Markets drift lower after FOMC meeting

Dow gave up early gains to settle for a loss of 32 (near the lows), declines just ahead of advancers & NAZ lost 19.  The Financial Index dropped 1 to the 197s from selling into the close.  The MLP index was up almost 1 to the 395s while the REIT index hardly changed.  Junk bond funds inched higher & Treasuries sold off, bringing higher yields.  Oil rose to above 90 & gold pulled back, remaining above 1600.

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Teasury yields:

U.S. 3-month	0.091%
U.S. 2-year	0.231%
U.S. 10-year	1.527%

CLU12.NYM

Crude Oil Sep 12

88.57

0.51 (0.6%)

Photo:   Yahoo

The Federal Reserve (FED) said that the US economy is losing strength & repeated a pledge to take further steps to stimulate growth if the job market doesn't show sustained improvement.  But the FED took no new action after a 2-day meeting.  It acknowledged that economic activity had slowed over H1 & also said unemployment remains elevated & consumer spending is rising at a somewhat slower pace.  The statement was nearly identical to the one issued after the Jun meeting, expect for language noting slower growth.  The FED repeated that strains in the global market pose a significant risk to the US economy, the housing market is improving but remains depressed & inflation remains tame.  Policymakers also repeated their plan to hold short-term interest rates at record-low levels until at least late 2014.  The statement was approved on an 11-1 vote.

Fed Signals More Steps to Spur Economy Amid Slower Growth

Photo:   Bloomberg

IMF chief Christine Lagarde urged the ECB to take further steps to stabilize the eurozone's economy.  Lagarde said that the world economy is experiencing a decline in confidence, driven by doubts about the ability of European & US leaders to manage financial problems.  She also said European leaders should maintain a "crisis management mode" as they seek to address the debt crisis.  Lagarde noted recent comments by the ECB bank president, Mario Draghi, to do "whatever it takes" to save the €.  More can be done," Lagarde said, adding that low inflation allows for more aggressive steps to strengthen the €.  She has said the ECB could intervene in bond markets & push down high borrowing rates that are threatening heavily indebted govs such as Spain & Italy with financial collapse.  Aside from monetary policy, Lagarde said the eurozone needs structural reform to bolster investor confidence in the € & called for more centralized supervision of the eurozone banking system & a unitary fiscal policy.  The IMF will keep working with Greece, in talks over further austerity measures needed for Greece to remain in the intl loan program that is protecting it from bankruptcy.

IMF Chief Lagarde Praises Greece, Spain for Efforts

Enterprise Products Partners, a prominent MLP, net income rose 31% in Q2, boosted by an increase in the amount of crude oil & natural gas its pipelines transported.  Earnings per unit were 64¢, above the 51¢ last year.  A 4.5% increase in the number of units reduced the per-unit results.  Revenue fell 13% to $9.79B, as commodity prices dropped & lowered sales for petroleum products.  Analysts were expecting earnings of 58¢ on revenue of $11.75B.  Profit rose as EPD transported more crude, natural gas & other commodities thru its pipelines.  The company also made investments to offset the drop in price of natural gas & natural gas liquids.  Its pipelines transported an average of 4M barrels per day of natural gas liquids, crude oil, refined products & petrochemical in Q2, 3% higher than in 2011.  Natural gas pipeline volume increased 14% in Q2.  Results were also helped by a 14% decline in total costs & expenses, influenced largely by the drop in energy commodity prices.  The units gained 61¢, near the record highs reached last week.

Enterprise Products 2nd-qtr profit rises 31 pct AP

Enterprise Products Partners (EPD)

The outcome of the FOMC meeting should not have been a surprise to investors.  Just about everybody said that if a change was coming, it would have to wait until the Sep meeting.  However, comments by the FED that the economy was "weaker" contributed to late day selling.  The ECB meeting tomorrow has the potential to move markets.  Now that Draghi said that the ECB will do whatever is necessary to support the €, all eyes will be on him & expectations are running high.  Dow is trying to hold above 13K.  It represented an important ceiling in Feb.  Then it became a floor in Mar-Apr before selling in May.  It closed at 12,976.

