Markets soar on euro bailout hopes from the ECB

Dow surged 211 to close near its highs, advancers over decliners a modest 3-1 & NAZ gained 39.  The Financial Index rose 3 to 195 after trading sideways for more than a month.  The MLP index was up 4 to the 393s & the REIT index added 2+ to the 263s.  Junk bond funds were mixed. & Treasuries pulled back from record high prices (bringing record low yields).  Oil had been over $90 but gave up most of those gains in the PM.  Gold rose for a 2nd day after the ECB said it will do whatever is needed to preserve the € & amid increasing expectations of further stimulus measures in the US.

AMJ (Alerian MLP Index tracking fund)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.101%
U.S. 2-year	0.223%
U.S. 10-year	1.431%

CLU12.NYM

...Crude Oil Sep 12

....89.26

... 0.29

(0.3%)

EU Commission President Jose Manuel Barroso told Greece's new gov to "deliver, deliver, deliver" on promises for cost-cutting reforms.  The country depends on the reforms for continued financial support from other eurozone members.  Barroso met conservative Greek Prime Minister Samaras.  Meanwhile, the heads of an inspection team from the EU, the IMF & the ECB also arrived in the Greek capital to inspect the country's shaky public finances & the future of its rescue loan program.  Parties in the month-old Greek gov have finalized proposals to slash €11.5B ($14.1B) in gov spending over 2 years.  And the Greek drama plays on & on & on...

EU tells Greece to deliver on promised reforms AP


Contracts to purchase previously owned homes unexpectedly dropped in Jun for the 2nd time in the last 3 months, a sign of limited momentum in housing.  The index of pending home resales decreased 1.4% to 99.3 after a revised 5.4% gain in May that was less than initially reported, according to  the National Association of Realtors.  The forecast called for a 0.3% increase.  Slower job growth that’s holding down confidence & strict lending standards are restraining housing even with cheaper properties & mortgage rates at all-time lows.  While acknowledging the improvement in housing, Big Ben said last week that the Federal Reserve is ready to take further action to boost an economy that faces a headwind from Europe's debt crisis.

Pending Sales of U.S. Homes Unexpectedly Fell 1.4% in June

Photo:   Bloomberg

Companies cut back on orders for long-lasting factory goods in the US last month, outside volatile aircraft & other transportation equipment, suggesting businesses are losing confidence in the economy.  Orders for durable goods rose 1.6% in Jun from May, according to the Commerce Dept.  Excluding transportation equipment, orders fell 1.1%, the 3rd decrease in 4 months.  Orders for core capital goods, which indicate business investment plan fell 1.4%, also the 3rd decline in 4 months.  This category includes orders for computers & machinery.  Manufacturing has helped drive growth since the recession ended 3 years ago.  But it has slowed in recent months, along with the broader economy.  Europe's financial crisis has lowered demand for US exports & the pending expiration of several US tax cuts at the start of next year, along with scheduled spending cuts, may also be weighing on growth.

Goods Orders Signal U.S. Business Spending to Cool in Second Half: Economy


Kimberly-Clark, a Dividend Aristocrat, said Q2 net income rose 22% as higher selling prices, cost cuts & strong intl results helped offset the stronger dollar.  The company also raised guidance for the year due to higher sales expectations and lower commodity costs for materials like pulp.  "Halfway through the year, we are tracking ahead of our 2012 plan on most key financial metrics, and I'm encouraged by our execution in a continued volatile environment," said CEO Falk.  Like many businesses which have a significant amount of business overseas, it is facing the impact of the stronger dollar which lessens the value of intl sales.  Changes in foreign currency rates hurt revenue by more than 3 percentage points.  Still, EPS rose to $1.26, ahead of $1.03 last year.  Excluding one-time items EPS was $1.30, beating expectations of $1.28.  Net income was helped by sales growth, cost cuts & lower commodity costs which was partly offset by higher marketing, research & general spending & unfavorable currency exchange.  Revenue was nearly flat at $5.27B versus $5.26B which was also the analysts' estimate.  Personal care revenue rose 3% to $2.4B, while consumer tissue revenue fell 5% to $1.6B (hurt by restructuring & lower volume).  The company is guiding EPS for 2012 of $5.05-$5.20, up from a prior target of $5-$5.15 & analysts expect $5.16.  The company still expects sales to be flat to up 1%.  The stock rose 2.32 & has an excellent chart over the last year.

