Late day buying brings gains for markets

Thanks to buying in the last hour Dow rose 42, advancers ahead of decliners 3-2 & NAZ was up 27 (helped by a $70 gain for Google).  Bank stocks were sluggish despite favorable earnings reports.

S&P 500 Financials Sector Index

Value	199.93
Change	-0.49    (-0.2%)

MLPs & REITs had a good day with each index up 2+.  Junk bond funds inched higher & Treasuries rose a little after a good week for 3, 10 & 30 year bond offerings.  Oil rose, trimming a weekly loss, on bets that US fuel consumption may climb amid signs of improving confidence & manufacturing growth.  Gold climbed for a 9th straight day amid concern the US is getting closer to losing its top credit rating.

Alerian MLP Index

Value	373.09
Change	2.58   (0.7%)

Click below for the latest market update:

Treausry yields:

U.S. 3-month	0.005%
U.S. 2-year	0.351%
U.S. 10-year	2.906%

CLQ11.NYM

...Crude Oil Aug 11

...97.31

... 1.62  (1.7%)

Photo:    Yahoo

The President & Reps traded demands for a serious deficit plan, as an acrimonious stalemate deepened in negotiations to avert a looming gov default.  Reps said they would vote next week on a bill to raise the debt ceiling by the $2.4T Obama has requested as long as Congress adopts a balanced budget amendment -- an unlikely prospect. The measure will consume much of next week.  Swell!!  Back & forth, back & forth, without anything getting done & the clock keeps ticking.  This will probably go down to the wire in early Aug & then only a temp bill which will allow the gov to limp along without resolving the major issues.

Obama, Republicans Trade Demands for Debt Plan- Reuters




Carl Icahn
Photo:   Yahoo

Carl Icahn made an unusual offer to buy Clorox, a Dividend Aristocrat, for $76.50 per share in cash, presenting himself almost as a disinterested bidder & encouraging the company to try to find a better offer.  The offer is valued at $12.6B ($10.2B in cash, plus taking on debt & other costs).  CLX said the board is "committed to acting in the best interests of our company and our shareholders."  Icahn is already the biggest shareholder, after spending nearly $800M to buy a 9.4% stake in Dec.  Icahn seems more interested in drumming up other buyers than actually buying CLX himself.  If no other bidders stepped forward, Icahn said "our fellow stockholders" should have the opportunity to vote on the Icahn bid.  The stock rose  6.12 to 74.55 (but 55¢ below the high).

Icahn makes $10.2B offer for CloroxAP

Clorox Company (The) (CLX)

First Horizon National, a medium size bank, reported its profit surged in Q2, as the size of the lender's loan loss reserves declined sharply from last year.  EPS was 16¢ compared with a penny last year & forecasts of 11¢.  Revenue fell to $361.6M, from $426M, as net interest income declined to $172.9M from $182.1 last year. The quality of its loan portfolio has been improving, as both loans behind in payments & net loan charge-offs (loans written off as unpaid), declined on an annual & qtr-to-qtr basis.  As a result, the provision against loan losses remained at $1M, unchanged from Q1, but well below the $70M in Q2 of 2010.  Net charge-offs were 14% lower than in Q1 & 50% lower than a year earlier.  The low priced stock, which had been a Dividend Aristocrat before the financial meltdown, was up 12¢.  

First Horizon's 2nd-quarter profit surges AP

First Tennessee National Corporation (FHN)

The lack of respect bank earnings reports are getting is telling.  While these reports have swirling winds within them giving somewhat mixed signals, on balance they were favorable.  But stockholders did not see buying.  Dow retreated almost 180 this week which may be an indication of how earnings season will go.  Unsettled conditions in DC are unnerving for all.  A bit of good news,  Enterprise Products (EPD), the largest MLP, declared its 28th consecutive distribution increase, bringing the annual rate to $2.42.   The units were up 20¢ to 43.01.  More earnings reports are coming next week, but DC talks will dominate the markets.

Dow Industrials (INDU)

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Worries, worries, worries!!

