Markets fall on weak Spanish debt auction and stimulus doubts

Buying in the PM reduced losses.  Dow fell 124, decliners over advancers 4-1 & NAZ was off 45 in a weak tech sector.  Bank stocks led the selling, taking the Financial Index down 3+ to 210.

The MLP index fell a very big 4+ to just above 390 (about even YTD) & the REIT index was off 2½ to the 252s (still near its recent highs).  Junk bond funds were lower, but Treasuries gained as the stock market retreated.  Oil tumbled after the Energy Dept said US stockpiles surged the most since 2008 as domestic crude output climbed to the highest level in 12 years.  Gold had a very bad day, down $48, on a strong dollar.

JPMorgan Chase Capital XVI (AMJ)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.349%
U.S. 10-year	2.238%

CLK12.NYM

...Crude Oil May 12

...101.77

... 2.24

(2.2%)

Photo:   Bloomberg

Best Buy, the world’s largest electronics retailer, may have its credit rating lowered to junk status by S&P as it plans to close stores to improve its performance.  Currently it has a BBB- rating, the lowest level of investment grade, & was placed on credit watch with negative implications.  BBY is closing 50 big-box stores & cutting staff jobs, generating savings to spend on promotions & training store employees. The company plans to add 100 smaller-format Best Buy Mobile stores in the US in the current fiscal year.  A downgrade would indicate how serious its problems are.  The stock fell 60¢ & has a dreary chart.

Best Buy May Be Cut to Junk at S&P as Closings Show Weakness

Best Buy Co., Inc. (BBY)

Photo:   Bloomberg

SanDisk, a maker of memory chips, fell after it cut its revenue guidance for Q1.  It now expects to report revenue of $1.2B, down from an earlier forecast of $1.3-$1.35B which is also below the analyst forecast of $1.34B.  It lowered its forecast for gross margin to below 39%, rather than 39-42%.  Little detail was provided on what's behind the shortfall, beyond saying that demand was weaker than expected.  Several analysts cut full-year forecasts to match the Q1 outlook & reduced price targets.  However, some said they expect demand to come back in H2.  SanDisk's flash memory goes into smartphones & camera memory cards, & increasingly into laptops.  Flash memory prices are volatile although suppliers have been careful about adding capacity.  The stock sank $5.54 (11%).

SanDisk Declines Most Since January on Lower Sales Forecast

SanDisk Corporation (SNDK)

Monsanto said that a strong & early US seed selling season drove its fiscal Q2 income up 19% & it raised its earnings outlook for the full year.  Increased corn seed sales in Latin America also boosted results.  EPS was $2.24, above $1.88 a year earlier.  Revenue rose 15% to $4.75B from $4.13B.  Results topped expectations for EPS of $2.11 on revenue of $4.53B.  Q2 is important because it sells seeds ahead of the planting season in the Northern hemisphere.  Sales of corn seeds, by far the biggest segment, rose 17% to $2.82B.  Soybean seeds, its next largest segment, rose 12% to $698M.  The company boosted expectations for full-year adjusted EPS by 10¢ to $3.49-$3.54.  Including all one-time gains & losses, it expects to report EPS of $3.45-$3.50, a little below expectations of $3.51. The Dept of Agriculture just said that corn supplies are down 6%, indicating supplies will remain tight & prices high in the near term.  The USDA predicted that farmers will plant more corn this spring, the highest level since 1937.  The stock dropped 1.22.

Monsanto Raises Forecast as Profit Tops Estimates on Corn

Monsanto Company (MON)

The corp news was not good today.  MON is doing well as business from farmers is strong.  But BBY & SNDK disappointed with earnings season approaching.  Alcoa (AA), the first Dow stock to report, will announce on Tues with big banks right behind it.  Price for gas at the pump is just under $3.93, very troubling for the economy.  Sluggish stock action this week suggests markets are very nervous about earnings results.  Dow is down about 140 this week but has been able to hang in above the 13K floor & that floor has become very important to hold

Dow Industrials

Get your favorite symbols' Trend Analysis TODAY! Click Here

Markets tumble as the Federal Reserve signals no QE3

Dow sank at the opening & continued adding to those losses.  Dow is off 161, decliners over advancers 6-1 & NAZ dropped a bigger 51 (with Apple falling 9).  Banks led the selling with the Financial Index dropping almost 4 to the 209s.  The MLP index fell 4+ to 390 & the REIT index was off 3+ to 251.  Junk bond funds were a little lower, but Treasuries rose bringing lower yields.  Oil is having a bad day & gold plunged to a 12-week low as the dollar strengthened on signs the Federal Reserve may refrain from providing more stimulus measures.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.345%
U.S. 10-year	2.239%

CLK12.NYM

...Crude Oil May 12

...102.78

... 1.23

(1.2%)

GCJ12.CMX

....Gold Apr 12

.........1,624.20

... 45.80

(2.7%)

Get the latest daily market update below:

Photo:   Bloomberg

Private companies continued to add jobs in Mar, but at a slightly slower pace than in Feb.  Businesses added 209K, according to a report issued by ADP (lower than the forecast of 217K & marked a slowdown from 230K private sector jobs added in Feb).  Strong jobs data throughout the winter has been partially attributed to unseasonably warm weather, which allows some firms (i.e. construction) to remain fully operational during colder months.  Once that effect fades, job creation could weaken.  Small businesses continued to drive job growth.  Companies with fewer than 50 employees made up about half of all private sector job gains, hiring 100K.  Large companies with 500 or more employees hired 22K new workers & medium-sized businesses added 87K to their payrolls.  The ADP report typically sets the tone for the gov highly anticipated monthly jobs report on Fri.  While the reports tend to show the same trends over the long term, their figures can diverge from month to month.