Kimberly-Clark 2nd-quarter net income risesAP

Kimberely-Clark (KMB)

Markets had one of the best days this year on hopes that ECB will be able to solve all eurozone problems.  I'm not so sure.  Corp earnings have been fairly good although at the bigger picture level they paint a picture of a global economy that is only doing so-so.  Next week, Big Ben will host the FMOC meeting but few are expecting anything new coming from it.  Dow continues in its sideways trading range, it would not take much to break thru the 12.950 ceiling.  Tomorrow could be the day if the bulls are serious.  But modest market breadth during the up days looks worrisome.

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Higher markets on earnings & European debt hopes

Dow was up 81, advancers over decliners almost 4-1 & NAZ climbed 52.  Bank stock have been hot in Oct (hotter than in Jul), taking the Financial Index near its 181 highs made at the end of Jul.

S&P 500 Financials Sector Index

Value	179.86
Change	3.27     (1.9%)

The MLP index was up 1+ to the 367s & the REIT index gained 2+ to 222.  Junk bond funds were mixed to higher after recovering much of their big losses in Aug.  Oil rose for a 2nd day on speculation that economic growth in China & Japan will boost energy demand, taking oil above $90.  Gold rose for a 2nd day on concern that Europe's leaders won’t do enough to stem the debt crisis, boosting demand for the metal as a haven investment.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.283%
U.S. 10-year	2.229%

CLZ11.NYM

....Crude Oil Dec 11

...89.35

..... 1.95

(2.2%)

GCV11.CMX

...Gold Oct 11

......1,654.20

... 19.10

(1.2%)

Get the latest daily market update below:

Caterpillar, a Dow stock, profit rose 44% in Q3 & the company expects even stronger sales next year.  EPS was $1.71, sharply ahead of $1.22 last year.  Revenue surged 41% to $15.7B.  Excluding its $7.6B acquisition of Bucyrus Intl, EPS was $1.93 on revenue of $14.6B, ahead of forecasts of $1.63.  CAT predicts higher 2011 earnings than it forecast earlier, $6.75 on sales of $58B.  Previously it forecast profit of $6.25-6.75 on revenue of $56-58B.  Excluding the impact of Bucyrus, CAT expects EPS of about $7.25 on revenue of $56B.  Analysts project EPS of $6.76 on sales of $56.6B.  It projects revenue next year will increase 10-20% to $63.8-69.6B.  CAT is continuing to add jobs, nearly 5K in Q3 alone.  As of Sep 30, it had 149K employees, up more than 20% from a year earlier (including staff gained from acquisitions).  About 5.6K jobs were added in the US.  The stock is taking the report well, up $4.35.

Caterpillar 3Q profit soars, raises year view AP

Caterpillar, Inc. (CAT)

Kimberly-Clark, a Dividend Aristocrat, net income fell 8% in Q3 because of rising costs. The revenue outlook was reduced & the high end of its earnings outlook.  KMB is struggling with higher costs for oil, wood, pulp & other materials it uses in its products.  Price are being raised to make up for higher costs & it is relying on fast-growing overseas markets to make up for weakness in US demand.  EPS fell to $1.09 from $1.14 last year.  Adjusted EPS of $1.26 was in line with expectations.  But revenue rose 8% to $5.4B, beating expectations for $5.3B.  The revenue jump was helped by higher prices & by currency exchange translation.  Overall, it expects cost inflation to make a dent of $575-625M for the year, down from previous assumptions of $650-750M.  However, the company expects revenue increase of 4-6%, down from previous predictions of 5-7% & expects EPS of $4.80-4.90 after adjusting for one-time expenses. Previously, it guided for EPS to be in the lower half of a range from $4.80-5.05.  After doing well this year, the stock dropped 3.79 on the news.

Kimberly-Clark net income falls, though sales rise A

Kimberly-Clark Corporation (KMB)

Angela Merkel supporters praised her for getting France to drop demands to use the ECB to leverage euro crisis funds, but looked like making a meal out of the German parliament's new right to be consulted on how these are used.  "Merkel's Battle for our Euro," was the headline in the mass-circulation conservative paper Bild, saying she taught France's Nicolas Sarkozy "that the EFSF rescue fund cannot be used to print money" to solve the debt crisis.  "The chancellor must stick to her guns -- in the interests of Germany and of Europe," said the newspaper.  While her supporters in the lower house of parliament welcomed the assertiveness in the Sun summit from a leader often accused of dithering, they also risked delaying Europe's response to the debt crisis at a crucial juncture by insisting on a full debate before the 2nd summit on Wed.  Her Christian Democrats' (CDU) floor leader Volker Kauder was said to want a full debate rather than just a vote by the 41-member budget committee, which would be quicker & less risky while still fulfilling new rules on consulting MPs.  Some are not happy that Germany will have to bail out weaker countries which are not mending their extravagant spending habits.  The European debt mess plays on with no easy solutions.