Worries are overwhelming the traders. It's difficult to keep track of all the banks, especially big ones, selling for 5 (that's $5 per share). The Bloomberg chart from yesterday (below) shows Dow is down 133 (off the lows of down more than 200), decliners ahead of advancers 9-1 (don't see that too often) while NAZ is down 21. S&P 500 is down to 1211, former important lines of support are now history! Banks & related financials are leading today's plunge. FED Chairman Bernanke is testifying trying to explain what's happening with banks & what to expect going forward. The FDIC said bank deposits are safe. They better be, but a nervous public needs reassurance. One tiny glimmer of optimism is First Horizon (FHN), now a $5 stock, was up today. For those who want to read more about bank worries, read on. This financial mess will just have to play out, keeping the powder dry seems to be a good tactic for the time being.

There is corp news. Retail sales inched up 0.1% in June, no great surprise. Going forward, help from tax rebates is pretty much over. JNJ (JNJ), a Dow stock & member of the S&P Dividend Aristocrat list, is up 1.28 on a favorable earnings report. But Kimberly Clark (KMB), another member of that elite div list, is down after cutting guidance which brought downgrades for the stock. General Motors (GM), another Dow stock, eliminated the div, is laying off workers & cutting truck production to help preserve cash.

On this gloomy day it's good to keep in mind investment ideas for buying beaten up stocks, better times are coming. We all need to be reminded.

Regional banks sink markets!!

Regional banks sank markets!! The negative news & thoughts on regional banks swamped markets today. Dow was down (only) 45, decliners ahead of advancers 3-1 (could have been worse!) & NAZ fell 26. S&P 500 is down to 1228, considered to be a ugly number by many. There were 500 new lows on NYSE, that was to be expected. NYSE volume was 1.4B, pretty much a routine kind of number.

Regional banks probably had their worst day in history, very tough to keep track of all their problems. Washington Mutual (WM & the biggest S&L in the US), along with National City Corp (NCC), First Horizon (FHN & former member of the S&P Aristocrat Dividend list), to mention just a few, were clobbered. Many of these stocks are selling at 20 years. These stocks was sold on fears following the failure of IndyMac on Fri which the FDIC has had to take over. Can you remember the last time the FDIC had to take over a failed bank? All this was in the middle of Fannie Mae (FNM) & Freddie Mac (FRE) getting help from the FED/gov leading to a very confusing mess, something not liked by markets. Oil remained near 145, but today it's like nobody cares. For what it's worth, Pres Bush lifted an executive ban on offshore drilling, putting that ball back in congress's court.

In the midst of all this confusion, junk bond funds & REITs pulled back as they're associated with financial products. The junk bond funds in particular should be getting some respect. They invest in junk bonds, not mortgages & with the latest sell-off have yields typically over 11%. For the very brave, a nice place with yields 700+ basis points over Treasuries.

Asian markets open in a few hours, they should give an early clue of how they're taking the financial news in the US. Earnings are coming in the next few days, bank reports will get the most attention. Stay tuned!!

Early gains reduced to modest gains late in the day

Markets started hot out of thee gate this AM, but lunchtime the gains slipped. At the close Dow was up 57, advancers over decliners only by 25% % NAZ was up 10, not impressive. NYSE volume continues at 1.3B. Financials (i.e. banks) were strong but much the gains were lost by day's end. Lehman Bros (LEH), down 1.05, continues as the hot story, investors are mulling over what the changes mean. Oil rebounded from early losses, ending with a gain of 36¢ to 136.74. Supply worries from Nigeria helped bring buyers back. Retail sales helped drive gains in the AM, however analysis showed that much of the larger than expected gains were due to higher gas & fuel sales (i.e. inflation driven), something we have to constantly think about in today's world. Besides oil, commodities prices were very strong. Corn, our leading crop & export, reached a record price of 7.18. The main use for corn is feeding farm animals, that price will bleed through to a lot of groceries. The Alerina MLP index broke it's support level of 290, down 1.26 to 288.74

Key Bank (KEY) & First Horizon (FHN) are banks who were members of the S&P 500 Dividend Aristocrat list. Their divs have been cut. If not off that prestigious list, they will come off shortly. There are about 60 on the list, but even a track record of over 25 year as of higher divs year does not guarantee the future.