Markets uncertain after weaker earnings

Dow was flat (actually up pennies), decliners over advancers 2-1 & NAZ dropped a big 22.   There was a little buying in bank stocks, but nothing meaningful. 

S&P 500 FINANCIALS INDEX

Value	220.52
Change	0.84   (0.4%)

The Alerian MLP Index started the week at 389 & has had a very bad sell-off in just 2 days.  The REIT index fell 2 to the 246s.  Junk bond funds slipped a few pennies but Treasuries gained.  The yield on the 10 year Treasury bond is flirting with 5 months lows, under 3.2%.   Oil fell to a 2-week low as the Standard & Poor’s 500 Index dropped & on projections that a gov report will show US crude inventories climbed. Gold was subject to profit taking, maybe affected bv the big sell-off in silver this week.  The green line in its chart shows the effects today's selling.

ALERIAN MLP INDEX

Value	377.57
Change	-7.02    (-1.8%)

Treasury yields:

U.S. 3-month		0.02%
U.S. 2-year		0.60%
U.S. 10-year		3.25%

CLM11.NYM

...Crude Oil Jun 11

110.88

... 2.64   (2.3%)

Photo:   Bloomberg

Small cars sold briskly in the last month, as gas prices approached $4 a gallon & some buyers worried about shortages of Japanese-made vehicles .  Sales in Apr were led by highly fuel-efficient models such as Chevrolet's Cruze, Hyundai's Elantra & Ford's Focus.  Don Johnson, GM's VP of sales & marketing, said consumers shifted into smaller cars starting in Mar & the trend continued in Apr. Unlike 2008, GM & other companies now have good small cars & can quickly boost production of them.  "We're probably the best prepared ever for this shift," he said.  So far, GM says the Mar earthquake won't affect its profit, although it has had to slow production because of a lack of parts from Japan. Chrysler said this week that the earthquake will cost it between 50-100K vehicles this year, but it won't have an impact on earnings.  Hyundai sales jumped 40%, largely because of fuel-efficient models such as the Elantra, which gets an estimated 40 mpg on the highway. The car's sales more than doubled. Combined with the Sonata midsize car, the 2 made up 71% of its sales.  GM sold more than 25K Chevrolet Cruze compact models in Apr, the best performance for the 36-mile-per-gallon car since it was introduced in Oct. Ford (F) sales of its new Focus compact rose 22% from last year.  GM US car & truck sales jumped 26%, led by the shift to small cars.  People switched to more efficient engines, which use less gas.

Ford (F) US sales rose 13%, largely because of a 26% jump in car sales. But it wasn't only the most efficient cars like the Fiesta & Focus that buyers demanded. Sales of the Mustang sports car rose 59%.  The impact of gas prices could be felt in its largest vehicles, half of all pickup buyers chose Ford's new V-6 engine instead of the less efficient V-8.  Chrysler's sales rose 22% to 117K, the best Apr in 3 years. Sales were led by the Jeep brand with a 65% increase.  Toyota (TM) sales rose only 1.3%, led by a 9% gain from the Camry midsize sedan, traditionally the most popular car in the US.  But sales of the Corolla compact fell 13.3%, & 2 models made in Japan, the Yaris & the Prius, saw sales declines.  Nissan sales were up 12.2% to 71K.  Honda (HMC) sales rose 9.8%, led by a 73% leap in sales of the Fit subcompact.  Subaru sales were up 7% to 24K, led by the Outback small SUV which rose 23%.  This is a fairly good report, but even higher gas prices could pinch hard in May.  GM stock was up 81¢ & other majors were lower.

GM’s April Sales Beat Analyst Estimates as Ford, Nissan Miss

General Motors Company (GM)

Gas prices are still pushing on $4.00.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.967	$4.104	$4.233	$4.161	$3.318	$4.367
Yesterday Avg.	$3.952	$4.092	$4.218	$4.155	$3.331	$4.384
Week Ago Avg.	$3.869	$4.008	$4.138	$4.139	$3.271	$4.305
Month Ago Avg.	$3.645	$3.782	$3.912	$3.978	$3.074	$4.045
Year Ago Avg.	$2.895	$3.074	$3.184	$3.099	$2.281	$3.002

Source:   AAA


The sales reports for the auto industry were fairly good although it's difficult to make too much of it when forecasting (with sharply higher gas prices).  The bigger picture is that higher price gas is pinching consumer spending.  The broad selling in MLPs is eye popping.  Today was one of the worst days ever for the index!  This is the time of ex-distributions which aggravated the decline, but this effect is routine (every 3 months).  I have a feeling there are more substantial reasons behind the selling.  The selling in NAZ was also unusual.  Apple (AAPL) could be the reason, but not today.  It added almost 2 to the 348s (where it was in mid Jan).

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Markets soft on weaker earnings reports

Dow was flattish (actually down 7), decliners over advancers 2-1 & NAZ fell 17.  Bank stocks were a little higher but the Financial Index can not make headway.