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Markets slip on weak retail sales

Dow fell 59, decliners ahead of advancers 3-2 & NAZ was off 9.  The Financial Index slid a tad to 198.  The MLP index was up a fraction to 392 & the REIT gained a fraction to the 267s, a new yearly high.  Junk bond funds are inching higher & Treasuries rose.  Oil & gold hardly budged. 

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.086%
U.S. 2-year	0.222%
U.S. 10-year	1.442%

CLQ12.NYM

...Crude Oil Aug 12

...87.41

... 0.31

(

0.4%)

GCN12.CMX

...Gold Jul 12

........1,586.20

.... 5.40

(0.3%)

Get the latest daily market update below:

• 

Photo:   Yahoo

US retail sales fell for a 3rd straight month in Jun as demand slumped for everything from cars & electronics to building materials, a sign the economic recovery is flagging.  Retail sales slipped 0.5% according to the Commerce Dept.  It was the first time sales had dropped in 3 consecutive months since late 2008, when the economy was still mired in a deep recession.  Expectations were for retail sales to rise 0.2%.  The retail sales report raised hopes the Federal Reserve could launch another bond-buying program to help the economy.  Job creation has slowed dramatically in the last few months as employers worry about a sagging global economy hurt by Europe's snowballing debt crisis.   The factory sector also has shown signs of contraction due to the global slowdown.  The retail data is worrisome because it suggests consumer spending, which drives about 2/3 of the economy, is also sagging, as retailers enter the important back-to-school season.

Retail Purchases in U.S. Unexpectedly Decrease 0.5%

Photo:   Bloomberg

Citigroup earned $2.9B in Q2 & exceeded forecasts, helped by lowering the amount it keeps aside for loan losses because more customers paid back loans on time.  But net income was down 12% from a year ago.  The bank took a loss of $424M from selling its stake in a Turkish bank, drew down loan loss reserves by $984M & took an accounting gain of $219M because the value of its debt decreased.  Excluding those items, EPS was $1, exceeding the 89¢ expected.  Revenue was $18.6B, down 10% from a year-ago.  Analysts expected $18.8B.  As more customers paid back loans on time, Citi kept aside less for future losses — $27.6B at the end of Q2 (compared with $34.4B in the prior year).  CFO John Gerspach said that strength in the dollar hurt earnings for the intl operations.  Over the weekend, Citi said it will not seek to increase its div this year but may seek permission to raise it in 2013.  "I believe we will be in good shape and have the capital to be able to do that by the end of the year," CEO Vikram Pandit said.  "That's a decision that will have to be taken with our regulators and we will have those conversations at the end of the year."  The stock rose 45¢.

Citigroup Profit Exceeds Analysts’ Estimates on Investment Banking Revenue

Citigroup (C)

The IMF cut its 2013 global growth forecast as Europe's debt crisis prolongs Spain's recession & slows expansions in emerging markets from China to India already facing weaker domestic demand.  Growth worldwide will be 3.9% next year, less than the 4.1% estimate in Apr.  It cut the growth forecast for China's slowing economy & said a "hard landing" was still possible.  The China growth outlook for 2012 was reduced by 0.2% to 8% & for 2013 by 0.3% to 8.5%.  While far stronger than the US & Europe, China's slowdown has dampened hopes it might make up for weak Western demand & drive global growth.  China's Q2 growth fell to a 3-year low of 7.6% as exports, consumer spending and factory output weakened.  A rebound might begin in H2 but could take longer & be weaker than previously expected.  Premier Wen Jiabao warned a recovery was not stable & trouble may continue for some time. He promised tax breaks & other aid to companies hurt by slowing exports.  "There are tail risks of a hard landing in China, where investment spending could slow more sharply, given overcapacity in a number of sectors," the IMF said in its latest World Economic Outlook.  "Policies have been eased since, and this easing should gain traction in the second half of 2012," it said. "Nevertheless, concerns remain that potential growth in emerging market economies might be lower than expected."  This is a very dismal story.

IMF Cuts Global Outlook as EU Ensnares Emerging Economies

 
Citi earnings were mildly encouraging although it's hard to tell what's really going on with the maze of contradictory numbers.  But the macro story is weak as the global economy is just getting by even though China continues to grow.  Dow failed to follow thru after the big rally on Fri, stuck in a trading range of 12½-13K.  Earnings probably will not give the lift that bulls want to see.

