Markets falll on profit taking

Dow fell 67, decliners over advancers 5-2 & NAZ was off 19.  Bank stocks are in demand, taking the Financial Index up a fraction to 214.

The MLP index fell 1½ to 400 after yesterday's big day while the REIT index was flat at 253, its yearly high.  Junk bond funds rose as did Treasuries following major selling last week.  Oil dropped from the highest price in almost 3 weeks on signs US crude supply is rising & speculation that Saudi Arabia may boost output (from already high levels).  Gold continues weak, hurt by India boosting taxes on gold purchases.

JPMorgan Chase Capital XVI (AMJ)

Treasury yieldds:

U.S. 3-month	0.092%
U.S. 2-year	0.371%
U.S. 10-year	2.348%

CLJ12.NYM

.....Crude Oil Apr 12

...106.39

...... 1.70

(1.6%)

GCH12.CMX

...Gold Mar 12

........1,642.00

... 24.90

(1.5%)

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Photo:   Bloomberg

Greek bonds & credit ratings are factoring in bailout III that will require greater concessions from intl creditors.  Within a week of bailout II, the IMF said Greece may require additional funding or a further debt restructuring.  PIMCO, which runs the world’s biggest bond fund, said it remains “cautious” on euro-area gov debt even after the largest-ever sovereign refinancing because the risk remains that Greece will leave the single-currency area.  The price of Greek bonds maturing in 2042 trade at 21.48¢ on the € with a yield of 15%. S&P rates the securities CCC, its 4th rank above default, citing questionable growth prospects, a weakening political consensus to implement budget cuts, & a “still large” debt burden.  Yields on Portuguese bonds due in 2037 were at 11%, & are priced at 41.8¢.  The securities are rated BB by S&P, 6 steps above the new Greek securities.  The Greek ratio of debt to GDP will fall to 116% in 2020 from 165% last year if the nation’s “ambitious” program to overhaul the economy is implemented, according to a report posted on the website of the EU.  Some say efforts should be made to push Greece’s debt level below 90% of GDP.  Who said the Greek debt mess is over?

Greece’s Third Bailout Seen in Debt With Junk Grade: Euro Credit


Permits for homebuilding neared a 3½ year high in Feb, even as groundbreaking activity slipped.  New building permits surged 5.1% to an annual rate of 717K units according to the Commerce Dept, the highest rate since Oct 2008 & exceeded expectations for an advance to a 690K pace from the Jan 682K rate.  Housing starts slipped 1.1% to a rate of 698K units.  Jan starts were revised up to a 706K unit pace from a previously reported 699K unit rate.  Residential construction is expected to add to economic growth this year for the first time since 2005.  While home building accounts for about 2.5% of GDP, it remains a major force in the economy because every house built creates 2.5 jobs.  Sentiment among home builders held at a near 5-year high in Mar & they are optimistic about sales over the next 6 months.  Housing starts last month were pulled down by a 9.9% drop in the construction of single-family homes - which account for a large portion of the market.  Basically the news is less dreary than last year.

Housing in U.S. Heals With Starts Near Three-Year High: Economy

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Photo:   Yahoo

Tiffany Q4 profit slipped, as wealthy customers continued to buy its priciest items but demand for its more modest jewelry fell.  The lower-than-expected earnings broke a 5-qtr streak of better-than-expected results.  But the company was optimistic about prospects for 2012, predicting both higher profits & revenue.  For fiscal Q4 ended Jan 31, EPS was $1.39, down from $1.41 in 2010.  Results fell below expectations of $1.42.  Revenue rose 7.8% to $1.19B, matching predictions.  Revenue at stores open at least a year rose 5%, as the average price per unit sold increased, partially a result of higher metals & diamond costs that were passed on to customers.  European sales increased just 3% to $142M. Asia-Pacific sales jumped 19% to $225M & Japan sales rose 12% to $204M.  Sales in the Americas region rose 5% to $605M & same-store sales increased 3%.  In the Americas, sales of items priced below $250 fell, while demand increased for higher priced product categories.  For 2011, EPS was $3.40, up from $2.87 in 2010.  Revenue rose to $3.64B from $3.09B.  TIF projected a 2012 EPS of $3.95-$4.05, ahead of expectations of $3.93.  Revenue is expected to rise about 10%, largely as a result of higher Asia-Pacific & Americas spending.  The stock liked the report & rose $4.55 (6%).

