Markets soar on European debt deal

Dow exploded, gaining 339, closing slightly below its highs & topping 12K, advancers over decliners 7-1 (below earlier levels) & NAZ jumped 87.  Banks soared, there's no other way to describe it.  The Financial Index shot up 11 to the 189s, but is still down 16% YTD.

The MLP index rose only a fraction in the 372s & the REIT index flew up over 10 to the 234s.  12 month charts for both are shown below to give a better idea of the enormous rally in Oct.  Junk bonds were up a more moderate 1% & Treasuries sank with that money going into the stock market.  The VIX, volatillity index, tumbled 4+ to the 25s on easing fears.  Oil is climbing on positive economic news for the US & Europe.  Gold only had a modest gain.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Click below for the latest market update:

Treasury Yields:

U.S. 3-month	0.005%
U.S. 2-year	0.309%
U.S. 10-year	2.376%

CLZ11.NYM

...Crude Oil Dec 11

...93.75

... 3.55

(3.9%)

Time Warner Cable reported a small decline in Q3 earnings, shy of expectations as it continued to lose subscribers to its video service.  The country's 2nd biggest cable company continued to see a defection of video customers even as its high-speed Internet subscriber base grew.  CEO Glenn Britt said TWC showed "steady financial progress" in Q3, helped by residential broadband & business services & added that the company saw stronger subscriber results in Aug & Sep.  EPS was $1.08 compared to $1 last year (while net income fell 1%).  Revenue grew 4% to $4.9B.  Expectations were for EPS of $1.13 on revenue of $4.95B.  Residential services revenue climbed 2% to $4.3B & business services revenue jumped 35% to $387M.  Growth in the number of high-speed data subscribers helped boost results.  But advertising revenue fell 3% to $216M.  The market didn't like the news, sending the stock down 5.46 (8%).

Time Warner Cable Slumps as Profit Falls Short

Time Warner Cable Inc (TWC)

Photo:   Yahoo

European leaders bought time to work out more lasting solutions to the debt crisis. Today's 3-pronged deal appears to have met or beaten expectations for some kind of decisive action.  It retools the eurozone's underpowered bailout fund, calls on banks to take 50% losses on Greek bonds & orders them to raise €106B in new capital by Jun.  But European leaders will have to work out the complex financial details quickly & skillfully.  It's unclear whether the bailout fund changes will be enough to prop up Italian & Spanish banks, or whether the bond writedown will be enough to pull Greece from the brink.  The debt crisis is still far from over.  The hope is that the 3 measures crafted will give European countries some breathing space within which to focus on getting their economies growing again to reduce debt & boost confidence in the region's financial markets.  That's called, "High hopes."  The most difficult part of the plan was persuading banks to take 50% losses on their Greek bonds.  The deal will cut Greek debt to 120% of economic output by 2020, from 180% otherwise.  Yet debt of more than 100% of GDP is still breathtakingly high.  Eurozone finance ministers are to work out the terms of the scheme in Nov, but there are already doubts about how leveraging the bailout fund's limited resources will work.  This deal which the markets love today, is still just a work in progress.

Eurozone wins respite, but it could be brief AP


With this rally, you would think Santa Claus brought gifts for everybody.  Not so.  Disappointing earnings caused stocks to sell off.  Dull economic keeps coming.  Pending home sales dropped 4%, but that got lost today.  Dow is up almost 1.3K this month, one its best months in history & there is explanation.  The European debt mess has not gone away.  The super committee will come up with its recommendations to reduce federal spending.  Early word is that is not going well.  Both sides are playing hardball!  Let's see what tomorrow brings to the markets. 

Dow Industrials (INDU)

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Dow soars over 12,000 on GDP data

Markets are having another excellent day in Oct.  Dow is up 249 (at its highs), advancers over decliners 10 to 1 & NAZ jumped 53.  Bank stocks are leading the way with the European debt crisis settling down.  The Financial Index rose 7+ to the 185s, a 3 month high.  

