Markets edge higher despite weaker jobless data

Dow went up 25, advancers 2-1 ahead of decliners & NAZ added 16.  The Financial Index was up a fraction to 207.  The MLP index rose 2½ to 392 (helped by new regulations on fracking) & the REIT index was up 1 to the 253s.  Junk bond funds were mixed to higher & Treasuries had modest gains.  Oil was pretty much sideways while gold found a few buyers. 

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.266%
U.S. 10-year	1.954%

CLK12.NYM

...Crude Oil May 12

...102.40

..... 0.27

(0.3%)

GCJ12.CMX

....Gold Apr 12

.........1,653.00

... 14.20

(0.9%)

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The Labor Dept said weekly jobless applications dipped last week 2K to 386K, but that was after it revised up the previous week's data to show 8K more people applied for benefits than first estimated.  The 4-week average, rose 5K to 375K, the highest level in 3 months. This was discouraging news, suggesting jobs growth is slowing.

US jobless data take shine off markets AP

Photo:   Bloomberg

Americans bought fewer previously owned homes in Mar, a reminder that the housing market remains weak.  The National Association of Realtors said that home sales fell 2.6% to an annual rate of 4.48M, following a revised figure of 4.6M in Feb.  A mild winter may have encouraged more to buy earlier, essentially stealing sales from Mar.  The first 3 months of 2012 made up the best winter for sales in 5 years & the increase offers some encouragement ahead of the spring-buying season.  Still, sales remain far below the 6M rate that equates with healthy markets.  First-time buyers, who are critical to a housing recovery, rose to 33% of all purchases, but in healthy markets they make up at least 40%.  The supply of homes on the market fell 1.3% to 2.37M, which could help drive up prices further in the coming months.  One reason is that home foreclosures declined, although they are still high.  Homes at risk of foreclosure made up 29% of sales, down from 34% in Feb.  In healthier markets, foreclosures make up less than 10%.  Positive signs include mortgage rates hovering just above record lows & the median sales price of homes rose for the 2nd straight month in Mar, to $163K.  Housing is still far from a recovery.

Sales of Previously Owned Homes in U.S. Unexpectedly Declined Last Month

Photo:   Bloomberg

Verizon, a Dow stock, posted Q1 earnings & revenue that beat expectations as customers increased spending on services such as wireless data.  While wireless customer growth slowed, CFO Shammo said the mobile venture, Verizon Wireless, saw the fastest growth in mobile service revenue in 3 years as more customers used smartphones.  Verizon Wireless average monthly revenue per user (ARPU) for contract customers rose 3.6% to $55.43 compared with expectations for growth closer to 3%.  This was helped by data service revenue that grew 16% to $23.80.  Shammo said the growth should continue as more people buy smartphones & the company offers new shared data service plans this summer under which customers will be able to connect more than one device under a single data service plan.  "We're confident we'll continue to accelerate our growth in this area," Shammo said.  VZ sold 3.2M iPhones & 2M phones using its fastest network based on Long Term Evolution (LTE) technology.  EPS rose to 59¢ compared with expectations for 58¢ & 51¢ last year.  Revenue rose to $28.2B from $27B & was ahead of the forecast for $28.2B.  Stockholders liked the news, taking it up 86¢.

Verizon Profit Beats Estimates as Slowing IPhone Sales Widen Profit Margin

Verizon Communications Inc. (VZ)

Markets are back to spinning their wheels, although buyers have the upper hand presently.  The US economic data is so-so.  Bank earnings have not been inspiring.  Spain is muddling by but that looks like it will get a lot worse in the short term.  The Dow chart shows after cracking thru 13K it has been going nowhere.  Bulls say that is a welcome way to digest big gains in the last 6 months.  I don't know.

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Markets drift lower as traders watch Europe

Dow was under water all day but losses narrowed in the PM.  Dow finished down 17, decliners over advancers 3-2 & NAZ fell 3.  Bank stocks were lower on worries about the Greek debt situation.