S&P 500 FINANCIALS INDEX

Value	220.22
Change	0.55   (0.2%)

MLPs sold off again, taking the index down 5 to 379.  But the REIT index was off only a fraction in the 248s.  Junk bond funds were off a penny or so & Treasuries were slightly higher taking yields near the lowest levels in 3 months.  Oil dropped for a 2nd day on signs growth in the US may slow, while price swings intensified on concern the death of Osama bin Laden will lead to retaliatory attacks by terrorists.  Gold was weak but silver is adjusting to $43 after major selling yesterday.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.60%
U.S. 10-year		3.27%

CLM11.NYM

...Crude Oil Jun 11

...112.63

... 0.89

(0.8%)

GCK11.CMX

...Gold May 11

...1,543.50

... 13.30

(0.9%)

Orders placed with US factories rose more than forecast last month on increasing demand for machinery & computers. Bookings for manufacturer goods climbed 3%, a 5th consecutive increase, after a 0.7% Feb advance, according to the Commerce Dept. The report also revised up estimates for capital equipment bookings issued last week.  Manufacturing continues strong along with high unemployment.

Orders Placed With U.S. Factories Increase More Than Forecast

Lipitor
Photo:   Bloomberg

Pfizer, a Dow stock, Q1 profit rose 10%, despite flat revenue, due to lower costs for production & research & a smaller tax bill.  EPS was 28¢, up from 25¢ last year.  Excluding one-time items, EPS was 60¢, 1% below last year.  Revenue was $16.5B, essentially even with the prior year.  PFE maintained its forecast given in Jan for 2011 EPS of $2.16-2.26, excluding just over $1 in one-time items. But it reduced the revenue forecast, to $66.2B from $67B & for a 2nd time reduced its 2012 revenue forecast, this time to $63.5B from $64.25B. 2012 is crucial, because Lipitor, the world's top-selling drug with nearly $11B in annual sales, loses US patent protection at the end of Nov.  Chief Executive Ian Read said he was pleased "with our solid financial performance during the quarter despite the loss of (patent) exclusivity of several products in the U.S." & other countries.  "I believe we are well positioned to succeed in fixing our innovative core, which, if successful, can lead to greater value in both the near and longer term," he added.  The stock fell 57¢.

Pfizer First-Quarter Profit Beats Analysts’ Estimates on Declining Costs

Pfizer, Inc. (PFE)

Clorox Q3 net income fell 8% as it wrestled with higher costs & a fall-off in some of its well-known brands.  As a result, it trimmed the top end of its earnings outlook.  Revenue rose 1.3% over last year, an improvement from the 3% decrease it saw in the previous 2 qtrs.  But EPS fell to $1.09 from $1.16 per share.  Excluding one-time items, EPS was $1.03, just below expectations of $1.04 but revenue was $1.3B, in line with expectations.  CLX faces rising costs for raw materials & has raised prices.  The stock dropped 3 to 67.

Clorox 3Q net falls as it deals with higher costs AP

Clorox Company (The) (CLX)

Markets are pausing again with a downward bias as earnings are less exciting.  Sears Holdings (SHLD) is down $7 (almost 10%) after predicting a Q1 loss.   While Sears is not one of the stronger performers, this suggests retailers could disappoint.  Apr auto sales should be out later today & expectations are not clear.  Considering a lack of pickup from earnings & the state of world events, the rest of the week could be sideways while waiting for the jobs report on Fri.

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Markets wobble after the death of bin Laden

Dow slipped 3, decliners ahead of advancers 3-2 & NAZ dropped 9.  Bank stocks were a little lower, taking the Financial Index back below 220.

S&P 500 FINANCIALS INDEX

Value	219.67
Change	-0.82    (-0.4%)

The MLP index dropped 5½ to the 384s, a very big drop by its standards, while the REIT index was flat.  Junk bond funds edged higher & Treasuries also rose.  Treasury yields traded at almost 6- week lows on thoughts the economic recovery will be gradual.  Oil dropped for the first time in 4 days after bin Laden was killed & a report showed US manufacturing cooled in Apr. Silver futures plunged the most since Jan as the CME raised the cash deposit required for trading after prices reached a 31-year high last week.  Silver dropped 3.30 to 45.28 while gold remained near record highs in the 1560s (greeen line is today & red is last night overseas).

ALERIAN MLP INDEX

Value	384.59
Change	-5.20   (-1.3%)

Trasury yields:

U.S. 3-month		0.03%
U.S. 2-year		0.60%
U.S. 10-year		3.29%

CLM11.NYM

...Crude Oil Jun 11

...113.33 T

... 0.60

(0.5%)

Corn Products Intl income in Q1 nearly tripled because of higher prices for its products & a payment to settle a trade dispute.  EPS was $1.97 (including about 75¢ related to the NAFTA, settlement), compared with 57¢ last year.  Revenue jumped 56% to $1.46.  Excluding items, EPS rose to $1.28 from 63¢, surpassing expectations for 89¢ on $1.4B in revenue.  The company expects EPS for 2011 of $4.85-5.15 on revenue of $6B (including the impact of the NAFTA settlement).  Revenue was increased in part from higher prices for its ingredients, which helped gross profit double.  The company makes products from milling corn that are used to make everything from food sweeteners to chicken feed.  The stock rose $1.04.

