the new bonds for the swap.  Can you spell "touchy?"

Venizelos: Greek Debt Swap Best, Only Offer


Enbridge Inc, general manager for Enbridge Partners (EEP) - a major MLP, plans to resume crude deliveries this week on its pipeline in Illinois that was shut over the weekend, allowing supply to reach Chicago-area refineries.  Line 14 may start operating on Wed & line 64 the following day.  Line 6A, also closed by a fire at an EEP pumping station, has already restarted.  Deliveries were halted on line 14/64 after 2 vehicles collided, starting a fire at the pumping station near New Lenox, Illinois, 36 miles southwest of Chicago.  2 people were killed & several others injured in the crash.  ENB fell 15¢.

Enbridge Shuts Illinois Crude Pipeline After Fire; Oil Prices May Advance

Enbridge Inc (ENB)

Gas prices keep shooting up (according to AAA).  The $3.77 average price will go higher this week.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.767	$3.915	$4.046	$4.083	$3.201	$4.213
Yesterday Avg.	$3.764	$3.910	$4.041	$4.078	$3.199	$4.210
Week Ago Avg.	$3.698	$3.843	$3.974	$4.030	$3.166	$4.166
Month Ago Avg.	$3.475	$3.602	$3.738	$3.878	$3.088	$4.064
Year Ago Avg.	$3.503	$3.634	$3.763	$3.863	$2.929	$3.854

Sellers failed to take control control, largely on a lack of significant news one way or the other.  Dow reached 12.9K on Feb 16 & has been treading water since then.  That includes much of earnings season.  The ENB story was mentioned as a reminder than MLPs (EEP) are mortal & subject to problems like other companies.  The Greek bailout is far from a done deal as creditors have to agree to the haircut on their investments,  The 75% acceptance level is above the two-thirds that Greece claims is good enough.  Who knows?  At a minimum, there will be disgruntled investors.

Dow Industrials

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Markets extend gains on Greece debt hopes

Stocks are strong on hopes for the best with European finances.  Dow rose 110, advancers ahead of decliners 3-1 & NAZ was up 28.  However, bank stocks, traditional market leaders, are lower, having to deal with a host of problems, including earnings downgrades.

S&P 500 Financials Sector Index

Value	200.80
Change	-0.22     (-0.1%)

The MLP index rose 1½ to the 366s but the REIT index slipped a fraction in the 236s.  Junk bond funds were weak & Treasuries were lower ahead of an auction at lunch time. Oil rose from a 4-month low amid speculation that Greek lawmakers will approve austerity measures to prevent a default & on forecasts US fuel demand will rise before the Jul 4 holiday. Gold gained for the first time in 4 days as concern about Greece’s debt crisis spurred demand for the metal.

JPMorgan Chase Capital XVI (AMJ)

Treasuryyields:

U.S. 3-month	0.015%
U.S. 2-year	0.438%
U.S. 10-year	2.954%

CLQ11.NYM

....Crude Oil Aug 11

...91.88

... 1.27 (1.4%)

GCM11.CMX

...Gold Jun 11

.......1,499.50

... 3.50

(0.2%)

The Conference Board's Consumer Confidence Index slipped to 58.5 in Jun, down from a revised 61.7 in May.  Expectations were for the figure to edge up to 61.  The results follow an almost 6-point drop from May to Apr, which had marked a 6-month low as job worries increased.. A reading of 90 indicates a healthy economy on the index which measures how Americans feel about business conditions, the job market & the next 6 months.

• Consumers' confidence down in June on job worries- AP

Photo:   Bloomberg

Greek police fired tear gas to disperse protesters in the center of Athens as labor unions shut down gov services ahead of a vote on austerity measures to determine if the nation can avoid a default. Unions began their 4th general strike of the year at midnight, protesting a 5- year plan of budget cuts & asset sales. Police estimated about 12K joined marches on the first day of the 48-hour walkout.  The Prime Minister faces his 2nd survival test in a week with a vote on the package that’s needed before Greece can tap a 5th loan payment from last year’s €110B ($157B) rescue. Failure to pass would lead to the euro area’s first sovereign default.  “Voting for the medium-term plan means we can close this chapter of uncertainty for the Greek people,” Papandreou told lawmakers at the start of a 3-day debate late yesterday. “From the brink of catastrophe we are securing, colleagues, the great opportunity to change our country.”  Clearly, the situation remains tense. 

