Higher markets on strong manufacturing data

Dow gained 52, advancers over decliners 3-1 & NAZ jumped 28 propelled by a 19 gain for Apple (AAPL).  Bank stocks rose, taking the Financial index to the 214s, just below its 215 high last week.

The MLP index rose 1+ to the 393s & the REIT index was up 1+ to the 255s, a new yearly high.  Junk bond funds went higher as did Treasuries.  The price of oil is climbing on reports that US factories have cranked into a higher gear, suggesting greater demand for oil.  Gold went up $9, but hasn't done much in Mar.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month	0.061%
U.S. 2-year	0.325%
U.S. 10-year	2.203%

CLK12.NYM...

Crude Oil May 12

...105.22

... 2.20

(2.1%)

General Motors will suspend production of the Chevrolet Volt for an extra week this summer as it tries to control the car's inventory.  But GM said sales picked up in Mar to a record of more than 2K, & it may cancel the extra week if sales remain strong.  Most auto factories close for 2 weeks starting in early Jul to get updated for the new model year but GM added a 3rd week at the Volt factory.  The plant was already closed from Mar 19-Apr 23, as the supply of Volts grew on dealer lots.  About 1300 workers at the factory have been idled.  Until Mar, sales of the car were disappointing.  Volts in its inventory at the end of Feb were enough to supply dealers for 154 days (a 60-day supply is considered optimal).  The Volt has a starting price of just under $40K, but it is eligible for a $7500 federal tax credit, as well as other credits in some states.  Auto retail sales for Mar are expected tomorrow.  GM rose 1.11.

GM adds week to Volt plant's usual summer closureAP

General Motors Company (GM)

AVP CEO  Andrea Jung
Photo:   Bloomberg

Coty's offer to buy Avon Products thrust the perfume maker into the spotlight.  The $10B bid, rejected by AVP, could be raised, Coty said.  It has the backing of Germany's Benckiser group & Warren Buffett's favorite banker in its bid for the world's largest direct seller of cosmetics.  Its $800M purchase of Unilever's fragrance unit in 2005 made Coty the largest maker of perfumes & colognes in the world, giving it the licenses for prestige perfume brands such as Calvin Klein.  Coty offered $23.25 per share for AVP which was swiftly rejected.  AVP continues to search for a new CEO & deal with issues including US gov investigations into possible bribery in China & elsewhere.  AVP stockholders liked the news & the stock jumped 3.34 to 22.70 (17%).

Avon rejects $10 billion takeover bid from CotyReuter

Avon Products, Inc. (AVP)

The price of gas at the pump is almost $3.93 & headed to top the record $4.11 reached in 2008.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.925	$4.068	$4.197	$4.164	$3.366	$4.429
Yesterday Avg.	$3.925	$4.066	$4.197	$4.164	$3.367	$4.431
Week Ago Avg.	$3.897	$4.043	$4.173	$4.159	$3.304	$4.348
Month Ago Avg.	$3.757	$3.899	$4.032	$4.071	$3.205	$4.218
Year Ago Avg.	$3.645	$3.782	$3.912	$3.978	$3.074	$4.045

source:    AAA


Buyers returned at lunchtime to bid up the markets.  Late Fri, Groupon (GRPN), which went public last year, said it needed to slash its Q4 revenue outlook & raised its net loss view due to higher-than-expected refunds.  The stock plunged $3.11 (17%), but that did not disturb the markets.  Auto sales tomorrow should be more of the same fairly good news & the jobs report on Fri could be a plus for the markets.  However, the absolute number will be less important than whether it beats the estimates which are optimistic.  With return of the bulls, markets should have a good week.  But the high price of gas is a dark cloud moving over the stock  market.

Dow Industrials

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Retailers rise in mixed markets

Late day buying brought the markets into the black, barely.  Dow gained 21, advancers just below decliners & NAZ was down pocket change.  Bank stock also waffled as the Financial Index slipped a fraction to the 179s.

The Alerian MLP index shot up 4 to 395, as reaching a new record high yesterday brought out MLP buyers.  The REIT index fell 2+ to below 231, junk bond funds were mixed while Treasuries were weaker.  Oil fluctuated near an 8 month high after the EU said it’s working to sanction oil imports from Iran & on concerns that Europe’s debt crisis will affect consumption.  Gold rose for those same reasons.

ALERIAN MLP Index



DJ REIT INDEXDJR

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Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.259%
U.S. 10-year	1.984%

CLG12.NYM

...Crude Oil Feb 12

...103.26

... 0.30

(0.2%)

Photo:   Bloomberg

Auto sales increased as  consumer confidence reached an 8 month high in Dec, & carmakers aired holiday ads.  US automakers rallied in 2011, 2 years after General Motors & Chrysler emerged from bankruptcies & GM reclaimed the top spot in world vehicle sales from Toyota (TM).  GM Dec vehicle sales rose 4.5% to 234K, topping the 4.4% estimate.  Chrysler sales jumped 37% to 138K cars & light trucks, more than the 33% estimate.  Toyota & Nissan also beat estimates.  Industry light-vehicle sales in Dec may have run at a 13.4M annual rate, up from the 12.5M pace a year earlier.  TM sales of Toyota, Lexus & Scion models increased 0.4% from a year ago to 178K vehicles, topping an expected 1% decline.  Nissan deliveries rose 7.7% to 100K, beating the 5% gain predicted  GM & Ford were each up fractionally.