Company Payrolls in U.S. Grow by Estimated 209,000 Workers

Photo:   Bloomberg

ECB President Draghi said it was premature to talk about withdrawing the bank's massive emergency loans to banks given slack economic conditions & record high levels of unemployment across the 17-country eurozone.  Draghi spoke after the ECB left its key interest rate unchanged at the record low of 1%.  He said the bank was still sizing up the "powerful and complex" effects of the €1T ($1.3T) in loans it handed out in 2 batches to banks in Dec & Feb.  He added that the 2nd round of the loans came too late to appear in the recent economic data the bank has to consider but stressed that the onus was on govs to push thru economic reforms that will help revitalize their economies.  "So it's necessarily a partial analysis that we are having today," he said.  "Given the present conditions of output and unemployment, which is at an historical high, any exit strategy talk is premature."  The eurozone economy shrank 0.3% in Q4 & indicators for future growth indicators remain weak, raising the likelihood that the economy shrank again in Q1, creating the technical definition of recession.  Unemployment is at a record 10.8%, while youth unemployment has reached freakish levels of 50% in Spain & Greece.

ECB’s Draghi Sees ‘Upside Risks’ to Outlook for Inflation

Markets are having a bad day after what has been a flattish period over the last 2 months.  Considering the Dow's sharp run-up from the lows 6 months ago at 10.4K, some setbacks must be accepted.  But this sell-off may be more serious.  Considering the strength of the US recovery, it's difficult to imagine any rationale for a QE3.  Why was it expected?  Europe is going nowhere fast & the US economic recovery may be slowing.  The jobs report on Fri will be especially important for the markets. 

Dow Industrial

Get your favorite symbols' Trend Analysis TODAY!  

Click Here

Lower markets after FOMC does not support QE3

Dow dropped 65, decliners over advancers 2-1 & even NAZ fell, down 6, as Apple had to settle for a gain of only 10+.  The Financial Index fell 1+ to 213 on growing worries about new regulations.  MLPs found some buying, taking the index up 1+ to the 394s but the REIT index fell 1+ to the 254s.  Junk bond funds were mixed but Treasuries fell back, taking the yield on the 10 year treasury up 9 basis points to 2.28%.  Oil & gold tumbled after release of the minutes from the last FOMC meeting.

JPMorgan Chase Capital XVI (AMJ)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.364%
U.S. 10-year	2.275%

CLK12.NYM

Crude Oil May 12

103.95 3:11PM EDT

1.28 (1.22%)

China's economy may have expanded at an 8.4% annual rate in Q1 (the least since H1 2009) according to a preliminary estimate given by an official.  The official cited “relevant China research institutes’ initial figures” for the estimate & predicted a gain of about 3.5% in consumer prices.  The growth figure compares with the 8.3% median estimate of economists.  Its 5th straight slowdown in quarterly growth will underscore concerns that weakness in the Chinese economy is set to limit a global expansion already capped by Europe's austerity measures.  Premier Wen Jiabao pared this year’s expansion target to 7.5% from an 8% goal in place since 2005 on Mar 5 as part of gov plans to tilt growth toward consumption & away from exports.  In Q4, the annual growth rate was 8.9%.  China had its largest trade deficit since 1989 in Feb as Europe’s debt turmoil damped exports & imports rebounded after the weeklong Lunar New Year holiday.  Exports fell for the first time in 2 years in Jan, while industrial production & retail sales have slowed this year.  Changes in the Chinese economy affect trading around the world.

• China Grows 8.4% in Estimate Cited by NDRC Vice Chairman

Photo:    Yahoo

The Federal Reserve (FED) is worried that recent strong gains in hiring could fizzle if US economic growth doesn't pick up, but there's no widespread support for additional bond purchases, even if the economy worsens.   At its recent meeting, the FED spent very little time discussing another round of bond purchases.  When the idea was mentioned, only a couple members said they would support it & only if the economy lost momentum or inflation stayed below the  target rate of 2%.  The FED stuck with its plan to keep interest rates at record lows until at least late 2014 & it sketched a slightly sunnier view of the economy, largely because of the best 3 months of hiring in 2 years.  But some noted that there have been similar bursts of hiring in the past 2 years that ended up fading.  The readout from the last meeting largely echoed a speech Ben Bernanke gave last week. The FED is concerned that the recovery could falter, as it did last year.  Americans aren't receiving meaningful pay increases.  Gas prices are high & Europe's debt crisis could weigh on the US economy.  As long as inflation remains tame, the FED is likely to hold interest rates down to give the economy more support.  While the economy is recovering, it's difficult to make the case for a QE3,

FOMC Saw No Need of New Monetary Easing, March Minutes Show


The average price for gas at the pump is still over $3.92, essentially matching last year's record high & just pennies below the all time record of $4.11 in 2008.  Stock markets don't like high prices.

Source:   AAA


The markets had a mild sell-off, they're entitled after the long run over the last 6 months.  Auto sales are getting a luke-warm reception, good but short of great.  Analysts would like to see an annual rate above 14M vehicles which is not certain, especially if the economic recovery slows.  MLPs have given up their title as market leaders.  The MLP index is up only 5 YTD & 17 below the record set in Feb.

Dow Industrials

Get your favorite symbols' Trend Analysis TODAY!  

Click Here