• Greek Police Fire Tear Gas to Disperse Protesters Before Vote on Austerity

Enbridge Energy Partners (EEP) sold 8.05M units for $30 a share in part to help reduce its debts.  The units were priced at a 2.9% discount to their closing price of $30.89 on Mon.  The units fell 1.03 to 29.86 & are a drag on the MLP index today.  EEP will receive more than $200M in net proceeds, used to repay debts & finance a portion of capital expansion projects.

Enbridge Energy to offer up to 8.07M common units AP

Enbridge Energy, L.P. (EEP)

The week is starting out on the right for for the bulls.  Stocks have moved ahead solidly, largely encouraged by a French plan to refinance Greek debts with 30 year bonds.  Of course, this all assumes that Greece will vote for the austerity measures & asset sales even though its people are not supporting this plan.  That's called a disconnect which is being ignored by the markets.  In the meantime, a plan to raise the debt ceiling for the US Treasury looks to be dead in the water.  The Reps are digging in their heals, demanding budget cuts, while the Dems want to raise taxes (while the economy is sputtering). .Uncertainty is on the rise, a negative for stock markets. 

Dow Industrials (INDU)

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Mixed markets on thin trading

Dow rose 20 from late day buying, decliners slightly ahead of advancers & NAZ fell 4.  Chevron (CVX) & Exxon Mobil (XOM) led the Dow higher with oil trading above $91.  Bank stocks, like the rest of the markets, were just marking time.

S&P 500 FINANCIALS INDEX

Value	215.71
Change	0.06  (0.0%)

The MLP index rose 2½ to the 359s on late day buying.  The REIT index was up a ½ in the 215s, near the upper end of its trading range for the latter part of the year.  Junk bond funds were lower, following the sell off in Treasuries (discussed below).. 

Alerian MLP Index   ---   1 year



Dow Jones REIT Index   ---   1 year



10-Year Treasury Yield Index   ---   1 year




Oil traded near a 26 month high after a report showed US retailers had their best holiday sales in 5 years & crude supplies were forecast to extend their biggest monthly decline since Dec 2006.  Cold weather in the north increases demand for oil & gas.  Gold rose the most in 7 weeks on speculation that Europe’s debt crisis will spread, boosting demand for the precious metal as a haven asset.

CLG11.NYM

...Crude Oil Feb 11

...91.30

...... 0.30  (0.3%)

GCZ10.CMX...

Gold Dec 10

.....1,406.30

... 23.90  (1.7%)

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Treasuries slid after a $35B auction of 5 year securities attracted the lowest demand in 6 months. The 10-year yield rose a very big 13 basis points to 3.48%.  Treasuries extended losses after the auction drew a yield of 2.149% & the bid-to-cover ratio was 2.61X, the lowest since Jun. US debt due in more than a year is headed for the biggest monthly loss in global gov bond markets amid signs that the economy is strengthening, reducing demand for investments viewed as less risky.  The 2 year Treasury yield shot up 7 basis points to 0.75% & the yield on the existing 5 year note increased 13 basis points to 2.15%.  Among other factors were higher oil prices (at their highest levels in more than 2 years).

Treasuries Drop After $35 Billion Auction as Stocks Advance

Treasury yields:

U.S. 3-month		0.14%
U.S. 2-year		0.74%
U.S. 10-year		3.48%

Enbrdige Energy (EEP), a major MLP, shut its Spearhead crude oil pipeline early today because of maintenance. The Spearhead line, which mostly transports heavy Canadian oil in the central US, is expected to return to service late today. EEP said earlier that the line will carry 174K barrels a day in Jan, about 20% of the shipment requests for the month. The Spearhead line spans 657 miles (1,058 kilometers) from Chicago to Cushing, Oklahoma.  This was reported as coming from Enbridge, Inc (ENB), the Canadian General Partner for EEP, but EEP operates the pipeline.  This pipeline was restarted 2 weeks ago after fixing problems with the pipeline in the last few months.  EEP was up 49¢ but has plateaued in recent months.

