Mixed markets on mixed earnings and economic data

Dow fell 22, decliners barely ahead of advancers & NAZ was down 13.  Bank stocks also had a restful day.

S&P 500 Financials Sector Index

Value	189.62
Change	-1.72    (-0.9%)

MLPs took a breather after yesterday's record run & the REIT index was up 1+ to the 246s.  Junk bond funds inched higher & Treasuries had a good day.  Oil rose on hopes that low interest rates will drive more demand for oil.  Gold shot up 22, a 6 week high.

Alerian MLP Index

Value	400.74
Change	-0.83    (-0.2%)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.211%
U.S. 10-year	1.930%

CLH12.NYM

Crude Oil Mar 12

99.75 2:56PM EST

0.35 (0.35%)

Photo:   Bloomberg

Durable goods orders climbed more than forecast in Dec, pointing to a rebound in business investment that could help support the US economy in early 2012.  Bookings for long-lasting goods advanced 3% after rising 4.3% in Nov, the biggest back-to-back gains in almost a year, according to the Commerce Dept.  Growing demand for raw materials from emerging markets & the need to replenish depleted inventories & update equipment are swelling order backlogs.  Combined with fewer layoffs & added confidence, the gains may help shield the US from a slowdown in Europe caused by the region’s debt crisis.  Orders climbed 10 % last year after a 15.5% gain in 2010.  

Durable Goods Orders in U.S. Climb 3%, Stronger Than Economists Estimated

• 

Photo:   Yahoo

3M, a Dow stock & Dividend Aristocrat, profit inched up 3% in Q4 as more demand for products for the home, office & automobile offset declining sales of high-tech products.  Growth in developing countries, where MMM now derives more than half of its sales, is slowing.  But MMM believes rapid growth in China & other emerging nations will resume in H2.   MMM is maintaining its current profit forecast for 2012 for EPS of $6.25-$6.50.  Analysts are predicting EPS of $6.33.  Q4 EPS was $1.35 compared with $1.28 in the prior year.  Revenue rose 6% to $7.09B.  The stock gained 1.10.

3M posts small profit increase in 4Q AP

3M Company (MMM)

Photo:   Bloomberg

AT&T, another Dow stock & Dividend Aristocrat, predicted 2012 earnings that trailed expectations as record demand for smartphones such as the iPhone drive up subsidy costs, projecting “mid-single-digit or better earnings growth” for 2012.  Analysts are predicting 11%.  ATT reported a Q4 loss of $6.7B because of a pretax charge of about $4B for the failed takeover of T-Mobile & expenses for revaluing benefit plans & other assets.  Activations of the iPhone soared to 7.6M in Q4, boosted by the new 4S model & a previous version offered for free with a contract.  ATT gained 717K subscribers on monthly contracts, more than the 574K projected.  Sales rose 3.6% to $32.5B.  The net loss was $1.12 a share, compared with a profit of 18¢ in the prior year.  EPS, excluding some items, fell to 42¢, under the 43¢ predicted.  Revenue at the wireless business increased 10% to $16.7B, boosted by web browsing &-mailing by smartphone users.  Smartphone subsidies helped reduce operating profit to 15.2% of sales from 22.9%.  Making money in the phone business is getting tougher.  The stock was off 76¢,

AT&T Earnings Forecast Falls Short as IPhone Demand Boosts Subsidy Costs

AT&T Inc. (T)

This was another uneventful day in the markets, but Jan has been a good month.  Dow is up 270 this week & over 500 in Jan.  Meanwhile, long term Treasuries & gold (traditional safe havens) are also having a good run in Jan.  Back to reality, debt relief talks were restarted in Greece.  Duhh!!  I think we heard that a week ago (or was it a month ago).  MLPs took a day off after their rise to new record highs.  The index is up 13 in Jan, not bad.  New record highs bring correspondingly lower yields, the index yield is below 6%.  However, with a low interest rate environment projected to last for years, maybe "only 6%" will be less of a problem.

Dow Industrials

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Markets tumble on mediocre earnings and European debt worries

Dow dropped 122, decliners over advancers 4-1 & NAZ lost 32.  Bank stocks led the way lower although the Financial Index is overbought in Oct.