GM, Ford, Chrysler U.S. Sales Top Estimates

General Motors Company (GM)

Ford Motor Credit Company (F)

Photo:   Bloomberg

Groupon shares fell below the IPO price, as merchants & investors are having second thoughts about the industry.  Half the businesses that offered an online deal- of-the-day in the past aren’t planning to do so again in the next 6 months because merchants were concerned about a low rate of repeat business from new customers gained through such offers.  To keep growing, the industry may more than double to $4B by 2015, will probably agree to charge businesses less which will cut into its profits.  Margins are already shrinking.  While 80% of merchants were satisfied with daily-deal companies, about 52% of merchants said they’re not planning to offer a discount through such sites.  The stock dropped 48¢ to $18.79 & is below the $20 offering price.

Groupon’s Shares Tumbling Below IPO Price Reflects Daily-Deal Peril: Tech

Groupon, Inc. (GRPN)

Markets were not able to follow thru after yesterday's big gain.  The big jobs report on Fri can be felt already & tensions with Iran are another major negative.  Retail sales & auto sales were OK, although discounting probably reduced profitability.  Tomorrow may be another nervous day for traders with little accomplished.  The standout performance is for the MLP index, but MLPs are yield securities & rising prices bring lower yields.  The yield for the index is about 6%, below that has signaled trouble in the past.

Dow Industrials

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Reduced GDP growth weighs on markets

Dow was under water all day, finishing with a loss of 53, decliners were ahead of advancers 3-2 & NAZ was about even.  Selling in bank stocks led today's modest decline.

S&P 500 Financials Sector Index

Value	162.12
Change	-1.51    (-0.9%)

The indices for the MLP index & REIT index were each fractionally lower.  Junk bond funds & Treasuries were mixed.  Oil gave up some its AM gains in the PM.  Gold  rose the most in a week after mounting debt woes in the US & Europe spurred demand for the metal.

AMZ  Alerian MLP Index

DJR  Dow Jones Equity REIT Index

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Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.258%
U.S. 10-year	1.933%

CLF12.NYM

...Crude Oil Jan 12

....97.86

... 0.94

(1.0%)

Photo:   Yahoo

The Federal Reserve (FED) discussed at its recent meeting how to give businesses & investors more information about what might trigger an increase in interest rates.  A panel is exploring ways to provide more information on future central bank moves.  It is believed that more clarity on interest rate policy could help reassure investors & businesses that rates will stay low.  In Aug, the FED said it planned to keep short-term rates near zero until at least mid-2013, as long as economic growth remained weak.  After the Nov meeting, the FED sketched a bleaker outlook for the US economy, which it predicted would grow much more slowly & face higher unemployment than it had estimated in Jun.  While the FED announced no new policy actions after the meeting, the gloomier forecast increased the likelihood that it would take new steps soon.  The decision to leave policy unchanged in Nov was approved on a 9-1 vote.  The vote was a shift from the previous 2 meetings when 3 members had dissented for the opposite reason.  The 3 members argued those moves increase the risks of future inflation. The rest of the board seemed to agree that inflation is under control & the FED should focus more on policies that could help lower the unemployment rate.  After the minutes were released, the market rose but sold off again in late day trading.

FOMC Minutes Show Additional Easing Discussed

Groupon, the largest internet daily-deal site, plunged 15%, dragged down for a 2nd day on concern that profit margins will be squeezed by surging marketing costs & competition from rivals such as LivingSocial.com, (backed by Amazon.com).  It also became cheaper to borrow the shares for short sales, bets that the stock will decline.  GRPN was hyped after the IPO but now investors are having 2nd thoughts.  The stock fell $3.51 to $20.07 (just above the IPO price) & would have behaved much better if the markets were healthy.

Groupon Shares Plunge, Trading Close to IPO

GRPN    Groupon Inc.

The implosion of the supercommittee is likely to delay any major deficit-reduction agreement until after the next presidential election which may pose an immediate threat to the struggling US economy.  Failure means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year, weigh on household spending that accounts for 70% of the US economy.  This also stoked doubts about lawmakers’ ability to overcome partisan gridlock & deal with the nation’s fiscal future.  However, S&P reaffirmed that it would keep the US credit rating at AA+ after stripping the AAA grade on Aug 5.  Moody’s reaffirmed its AAA rating with a negative outlook.  Fitch noted what it said in Aug that a supercommittee failure would probably result in a “negative rating action,” likely a revision of its outlook to negative, & that a review would be concluded by the end of this month.   Doubts created by this super failure are not going away anytime soon.

Supercommittee Failure Poses Economic Threat


The FED doesn't know what to do next to help the economy, like of the rest of us.  Markets are floundering, looking for guidance & not getting help from anybody.  At least today was more like the traditional day of trading before a holiday, quiet with little happening.  Dow remains on defense, near the 11½K level.

Dow Jones Industrial Average

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