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Markets tumble on weak jobs report

Dow dropped 155, decliners over advancers 3-1 & NAZ fell 42 (Apple (AAPL) was no help today).  The Financial Index was off 1½ to the 194s.  The MLP index slipped 1 to 382 & the REIT index was off a fraction in the 264s.  Junk bond funds were mixed & Treasuries rose.  Oil fell a 2nd day in after the US added fewer jobs than forecast last month.  Gold is back below $1600.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.274%
U.S. 10-year	1.544%

CLQ12.NYM

...Crude Oil Aug 12

...84.68

..... 2.54

(2.9%)

GCN12.CMX

...Gold Jul 12

.......1,593.80

... 15.10

(0.9%)

Get the latest daily market update below:

Photo:   Bloomberg

Employers hired fewer workers than forecast in Jun as payrolls rose only 80K after a 77K increase in May, according to the Labor Dept.  The forecast was for a 100K gain.  The unemployment rate held at 8.2%, matching the forecast.  Private employment, which excludes gov agencies, increased 84K, the weakest in 10 months.  The so-called underemployment rate, which includes part- time workers who’d prefer a full-time position & people who want work but have given up looking, increased to 14.9% from 14.8%.  This is grim data.

Payrolls in U.S. Rose 80,000 in June; Jobless Rate 8.2%

Photo:   Bloomberg

The IMF will reduce its estimate for global growth this year on weakness in investment, jobs & manufacturing in Europe, the US, Brazil, India & China, Managing Director Christine Lagarde said.  "The global growth outlook will be somewhat less than we anticipated just three months ago," Lagarde said.  "And even that lower projection will depend on the right policy actions being taken."  The new outlook will be announced in 10 days, after an Apr estimate of 3.5%.  Interest-rate cuts in China & Europe yesterday & the Bank of England's boost to an asset-purchase program underscored the fragility of the global recovery as austerity measures & debt burdens weigh on advanced nations.  Lagarde is pressing for fiscal union in Europe to aid growth & financial stability as nations such as Greece wrestle with balancing their books.  The "key emerging markets" of Brazil, China & India are showing signs of slowdown, Lagarde said.  Those 3 countries along with Russia will comprise more than 20% of the world economy this year, according to IMF data.  "Over the past few months, the outlook has regrettably become more worrisome," Lagarde said. "Many indicators of economic activity -- investment, employment, manufacturing -- have deteriorated. And not just in Europe or the United States."  The IMF has already lowered its US growth estimate to 2% from 2.1% in Apr.  EU leaders agreed last week to loosen bailout rules, lay the foundations for a banking union & break the link between sovereign & banking debt thru the direct recapitalization of lenders.  More uncertainty about where the global economy is headed.

Lagarde Says IMF to Cut Growth Outlook as Global Economy Weakens


The new Greek Prime Minister Samaras will outline shortly how his coalition gov intends to deal with the country's massive financial crisis, as an inspection of Greece's public finances continues.  He will address parliament at the start of a 3-day debate that will end in a vote of confidence in his 3-party coalition, that has 179 seats in the 300-member assembly.  The gov admitted yesterday that key elements of its painful economic adjustment program are off track, as meetings continue with inspectors from the EU, ECB & IMF.  Greece is suffering thru a 5th year of recession, with unemployment topping 22% (roughly double the eurozone average).  Senior ECB & IMF officials this week urged the new gov to make up for delays in structural reforms & appeared unwilling to discuss a potential renegotiation of bailout terms, a central pledge of the gov.  The left-wing main opposition Syriza party said it would press the gov on whether it had abandoned its election campaign pledge during the confidence debate in parliament.  Greece continues to be an unsettled mess.

New Greek PM to Outline Crisis Policy


Hardly anything went right today in the markets.  The jobs report was dismal, leaving little hope even for the optimists.  The global economy is not sending favorable signals. Greece hasn't gone away, it's just muddling along tryhing to manage an impossible situation.  The reduction in growth outlook for the US by the IMF is troubling.  There is a growing worry that behind those bank rate cuts (which sound good) are fears that the global economy situation is worse then is commonly assumed.  But with all these problems, Dow still has had a nice recovery from its lows a month ago.

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