Enbridge Spearhead Pipe Shut Due to Line 61 Repairsat Bloomberg

Enbridge Energy  ---   1 year





The Shanghai Composite Index slid to a 3 month low on concern over higher Chinese interest rates.  When traders return next week, that might affect US markets.  Weaker demand for Treasuries at auction caused rates to shoot up today, not good going forward.  Gold is within 2% of its record, reached at the start of Dec, on increased worries over European sovereign debts.  Trading was slooooow, there's no other way to describe it when the NYSE floor volume is ½B shares.  The rest of the week could be even slower.

Dow Jones Industrials   ---   1 year

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Markets are adrift ahead of the FOMC meeting

Stocks are meandering awaiting the announcement by the FED later today.  Dow is up 6, advancers marginally ahead of decliners & NAZ fell 4.  Bank stocks were also higher in this directionless market.

SP 500 FINANCIALS INDEX

Value	196.66
Change	0.70  (0.4%)

The Alerian MLP Index fell a fraction in the 355s from yesterday's fresh record while the REIT index was off a fraction to 223.  Junk bond funds were mixed to lower.  Treasuries shave been rising in the last 3 days on expectations the Federal Reserve (FED) will resume buying long term Treasuries.  The yield on the 10 year bond dropped 5 basis points to 2.54% & has not been able to get far above the 2.4% lows it reached in the last 2 months.    

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.34%
U.S. 10-year		2.54%

Alerian MLP Index   ---   2 weeks




Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil extended gains after a government report showed a decline in supplies of gasoline & distillate fuels. Gold fluctuated ahead of the FED meeting.

CLZ10.NYM

...Crude Oil Dec 10

...84.42

... 0.52

(0.6%)

GCX10.CMX

...Gold Nov 10

....1,353.00

... 3.40

(0.3%)

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Orders to US factories rose broadly in Sep, propelled by business spending on commercial airplanes, boats & machines.  The Commerce Dept reported that factory orders rose by 2.1%, the steepest increase since Jan after orders were flat in Aug.  However excluding the volatile transportation sector, orders rose 0.4%, after gaining 1.3% in Aug.  Business spending on costly, long-lasting goods such as airplanes & heavy machines produced most of the demand. But consumer spending also rose by 1.0%, after a flat performance in Aug.  There are worries that recession-weary consumers will not spend enough to keep factories moving as business spending subsides but this report may ease those fears.

U.S. Factory Orders Increase 2.1% as Manufacturing Leads Economic Recovery

Factory orders - 1 year




US companies boosted payrolls by more than forecast in Oct according to a private report from ADP Employer Services. Employment increased 43K after a revised 2K drop in the prior month. The estimate called for a 2K.  This report suggests the Jobs report on Fri will show companies added 80K workers last month & the unemployment rate held at 9.6%. Concern that growth is too slow to lower unemployment will probably prompt Federal Reserve policy makers to take additional steps today to spur the US economy.  Over the previous 6 reports, ADP initial figures were closest to the Labor Department’s first estimate of private payrolls in May, when it overestimated the gain in jobs by 14K & was least accurate in Apr, when it underestimated the employment gain by 199K.

ADP Estimates U.S. Companies Added 43,000 Workers to Payrolls


Unemployment rate - 1 year





Enbridge (ENB), a Canadian energy company, reported Q3 net income fell to C$157M, or 42¢ a share, from C$304M, or 83¢ last year. ENB said adjusted earnings rose to 53¢ a share, up from 42¢. The pipeline outages of Lines 6B & 6A that resulted in leaks of crude oil in Jul & Sep hurt earnings from its investment in Enbridge Energy Partners (EEP) by $85B. The cause of the accidents remains under investigation. Analysts expected ENB to earn 47¢.  Sales for the qtr rose 33% to C$3.5B from C$2.6B in 2009.  ENB fell 17¢ & EEP rose 8¢ at their record highs.

Enbridge Profit Beats Analysts' Estimates; Pipeline Leaks Hurt U.S. Unit


Enbridge   ---   2 years




Enbridge Partners - 2 years




Very little is expected ahead of the FOMC meeting.  The FED should announce a quantitative easing (QE) plan to purchase $½B in Treasury bonds.  Less  would probably be taken as a negative & more could go either way.  There is still a lot of debating about whether some or a lot is needed to jump start the ailing recovery.  MLPs continue to reaching new highs while Apple (APPL) is only 3% below its record reached last month.

Dow Jones Industrials   ---   2 weeks

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