Merkel Plans to Seek German Parliamentary Approval for EU Summit Measures


The stock market is having an excellent month, what else is there to say?  Dow is up almost 1K, mostly on hopes the Europeans will use magic to cure their debt problems.  Earnings have been mixed as shown by the 2 reports above.  One key theme is that earnings from the US business is soggy.  Europeans will come up with something to help the financial mess & that may make the stock market happy, since traders only have only short term visions.  But problems will are not going away.  Speaking of that, the concept of reducing the US massive deficits has not been getting a lot of attention lately.  The super committee in DC is supposed to come up with ways to reduce the deficit in a few weeks.  Markets may not like what they hear.

Dow Industrials (INDU)

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Nervous markets on inability to raise debt celing

Stock markets are taking the impasse over raising the debt ceiling fairly well.  Dow is down 61, but decliners over advancers almost 4-1 & NAZ fell 14.  Bank stocks are leading the way down.

S&P 500 Financials Sector Index

Value	204.33
Change	-2.12    (-1.0%)

The MLP index dropped 3+ to 370 & the REIT index fell 2+ to 250.  Junk bond funds were weak but Treasurries were strong on the flight to safety.  The yield on the 10 yearTreasury bond is back below 3%.  Oil fell for the first time in 5 days after the failure to agree on raising the debt ceiling, boosting concern of a default.  But gold climbed to a record on increased demand for the metal as a protection of wealth.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.035%
U.S. 2-year	0.403%
U.S. 10-year	3.015%

CLU11.NYM

...Crude Oil Sep 11

...99.03

..... 0.84

(0.8%)

GCN11.CMX

...Gold Jul 11

.......1,617.60

... 16.30

(1.0%)

The latest daily market update below:




Moody's downgraded Greece's bond ratings by a further 3 notches & warned that it's almost inevitable the country will be considered to be in default following last week's new bailout package.  The new EU package of measures implies "substantial" losses for private creditors & as a result, it cut its rating on Greece to Ca -- one above what it considers a default rating!  Though Moody's said a Greek debt default is "virtually certain," it noted that the new measures will increase the likelihood that Greece will be able to stabilize & eventually reduce its overall debt burden.  It also said the package benefits other eurozone countries by "containing the near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt."  Eurozone countries & the IMF agreed to give Greece a 2nd bailout worth €109B ($155B), on top of last year's bailout.  If all goes to plan, banks & other private investors will contribute €50B ($71B) to the rescue package until 2014 by swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value, or selling the bonds back to Greece at a low price.  This means bondholders will lose money on their Greek debt holdings!

Greece Rating Cut to Second-Lowest Level by Moody’s on ‘Orderly Default’

Reps & Dems prepared dueling plans for raising the US debt ceiling, unable to break a partisan stalemate over how to tackle the $14.3T debt & quell market concerns about a potential default Aug 2.  John Boehner told fellow Reps he was determined to force action on a 2-step debt-limit extension that would provide a roughly $1T, a shorter-term increase than president has requested, defying a veto threat & the administration’s warnings of dire economic consequences.  The president canceled fundraising appearances, the debt crisis is that serious!  Spending cuts by the gov will crimp the economic recovery.

Republicans, Democrats Prepare Rival Debt Plans

Photo:   Yahoo

Kimberly-Clark, a Dividend Aristocrat, profits fell 18%, dragged down by higher commodity costs & an increased tax rate.  It now expects 2011 adjusted earnings will likely be in the lower half of its previous range, but raised its full-year revenue guidance.  CEO Thomas Falk said that the commodity cost environment has gotten worse over the past 3 months, but that the company was keeping its full-year outlook because it planned to lower overhead costs & should benefit from favorable currency exchange rates.  But Falk said if input costs don't moderate, it's likely KMP 2011 adjusted earnings will be in the lower half of its range.  Q2 EPS was $1.03, down from $1.20 last year.  Adjusted EPS was $1.18, beating $1.14 analysts forecasted.  Revenue rose 8% to $5.26B on higher sales volumes & increased prices.  KMB maintained full-year guidance for adjusted earnings of $4.80-$5.05 & revenue is now expected to climb 5-7%. The prior forecast called for revenue to rise 4-6%.  The stock fell 59¢.