Tiffany Jumps After Annual Profit Forecast Exceeds Estimates

Tiffany & Co. (TIF)

Stocks are suffering from mild profit taking.  Again, nothing dramatic is going on in the background.  Apple (AAPL), fell 4 after yesterday's big run up.  Dow is still looking positive, holding above 13K which the bulls like to see.

Dow Industrials

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Higher markets on hopes for Greek bailout

Dow advanced 97, advancers over decliners 4-1 & NAZ was up 29.  Higher banks stock are helping lift the markets.

S&P 500 Financials Sector Index

Value	184.73
Change	3.24    (1.8%)

The MLP index wa up a tad at 391 while the REIT index shot up 3+ to the 234s.  Junk bond funds rose & Treasuries were flattish with the yield on the 10 year Treasury still under 2%.  Oil rose for the first time in 4 days on growing concern that tension in the MidEast may disrupt supply.  Gold jumped to the highest in almost 3 weeks as the dollar’s drop bolstered demand for commodities.

ALERIAN MLP Index



DJ REIT INDEXDJR

Treasury yields:

U.S. 3-month	0.005%
U.S. 2-year	0.244%
U.S. 10-year	1.968%

CLG12.NYM

...Crude Oil Feb 12

...103.04

...... 1.73

(1.7%)

GCF12.CMX

...Gold Jan 12

.........1,636.10

... 28.60

(1.8%)

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Wholesale businesses barely increased their stockpiles in Nov, even though their sales grew strongly.  The data suggest many companies underestimated consumer demand & may boost stock levels in the coming months which would lift economic growth.  The Commerce Dept said that inventories at the wholesale level edged up 0.1% in Nov.  Sales at the wholesale level rose 0.6% after a stronger 0.8% increase in Oct.  The modest increase in inventories pushed total wholesale stockpiles up to $469B, an increase of 22.2% from the low hit in Sep 2009.  Stockpiles of metals, machinery & clothing increased.  Companies tend to build their inventories when they expect stronger sales in the coming months.

U.S. Wholesale Inventories Rise Less-Than-Forecast 0.1% as Sales Gain 0.6%

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Photo:   Yahoo

Tiffany sales over the holiday season weakened markedly in the US & Europe, prompting it to lower its full-year profit forecast.  Layoffs & lower bonuses on Wall Street & in London's City as well as a growing debt crisis in the euro zone have cast a pall on high-end jewelry spending in 2 of its most important markets.  Sales at the famous store in Manhattan, which accounts for 8% of revenue, were down 1% in Nov & Dec.  The decline would have been worse if not for intl tourists.  In Europe, sales at stores open at least a year fell 4%, hurt in particular by a weak British market which is also reliant on banker bonuses.  For Nov & Dec, worldwide sales rose 7% to $952M, a slower pace of growth than last year's 11%.  Company wide same-store sales were up 4%.  Now TIF expects EPS of $3.60-3.65 for the year ending Jan 31, down from its earlier forecast of $3.70-$3.80.  It got some relief in Asia, where sales excluding Japan rose 19% to $165M.  The stock sank 6.94 (10%).  It may be tougher to tax the rich in US.

• Tiffany Reduces Annual Profit Forecast

Tiffany & Co. (TIF)

Greece's talks with private creditors over a bond swap deal are making progress & close to reaching an agreement.  Under the deal, creditors would accept a 50% reduction in the face value of gov bonds, potentially cutting the country's debt by €100B ($128B).  The bond swap, part of a €130B new rescue package agreed by European leaders in Oct, seeks to ease Greece's massive deficit & help the country emerge from a financial crisis.  Greece hopes to wrap up talks ahead of a visit by intl debt inspectors next week.  Without the rescue funding, Greece would not be able to redeem the bonds.  A gov official said that while there was no agreement yet on the bond swap, known as the Private Sector Involvement ( PSI), the discussions were at a "satisfactory" point.  Negotiations on the details have dragged on amid disagreements over how much of a hit, "haircut," banks & other private investors should take.  The Greek plays on, hoping to reach a successful conclusion.

Greece: bond swap talks satisfactory, no deal yet AP


Alcoa (AA), the first Dow stock to report, had a Q4 loss (which was expected) but forecast 7% growth in global aluminum demand growth in 2012, with strength in the aerospace & automotive markets.  The stock was up 8¢ (less than1%).  That was good enough to make the markets feel better about earnings season.  OK!  Hopes are riding high that Greece will get lenders to accept a 50% haircut on the debt.  I call this a fragile basis for a rally, but buyers are returning to the markets.

