Markets muddle along waiting for a Greek bailout

Stocks hardly budged although decliners outnumbered advancers 3-2 as eyes continue to watch Greece.  Bank stocks fell.

S&P 500 Financials Sector Index

Value	197.93
Change	-0.82    (-0.4%)

The MLP index was up a fraction & the REIT index fell 2½ from its yearly highs.  Junk bond funds were little changed.but Treasuries saw selling, taking the 10 year yield well over 2%.  Oil & gold rallied on increased nervousness over the Greek debt mess.

Alerian MLP Index

Value	397.35
Change	0.22    (0.1%)

Treasury yields:

U.S. 3-month	0.076%
U.S. 2-year	0.250%
U.S. 10-year	2.028%

CLH12.NYM

...Crude Oil Mar 12

...99.71

.... 1.00

(1.0%)

GCG12.CMX

...Gold Feb 12

.....1,747.40

... 18.10

(1.1%)

Get the latest daily market update below:

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Photo:   Yahoo

Greek leaders clinched a long-stalled deal on reforms & austerity measures needed to secure a bailout & avoid a messy default.  The EU & IMF have been exasperated by a lack of agreement on sacrifices they demanded in return for a €130B ($172B) bailout.  Greek Finance Minister Venizelos set off for Brussels without a complete deal after all-night talks.  One sensitive issue, pension cuts, was left unresolved.  Officials say the full package must be agreed with Greece & approved by the EU, IMF & European Central Bank by Wed so paperwork can be completed in time to avoid a chaotic default.  The clock is ticking but don't expect much from this Scotch-Tape approach to solve  fundamental economic problems of spending too much.

Draghi Softens Outlook on Risks as ECB Refuses to Show Its Hand on Greece

Photo:   Bloomberg

First- time claims for unemployment insurance unexpectedly declined last week. Applications for jobless benefits decreased 15K to 358K according to the Labor Dept.  The forecast had been for 370K.  The 4-week moving average declined to 366K, the lowest since Apr 2008.  But the number continuing to collect benefits rose 64K to 3.52M.  Those who’ve used up traditional benefits & are now collecting emergency & extended payments increased by 18K to 3.5M.  The unemployment rate among people eligible for benefits, which tends to track the jobless rate, rose to 2.8%.  27 states & territories reported a decrease in claims, while 26 had an increase.  Initial jobless claims reflect weekly firings & tend to fall as job growth accelerates.  Better news (shown in the graph) but the unemployment continues in high territory along with the underemployed figure.

First-Time Jobless Claims in U.S. Unexpectedly Fell Last Week to 358,000

US Initial Jobless Claims

Value	358.00
Change	-9.0   (-2.5%)

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Photo:   Yahoo

Speaking of unemployment claims, PepsiCo, a Dividend Aristocrat, plans to cut 8.7K jobs (3%) of its workforce, to offset higher costs for ingredients & increased spending on advertising & marketing in North America.  Restructuring should save $1.5B by 2014, on top of $1.5B in cost cutting it previously announced.  The layoffs were announced as it reported better-than-expected Q4 profit, but forecast a decline in adjusted 2012 earnings.  PEP said "tough decisions" needed to be made because it expects 2012 will be the 2nd year in a row that it will encounter higher-than-average costs for commodities.  CEO Nooyi said although it's cutting 3% of its 800K worldwide work force, the reduction is spread out over 30 countries & the company typically adds 10-15K jobs in one year.  At the same time, PEP will increase advertising & marketing behind its brands by $500-$600M in 2012, with a particular focus on North America.  Additionally, it plans to increase divs & share buybacks to return cash to shareholders.  The stock dropped 2.82 (4%).

PepsiCo to Cut 8,700 Jobs, Boost Marketing

Pepsico, Inc. (PEP)

The story hasn't changed much this week, stocks aren't sure where to go with the uncertainty over the Greek bailout.  Gold is in a rally mode, a bet on more unhappiness coming out of Europe.  There are so many unknowns, it's unusually difficult to imagine what stocks will do.  The high yield sectors aren't getting a lot of attention, but their securities are at multi year highs.  Yields still matter!

Dow Industrials

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Stock markets await developments in Greece

Dow pulled in the black to gain 31, advancers ahead of decliners 4-3 & NAZ was up 4.  Bank stocks also managed to eke out a gain.