Kimberly-Clark 2Q profit falls on higher costsAP

Kimberly-Clark Corporation (KMB)

Sec of State Hillary Clinton reassured China, the top holder of American Treasuries, that the US will resolve its impasse over the debt ceiling & improve the country’s long-term fiscal outlook.  This is just another sign of how serious the debt ceiling impasse its.  Of course, even the pres is skipping fund raising events!  Nobody knows where this is going or how it will turn out.  But using Scotch Tape at the last minute to fix fundamental problems shows how badly this crisis is being handled.  The Chinese are worried about their massive investment in the US.  Stock markets have been hardly disturbed, at least so far.  Given the sloppy way US financial affairs have been handled in recent years, don't expect the crisis ending until the last hour on Aug 1, maybe even later!

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Markets are lower ahead of new week for earnings

Dow fell 52 from its yearly high, decliners ahead of advancers almost 3-2 & NAZ dipped 4.  Bank stocks slipped, taking the Financial Index into the red in the last hour.

S&P 500 FINANCIALS INDEX

Value	216.57
Change	-0.29   (-0.1%)

The MLP Index rose another 1+ to the 386s, setting a new record high while the REIT index fell pennies in the 241s (a multi year high).  The REIT index is up 6.3% YTD, slightly lagging the Dow.  Junk bond funds were off a penny or 2, near multi year highs, & Treasuries were flattish ahead of a $99B auction this week.  Oil dipped a little but near its yearly highs while gold reached near record levels on the weak dollar (the weakest since the Financial crisis in 2008).

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.05%
U.S. 2-year		0.65%
U.S. 10-year		3.37%

CLM11.NYM

...Crude Oil Jun 11

...111.45

... 0.84

(0.8%)

GCJ11.CMX

.....Gold Apr 11

......1,511.10

... 8.80

(0.6%)

Photo:   Bloomberg

More people bought new homes in Mar, giving the battered industry a small lift after the worst winter for sales in almost a half-century.  The Commerce Dept said new-home sales rose 11% last month to a 300,000 annual pace, following 3 straight monthly declines. But it remains far below the 700K pace viewed as healthy.  Last year was the 5th consecutive year of declines for new-home sales, it could take years before sales return to a healthy rate.  Poor sales of new homes mean fewer jobs in the construction industry. Each new home creates an average of 3 jobs for a year & $90K in taxes, according to the National Association of Home Builders.

Sales of New Homes in U.S. Rose 11.1% in March to 300,000 Rate




Photo:   Yahoo

Kimberly-Clark (KMB), a Dividend Aristocrat, reported Q1 net income fell 9%, from the rising costs of pulp, oil & other materials.  To fight back, it will raise prices & cut costs.  KMB also lowered the low end of its expectations for full-year earnings because of uncertainty about how much costs will climb.  EPS was 86¢, down from 92¢ last year.  Excluding one-time items, EPS was $1.09 below expectations of $1.17.  The bright spot was sales, overseas markets including Asia & Latin America were strong, though competition there will be fierce.  Revenue rose 4% to $5B. KMB expects sales to keep growing, & raised its predictions for 2011 growth.  KMB guided that excluding restructuring costs, EPS will be at least $4.80, compared with a previous minimum of $4.90. Analysts were expecting $4.95 on average.  The stock fell 2.46 & yields 4.4%

Kimberly-Clark Cuts Lower End of Earnings Forecast on Costs; Shares Slide

Kimberly-Clark Corporation (KMB)

RadioShack (RSH) Q1 earnings fell on weakness in its T-Mobile business & higher costs, prompting it to cut the top end of its full-year profit outlook. Sales at company-operated stores & kiosks open at least a year fell 0.6% in Q1 because of weak T-Mobile postpaid wireless sales.  In Feb, RSH said T-Mobile's product offerings were not competitive with those of other carriers. It reduced the top end of its 2011 outlook for EPS to $1.80 from $1.90, while keeping the low end at $1.60. RSH expects sales to rise at a low-to-mid single-digit percentage rate.  In Q1 EPS was 33¢, down from 39¢ a year earlier.  The results also included costs of 2¢ from early retirement of debt.  Sales rose 2.1% to $1.06B.  The stock was down 19¢.

RadioShack profit hurt by T-MobileReuters

Radioshack Corporation (RSH)

Weaker markets were to be expected.  Including today's loss, Dow is still up over 100 in the last week.  Initial earnings today are not encouraging.  Amazon (AMZN) was down fractionally in the 185s ahead of its earnings (Tues after the market close).  MLPs keep rising, taking their yields below 6%.  Gold continues to surge (up 1% YTD) on the weak dollar & a high level of tensions in the world. 

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