S&P 500 Financials Sector Index

Value	176.76
Change	-3.66     (-2.0%)

The MLP index fell 1½ to the 367s & the REIT index was off 3+ to the 222s.  But the charts show both are having an outstanding month.  Junk bond funds were a little lower & Treasuries rose on increased worries over European debt issues.  Gold also benefited from those thoughts.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.005%
U.S. 2-year	0.275%
U.S. 10-year	2.184%

CLZ11.NYM

....Crude Oil Dec 11

...93.51

..... 2.24

(2.5%)

GCV11.CMX

...Gold Oct 11

......1,667.00

... 15.50

(0.9%)

Get the latest daily market update  below:

Photo:   Bloomberg

Consumer confidence unexpectedly dropped to its lowest level in 2½ years in Oct as consumers fretted about job & income prospects.  The Conference Board said its index of consumer attitudes fell to 39.8 from a upwardly revised 46.4 the month before, the lowest level since Mar 2009 (when a dreary stock market was weighing on the minds the public).  Expectations were for the index to rise to 46.0.  The present situation index slipped to 26.3 from 33.3, while the expectations index declined to 48.7 from 55.1.  The expectations gauge was also at its lowest since Mar 2009.  "Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased," Lynn Franco, director of the Conference Board Consumer Research Center, said.  Consumers' view of the labor market was mixed. The number who said they found "jobs plentiful" fell to 3.4% from 5.6%.  However, the "jobs hard to get" category eased to 47.1% from 49.4%. Later this week, when GDP is released, it should show growth at a 2½% rate.  While that's not recession data, it feels like one to many.

Consumer Confidence Falls to Two-Year Low




Photo:   Yahoo

3M, a Dow stock & Dividend Aristocrat, lowered its earnings expectations for the year on slowing imports from overseas, especially in products like LCD TVs & other electronics from Asia that drive its business.  MMM expects EPS of $5.85-5.95 compared with $6.10-6.25 in previously guidance.  Core sales are expected to grow 3-4%, compared with a previous forecast of 6-7½% growth. 3M issued the outlook as it reported Q3 EPS fell to $1.52 from $1.53 last year.  Revenue rose 10% to $7.5M, mostly driven by acquisitions & gains in foreign exchange.  Analysts expected $1.61 on revenue of $7.8B.  A number of its customers reduced inventories during Q3, expecting slowing demand.  The stock slumped $3.92 (5%).

• 3M lowers view on slowing growth- AP

3M Company (MMM)

Photo:   Bloomberg


UPS reported higher quarterly profits as increased pricing, cost cutting & technology improvements helped compensate for domestic shipping volume dulled by a sluggish economy.  Iit affirmed its outlook for record 2011 results.  The US economy appears to have stabilized & is growing slowly, after concern about a possible double-dip recession stifled consumer demand earlier this year, UPS said.  The final 2 weeks before Christmas could have a meaningful effect on Q4 results if consumer demand picks up & retailers low on inventory need fast shipment of goods, CEO Scott Davis said.  "Over the last month or so, we are starting to see, I could say, better economic numbers, so there is more optimism out there, and that could turn things around," Davis said. "We are still expecting a slow-growth economy, but I don't think it is as negative as people were thinking two and three months ago."  UPS has forecast record EPS of $4.15-4.40 this year as it cut costs & raised shipping rates in the face of a slowly expanding global economy.  UPS & FedEx (FDX) are considered economic bellwethers because of the sheer volume of packages they handle.  The value of packages handled by UPS trucks & planes each year is equivalent to about 6% of US GDP & 2% of global GDP.  Domestic shipping volume averaged 12.74M packages a day, little changed from 12.73M last year.  Operating margins improved on higher yields, as well as on more efficient networks.  Intl shipping volume averaged 2.34M a day, up from 2.24M.  Revenue in this segment rose more than 14%, twice the rate in the domestic segment, driven by 6.5% growth in export volume.  Q3 EPS rose to $1.06 from 99¢ a year earlier, slightly ahead of expectations for $1.05.  Revenue rose 18% to $13.17B.  The stock fell 1.72 (2%).