S&P 500 Financials Sector Index

Value	197.50
Change	0.09    (-0.0%)

The MLP & REIT indices were fractionally lower & junk bond funds inched higher.  Treasuries were weak, taking the 10 year yield nearer to 2%.  Oil pared an earlier decline as Greek officials worked on a final draft of the financing document required to receive funding  for its debt crisis.  Gold found buyers because of the chaos in the Greek debt mess.

Alerian MLP Index

Value	397.01
Change	-0.34     (-0.1%)

Treasury yields:

U.S. 3-month	0.076%
U.S. 2-year	0.242%
U.S. 10-year	1.956%

CLH12.NYM

...Crude Oil Mar 12

...96.89

... 0.02

(0.0%)

GCG12.CMX

...Gold Feb 12

.....1,726.30

... 3.50

(0.2%)

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The number of job openings in the US jumped in Dec to near a  3year high, supporting other data that show a brighter outlook for hiring.  The Labor Dept said companies & govs posted 3.38M jobs, up from the 3.12M advertised in the previous month & nearly matches the 3 year high reached in Sep. The report on job openings follows optimistic employment figures last Fri showing employers added 243K net jobs in Jan & the unemployment rate fell to 8.3%.  However even with the gains, 13.1M remain unemployed in Dec.  That means an average of 3.9 people competed for each open job that month, the first time in 4 years that ratio was below 4 to 1. Better news on the jobs front, but this has been a long, slow & painful recovery.

Job openings jump to near a 3-year high AP

Greek PM
Photo:   Bloomberg

The Greek gov & creditors are working on the final draft of an agreement on budget & structural measures needed to free up a 2nd aid package.  The document will be discussed by political leaders later today.  Greek PM Papademos plans to convene the nation’s political leaders to seek consensus on the cuts required for a bailout, as unions called a strike to protest & European leaders pressed Greece to reach a deal.  While the PM & party leaders have agreed to make further cuts equal to 1.5% of GDP, they have yet to close gaps over measures demanded by creditors.  Chancellor Merkel said “time is running out” to reach an accord, while unions derided the conditions as “blackmail.”  At stake is whether Greece wins the bailout, secures a debt write-off with private creditors & remains in the euro region.  A Greek official said that “failure of these talks, failure of the plan, the country’s bankruptcy, means even greater sacrifice.”   Everybody is holding their breath, but the outcome does not look good.

Greece Trioka Work on Final Rescue Draft

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Photo:   Yahoo

Coca-Cola, a Dow stock & with the expected div increase coming shortly will extend its streak of raising dividends to 50 years, had better-than-expected Q4 results & announced a new cost-savings program on to boost its brands & mitigate higher commodity costs.  Its new productivity program is targeting annual savings of $350-400M by the end of 2015.  The company also raised its target for savings from the integration of its North American bottling operations by $200-250M.   KO plans to reinvest savings into "brand building initiatives," which usually include marketing & advertising.  Q4 revenue rose 5% to $11B as it gained market share in several drink categories (slightly ahead of $10.99B expected.  Worldwide volume rose 3%, growing 4 % in Latin America & Eurasia & Africa, 5% in the Pacific & 1% in Europe & North America.  EPS was 72¢, down from $2.46 per share a year earlier when the company recorded a gain related to the acquisition of its North American bottling operations.  Excluding items, EPS was 79¢, beating the average estimate of 77¢.  The stock rose 1.10, not far from its yearly highs.

Coca-Cola Profit Tops Analysts’ Estimates

Coca-Cola Company (The) (KO)

Photo:   Yahoo

Swiss bank UBS predicted further weakness in investment banking after a restructuring of the business failed to prevent an earnings hit from the euro zone debt crisis & worries about the global economy.  "Traditional improvements in first-quarter activity levels and trading volumes may fail to materialize fully, which would weigh on overall results for the coming quarter, most notably in the investment bank," UBS said.  Q4 net profit shrank to 393M Swiss francs from 1.66B in the 2010 period & was  below a forecast for 737M.  Investment banks had a rough time last year as trading & advisory income was hammered when clients pulled back from markets due to the euro zone debt crisis, & stopped doing deals.  The outlook is set to remain tough as tougher regulations & economic slowdown bite.  This is a reminder that global banks may have another difficult year.

UBS Posts 76% Drop in Quarterly Profit

UBS AG (UBS)

Not a lot going on in the markets.  Traders are watching for the next move out of Greece.  Other countries, such as Iran, Syria & Egypt, are getting a lot of attention, but that has not brought on selling.  Starting with the Oct rally, Dow has a a good run with only one setback.  Bulls continue to be in command, but even they have to be nervous.

Dow Industrials

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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.

Dow Industrials

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