Dow Industrials

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Markets advance on Bernanke rally

Stocks rallied after Ben Bernanke said the US is on track for long-term economic growth, but trading volume was light,  Dow was up 134, advancers over decliners 4-1 & NAZ shot up 60.  Banks had a more mild rally & the chart for the Financial Index still looks dismal.

S&P 500 Financials Sector Index

Value	171.82
Change	1.71    (1.0%)

The MLP index had another good day, but is learning to live below 250 which had been a critical support level.  The REIT index was up 3+ to 219.  Junk bond funds were up over 1% & Treasuries were higher.  Oil did little, trying to assess how the Libyan situation will affect supplies, not to mention possible disruptions in the northeast with the storm hitting over the weekend.  Gold rose for a 2nd straight day after Bernanke offered no plan to provide further stimulus for the economy.

Alerian MLP Index

Value	342.87
Change	3.84     (1.1%)

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Treasury yields:

U.S. 3-month	-0.005%
U.S. 2-year	0.192%
U.S. 10-year	2.191%

CLV11.NYM

...Crude Oil Oct 11

...85.44

... 0.14

(0.2%)

Photo:   Yahoo

Boeing, a Dow stock, finally got the green light from the US gov to enter its 787 Dreamliner into commercial service.  The first delivery will be  next month to Japan's All Nippon Airways.  The Dreamliner, which promises to raise the bar for fuel efficiency & passenger comfort, is about 3 years behind schedule & several $B over budget.  BA has 827 orders for the $185M plane.  Its airframe is made largely of light-weight carbon composites that help lower fuel costs. The composites also allow various improvements for passengers such as more comfortable cabin air pressure & bigger windows.  BA expects a production rate of ten 787s per month by the end of 2013. However kinks in the supply chain have caused several delays.  The stock was up 1.70 (3%).

Boeing Sets First 787 Delivery for September After Three Years of Delays

Boeing Company (The) (BA)

Photo:   Yahoo

Tiffany raised its full-year profit outlook as more shoppers worldwide bought its jewelry during the bridal season, helping it overcome rising gold & diamond costs.  Sales gains were strong across the board in Q2, a period that includes the Mother's Day & bridal seasons, which are 2nd in sales only to the end-of-year holidays for jewelers.  CEO Stephen Kowalski said that sales so far in Q3 are outpacing Tiffany's own forecasts despite continuing economic uncertainty.  TIF expects sales to rise by a high teen percentage for the year ending in late Jan, up from a previous forecast of a mid-teen percentage increase.  At the flagship store in Manhattan's, where it gets about a tenth of its business, sales rose 41%, helped by intl tourists.  In Asia, outside of Japan, revenue rose 45% excluding the effect of a weak dollar, thanks to the appetite of China's emerging middle class for Western luxury brands.  Sales also rose by double digits in Europe, where wealthy Russian & Chinese tourists account for as much as a quarter of total luxury spending.  Sales rebounded in Japan, which is still recovering from the earthquake in Mar.  Overall, sales, excluding the effect of currency translations, rose 24% to $872M in Q2, while sales at stores open at least one year rose an impressive 22%.  Gross margins rose 1.2 percentage points to 59%, enough to absorb higher costs for gold, diamonds & silver.  Excluding one-time items, such as the cost of relocating its NY staff to new offices, EPS was 86¢, far above the 70¢ forecasted.  Full-year profit outlook was raised 20¢ for EPS to $3.65-$3.75, above the $3.56 analysts were expecting. The stock rose $5.90 (9%) as its customers are immune to problems in the rest of the world.

Tiffany Advances After Raising Full-Year Profit Forecast on Sales in Asia

Tiffany & Co. (TIF)

Stocks rallied as Ben indicated the economy isn’t deteriorating fast enough to warrant any immediate stimulus.  But it's hard to make too much of the thinking with light volume.  The biggest news is about what damage the storm will do to NYSE & stocks.  Next week should continue light, assuming no major news developments on European debts (where they are working hard to patch holes), etc.  Dow rose 450 this week, good but it's still down 900 in Aug.  Next comes Sep, the toughest of the year for markets, when the politicos return from holiday & try to fix the massive gov deficits.  Gold remains strong, a troubling sign for further stock market advances.

Dow Industrials (INDU)

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