S&P 500 Financials Sector Index

Value	197.40
Change	-0.96     (-0.5%)

The MLP index was up a fraction while the REIT Index fell more than 1, from its yearly high, to under 251.  Junk bond funds were mixed to higher & Treasuries sold off, bringing the yield on the 10 year up to 1.9%.  Oil was lower, following the lead of stocks, although Mideast tensions could see it spike up soon.  Gold ended lower, pressured by a rising dollar & moving alongside oil.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.230%
U.S. 10-year	1.898%

CLH12.NYM

...Crude Oil Mar 12

...97.00

..... 0.84

(0.9%)

GCG12.CMX

...Gold Feb 12

......1,721.60

... 16.30

(0.9%)

The coalition gov in Greece caved in to demands to cut civil service jobs, announcing 15K positions would go this year, amid mounting pressure to agree on austerity measures.  The announcement signals a shift in Greece's policy, state jobs have far been protected so far.  A gov spokesman said the job cuts would be carried out under a new law that allows such layoffs.  In response, unions have called a 24-hour general strike Tues after 4K protesters joined protest rallies today.  Besides austerity measures, the bailout also depends on separate talks with banks & other private bondholders to forgive €100B ($131.6B) in Greek debt.  Greek gov officials say they expect private investors to take an overall cut of up to 70% on their bonds.  What else can they say?   The leaders have already agreed to cut 2012 spending by 1.5% of GDP, improve competitiveness by slashing wages & non-wage costs, & re-capitalize banks without nationalizing them.  Creditors are also demanding more spending cuts.  The gov has already promised to reduce the 750K strong broader public sector by 20% by year end, but has so far insisted it could reach that target thru staff attrition.  Can you spell "looming bankruptcy?"

Greece caves in on civil service firings A


Also on the intl front, the president ordered a freeze on all Iranian gov & financial institutions’ assets that are under US jurisdiction. The president cited “deceptive practices” of the Iranian central bank in hiding transactions of sanctioned parties & its failure to prevent money laundering, concluding that Iran activities pose an “unacceptable risk” to the intl financial system.  The executive order follows comments by US officials who have expressed concern that Israel may attack if intl sanctions fail to stop Iran’s pursuit of nuclear-weapons capability.  The order blocks all property & interests in property belonging to the Iranian gov, its central bank, & all Iranian financial institutions, even those that haven’t been designated for sanctions by the Treasury Department.  Iran has to be watched closely because it's a wildcard that can cause major financial problems. 

Obama Freezes Iranian Government Assets

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Photo:   Yahoo

Verizon (VZ), a Dow stock, & Coinstar's Redbox (CSTR) unit have formed a video joint venture to provide services aimed at competing against Netflix (NFLX).  This will combine the Redbox DVD rental kiosk business with an internet video offering from VZ & mark VZ's first foray into video streaming outside of its network operating region as the telephone company.  However, the venture's success will depend largely on the price of the service & the depth of content it has available.  VZ has agreed to make video content available for the streaming service.  The venture, 65% owned by VZ & 35% by CSTR, will offer its first products in H2.  VZ was up 30¢ & CSTR gained 90¢.

Verizon Forms Venture With Coinstar’s Redbox to Challenge Netflix in Video

Verizon Communications Inc. (VZ)

Coinstar, Inc. (CSTR)

There is a growing feeling the the Greek debt mess will evolve into a full bankruptcy.  There are just too many headwinds & no solutions which make everybody happy.  Nobody knows how a bankriptcy will play out, it's never happened before.  Then there's the question about the € if Greece leaves (is kicked out).  DC is not getting a lot of attention, but only 3 weeks left to extend tax cuts which seems impossible with the gridlock.  But markets are taking everything in stride with Dow near its highest levels since mid 2008.

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Markets nervous over European debt negotiations

Dow fell 36, decliners over advancers 3-2 but NAZ was up 2.  The Financial Index fell 1+ to 190, still near its 6 month high.