UPS Profit Tops Estimates on Higher Rates

United Parcel Service, Inc. (UPS)

A meeting of European finance ministers was cancelled,adding nervousness to the fragile situation with sovereign debts. This month the stock market has soared largely on hopes that these guys would solve complicated debt issues with magic tricks.  But the issues are complicated & it will take a lot to get this divided group to agree to major solutions. The earnings picture is a mixed bag, although some view it in a more positive light.  The US economy is sputtering & that is shown in many of the reports from the multi-nationals.  After rising 1K in Oct, Dow is entitled to a rest.  Today's sell off may be nothing more than that.  But I see the undercurrent as being darker. 

Dow Industrials (INDU)

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Markets pare losses

Dow was under water all day.  After being down 80, bulls were buying & in the end Dow was down only 3, decliners 5-4 ahead of advancers & NAZ was flat.  Bank stocks also rallied in the PM, paring the loss for the Financial Index.

S&P 500 FINANCIALS INDEX

Value	219.98
Change	-0.51  (-0.2%)

The MLP index fell a fraction in the 368s & the REIT index was up 2½ to the 228s, both doing little this year.  Junk bond funds generally edged higher.  But Treasuries rallied, taking the yield on the 10 year Treasury bond down 9 basis points to 3.32% (although it has been fairly flat over the last 2 months).

Treasury yields:

U.S. 3-month		0.15%
U.S. 2-year		0.58%
U.S. 10-year		3.32%

Alerian MLP Index   ---   1 year



Dow Jones REIT Index   ---   1 year



10-Year Treasury Yield Index




Oil continued to drop on speculation that US crude supplies rose for a 2nd week as imports increased & refineries operated at the lowest rate since Nov.  Those hedge fund guys keep selling gold (down 100 from its recent peak).

CLH11.NYM

...Crude Oil Mar 11

...86.28

.... 1.59

(1.8%)

GCF11.CMX

...Gold Jan 11

........1,331.50

.. 13.00 (1.0%)

*** Gold Super Cycle *** Click Here

Photo:  Bloomberg

Residential real-estate prices dropped in Nov by the most in a year.  The S&P/Case-Shiller index of home values in 20 cities fell 1.6% from the prior year, the biggest 12-month decrease in a year.  Mounting foreclosures will probably throw more properties on the market this year, further depressing prices, homeowners’ equity & construction.  The housing market is viewed as being in a state of hibernation because of all the foreclosure problems. 

U.S. Home Prices Fell 1.6% in November, Most in a Year, Case-Shiller Says



3M (MMM), Dow stock & Dividend Aristocrat, said that profitability suffered in Q4 as higher advertising & research spending ate into its margins & warned that rising raw material costs would pressure its bottom line.  The warnings came as MMM reported Q4 profits that topped expectations & raised its outlook for earnings in 2011.  MMM posted Q4 EPS of $1.28 which compares with $1.30 last year.  Sales rose 9.6% to $6.7B, lifted by especially strong growth in Asia & Latin America.  Analysts had expected EPS of $1.27 on sales of $6.6B.  But Q4 results appeared to disappoint investors wowed by recent blowout earnings from Dow companies  CEO George Buckley also expressed doubts about the strength & sustainability of the US economic recovery.  In a sign of the company's caution, 3M said it plans to hold back discretionary spending to protect its margins in the face of rising raw material costs, higher pension costs & tax rates & a lackluster economic recovery in the US, where a high unemployment rate & chronic weakness in the housing market have soured consumer sentiment. "We will spend cautiously in the early part of this year, to see where things go," Buckley said.  "I don't expect to see big improvements in the U.S. until employment takes a turn for the better."  But  MMM raised its forecast for 2011 EPS to a range of $5.95-$6.20 a share, up from a previous forecast of $5.90-6.10 after earning $5.63 in 2010.  The stock fell $1.82. 

 3M margins under pressure, shares fallat Reuters

MMM   ---   1 Year




The bulls were trying to reassert command in the PM, but they were only partially successful.  Earnings & guidance giving inconclusive results are not what the markets want to hear. Pretty good news was not quite good enough!  Dow remains under the important 12K level.  MLPs continue strong although they've been flattish this year despite favorable earnings reports & the usual distribution increases (qtr over qtr).  Markets are anxious to hear what the pres has to say tonight, probably not much new.  Tomorrow, the press release after the FOMC meeting in the PM should be the major news story.  

Dow Jones Industrials

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