Corn Products Intl 1Q net income nearly triples AP

Corn Products International, Inc. (CPO)

Honda Motor warned US dealers that it will run short of popular models such as the Civic compact later this summer because of parts shortages caused by Japan's earthquake & normal production may not return until the end of the year.  Production will be cut significantly of the new 2012 Civic, the 6th most popular car in the US.  In addition, the 2012 version of the CR-V small SUV will be delayed by at least a month this fall. To make up for shortages, HMC will keep making the 2011 version.  Nearly every major auto company has had to idle factories due to shortages, but HMC, Toyota (TM) & Nissan have been hit particularly hard.  "Our goal remains to normalize overall production sometime around the end of the year," John Mendel, executive VP of sales for American Honda, wrote. The stock was up 79¢.

• Honda to cut production of new Civic, other models- AP

Honda Motor Company, Ltd. (HMC)

Gas at the pump is over $3.95, $4 is predicted by week's end.

Source:   AAA


The could have been a much more exciting day for the stock market after the death of bin Laden.  Traders held back, maybe because some were still away on long holiday weekends.  Volume was light, NYSE floor volume was below 1B shares.  Tomorrow, auto sales for Apr should be released.  The thinking is that Apr could be the last "good" month before the reality of high gas prices works thru to them.  Dow is has had another tremendous run from mid Mar with only one modest correction along the way.  Today looks like a pause without great meaning. 

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Markets extend gains after Bin Laden is killed

Stocks remain strong,but were not propelled by earnings gains today.  Dow rose 44, advancers ahead of decliners 3-2 & NAZ rose 4.  Banks were also higher, but the Financial Index remains stuck in its rut near 220.

S&P 500 FINANCIALS INDEX

Value	220.84
Change	0.35   (0.2%)

The MLP index fell 2 to the 387s while the REIT index was down only pennies in the 248s.  Junk bond funds were a little higher as were Treasuries.  Oil was also rose after declining as much as $2 in overnight trading.  Silver futures (the red hot metal) plunged as much as 13%, the biggest intraday drop in 2½ years, as margins were raised for traders.  Early last year, silver was $15!  Gold touched a record before paring gains.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.04%
U.S. 2-year		0.61%
U.S. 10-year		3.29%

CLM11.NYM

...Crude Oil Jun 11

..........114.32

.. 0.39

(0.3%)

GCK11.CMX

....Gold May 11

............1,550.80

... 5.20

(0.3%)

ZIK11.CBT

......Silver 5000 oz. May 11

...44.49

... 4.05

(8.3%)

Photo:   Bloomberg

Manufacturing grew for the 21st straight month in Apr, though at a slightly slower pace than the previous month.  The Institute for Supply Management (ISM) says its index of manufacturing activity dipped to 60.4, down from 61.2 in Mar & 61.4 in Feb, the fastest expansion in nearly 7 years. A reading above 50 signals growth.  The index has topped 60 for 4 straight months after bottoming during the recession at 33.3 in Dec 2008.  Manufacturing has been one of the economy's brightest spots since the recession ended.  Factories have benefited from strong overseas demand for machinery & other goods. In addition, US consumers have spent more on autos, appliances & computers. 

U.S. Manufacturing Grows at Slower Pace as ISM April Index Falls to 60.4


Builders began work on more office buildings, hotels & factories in Mar, after 3 straight monthly declines.  Construction spending rose 1.4%, according to the Commerce Dept, the biggest advance since last Apr & was helped by a rise in spending on home-improvement projects.  The overall increase, however, came after building activity had fallen in Feb to the lowest level in in more than a decade. Even with the advance, activity in Mar stood at an annual rate of $769B, just half the $1.5T pace considered healthy. It could take 4 years for the construction industry to fully recover from the housing bust & deep recession.  Private construction projects increased 2.2% to an annual rate of $476B  (a 2.6% rise in residential construction & a 1.6% increase in nonresidential projects).  The gain in residential activity came from spending on home-remodeling projects but spending on both single-family homes & apartments declined.  The rise in nonresidential projects was led by a 5.5% increase in the construction & expansion of factories. 

U.S. Construction Spending Rises More Than Forecast as Manufacturing Gains





Photo:   Yahoo

Chrysler turned its first profit since leaving bankruptcy 2 years ago.  It reported Q1 net income of $116M on revenue of $13B. The profit is a milestone after its last reported profit was  in 2006.  Sales rose 18% worldwide in Q1. "Chrysler Group's improved sales and financial performance in the first quarter show that our rejuvenated product lineup is gaining momentum in the marketplace and resonating with customers," Chrysler CEO Sergio Marchionne said.  Momentum is crucial to Chrysler for it to have an IPO later this year or early next.  This is another sign of recovery in manufacturing.

Chrysler turns first profit since bankruptcy AP


Markets are digesting the news about Bin Laden, although not greatly affected.  Retail sales & auto sales figure will be released shortly, giving a quick read on how much higher priced oil is affecting spending patterns.  The big jobs report is coming on Fri & it is not expected to have dramatic new news.  A gain in jobs is forecasted to be around 190K, good enough to only maintain the current high unemployment rate.

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