The MLP index pulled back a fraction to just under its record 399 & the REIT index was up a smidgen in the 241s (another 6 month high).  Junk bond funds were mixed as were Treasuries following a recent sell-off.  Oil fell over concerns that the euro-zone debt crisis may spread.  Gold also lost ground, following a nice gain in Jan.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields"

U.S. 3-month	0.030%
U.S. 2-year	0.239%
U.S. 10-year	2.062%

CLH12.NYM

...Crude Oil Mar 12

...98.68

.... 0.90

(0.9%)

GCF12.CMX

...Gold Jan 12

.......1,664.80

... 13.20

(0.8%)

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Photo:   Bloomberg

Verizon, a Dow stock, paid dearly to put iPhones in the hands of subscribers, holding back profits in the hope that its customers will rack up higher monthly bills & stay loyal.  Q4 saw the launch of the iPhone 4S & it  sold sold 4.3M (7.7M smartphones total).   But higher sales meant lower profits.  VZ buys iPhones from Apple (AAPL) for $600 that are sold in stores for $200.  VZ lost $2B, or 71¢ in  Q4 which compares with income of 93¢ last year.  Excluding the pension effect & another one-time item, EPS was 52¢, a penny shy of the forecast.  Revenue rose 7.7% to $28.4B, in line with analysts' expectations.  Wireless accounted for all of the revenue increase, as the wireline division saw a small decrease.  Usually, the overall revenue increase is driven by higher monthly wireless service revenues, as it gains customers.  But this time, the largest contributor to the rise in revenue was phone sales, which doubled to $2.2B.  The stock fell 64¢.

Verizon Posts Loss on Pension Costs as Rising IPhone Sales Boost Expenses

Verizon Communications Inc. (VZ)

Johnson & Johnson another Dow stock & Dividend Aristocrat, Q4 profit was hit with a slew of charges for recalls, litigation & an acquisition dragged down income.  But revenue jumped last year, ending an unprecedented 2-year decline & profit to beat forecast. Q4 EPS was 8¢, down from 70¢ last year.  Excluding charges, EPS was $1.13.  Revenue totaled $16.3B, up from $15.6B last year.  Forecasts were for EPS of $1.09 on revenue of $16.3B.  "We delivered solid results for 2011, built on the strong growth of our recently launched pharmaceutical products, and continued the steady momentum of new product approvals across all our businesses," CEO Bill Weldon said.  Revenue fell 3.4% in the US to $7B, but jumped 10.2% in foreign countries to $9.27B.  The US decline was mostly due to an 8% drop in sales of prescription drugs.  JNJ now expects 2012 EPS of $5.05-$5.15 per share, excluding special items, below forecasts of $5.20.  The stock gained 4¢.

J&J Forecasts 2012 Profit Below Estimates

Johnson & Johnson (JNJ)

Photo:   Bloomberg

McDonald's, another Dow stock & Dividend Aristocrat, had a strong Q4.  Revenue surged 10% to $6.8B & EPS rose to $1.33.  Comparable store sales increased 14% during in Q4 & 14% for the full-year, with Europe up 15%, & Asia Pacific, Middle East & Africa comps gaining 27%.  France, the UK, Russia & Germany led European gains.  Forecasts were for EPS of $1.30 & top line results of $6.8B.  "During 2011, McDonald's continued momentum drove higher profitability and market share gains as we fortified our leadership position around the world," McDonald's CEO Skinner said . "The ongoing strength of McDonald's results is rooted in our Plan to Win with a relentless focus on what matters most to our customers. We are enhancing the customer experience – from our menu and service to our value and convenience – while giving more people more reasons to visit McDonald's more often."  MCD will spend more than $2.9B over the next 11 months opening new locations & renovating its existing footprint (remodeling 2400 stores, while opening 1300 new outlets).  Skinner expects momentum to continue through 2012, with Jan comps likely to be up 5.5%-6.5%. The stock fell 1.49.

McDonald’s Fourth-Quarter Profit Rises 11% as U.S. Same-Store Sales Gain

McDonald's Corporation (MCD)

Markets are doing little as they watch the Greek debt mess drone on.  The biggies are meeting in Davos, Switzerland, on a paid holiday to have a good time & decide little.  Earnings reports are OK but not spectacular.  But in all fairness, Dow is hanging in there, close to 11.8K ceiling, its highest level since it plummeted in late Jul.  While the Greek talks are in limbo, markets are not expected to do much.

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