The MLP indes rose 1+ to the 373s & the REIT index shot up 6 to almost 230.  Junk bond funds were up 1% & Treasuries sold off taking the yield on the 10 year Treausry to the highest in 3 months.  The VIX, volatility index, plunged 4 to 26 on easing fears about the markets.  Oil rose for the 4th time in 5 days on favorable economic data & as European leaders reached a deal to contain the region’s debt crisis. Gold buyers are not sure what to do.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.289%
U.S. 10-year	2.280%

CLZ11.NYM

....Crude Oil Dec 11

...93.11

... 2.91

(3.2%)

GCV11.CMX...

Gold Oct 11

......1,723.40

... 0.70

(0.0%)

Get the latest daily market update below:

Photo:   Bloomberg

During Q3, the economy grew at its fastest pace in a year as consumers & businesses stepped up spending, though part of the increase came from the reversal of temporary factors that had restrained growth.  US GDP expanded at a 2.5% annual rate according to the Commerce Dept, a jump from the 1.3% pace in Q1 & matched expectations.  Consumers & businesses appeared to have set aside their fears about the recovery.  Consumer spending was the strongest since Q4 2010, while business investment spending was the fastest in more than a year.  However,the recovery's pace is still too weak to lower a jobless rate.  Consumer spending, 70% of the economy, grew at a 2.4% rate after slowing to a 0.7% pace in Q2 even though consumer confidence has hit levels last seen during the worst of the 2007-09 recession.  Similarly, while some business surveys have pointed to a contraction in factory output, corp America increased its investment spending in Q3.  Business spending rose at a 16.3% pace as companies splurged on equipment & software, & invested in nonresidential structures.  Inventories rose only $5.4B, the smallest gain since Q4 2009, after increasing $39B in Q4.  Inventories subtracted 1.08 percentage points from GDP growth.  Excluding the drag from inventories, the economy grew at a 3.6% pace, pointing to underlying strength in domestic demand, after expanding 1.6% in Q2.  Spending on residential construction rose at a modest 2.4% pace after growing at a 4.2% rate in Q2.  Gov spending was flat, reflecting continued budget cuts by state & local govs.  All considered, the numbers were fairly good.

U.S. Economy Expands at Faster Pace




Photo:   Yahoo

The people above did not participate in the favorable Q3 economic data.  The number seeking unemployment benefits dipped slightly last week, though not by enough to suggest that hiring is picking up.  Weekly applications for benefits declined 2K to 402K according to the Labor Department, the 4th drop in 6 weeks.  Still, the 4-week average rose to 405K after falling to a 6-month 2 two weeks ago.  Despite recent declines, applications have been stuck above 400K for all but 2 weeks since Mar.  Employers have added an average of only 72K jobs a month in the past 5 months, below the 100K per month needed just to keep up with population growth.  That's down from an average of 180K in the first 4 months of 2011.  This sobering data needs to be tempered with the GDP data.

Jobless Claims in U.S. Decreased to 402,000


Exxon Mobil, a Dow stock & Dividend Aristocrat, profits rose 41% as higher prices for oil & natural gas made up for lower production.  Production dropped with some of the declines resulted from intl deals that limit the amount of oil that XOM can sell as prices rise.  Excluding those limits, production was still flat.  Exploration & production business increased profit nearly 19% in the US & 61% overseas.  The US refineries quadrupled profits as the price of gasoline & other fuels soared, but oil production fell 7% to 2.25M barrels per day while natural gas production slipped 3% to 4.28M cubic feet per day.  EPS was $2.13 in Q3, sharply ahead of $1.44 last year.  Revenue rose 32% to $125B.  Expectations were for EPS of $2.10 on revenue of $118.5B.  The stock fell 18¢ on the good news in an up market.  It has a P/E under 8X  Go figga!

Exxon Mobil profit rises 41 pct on higher prices AP






Markets liked what they heard & buyers came out of the woods today.  The GDP news was good, but short of excellent.  The economy did not head south, but it's heading north with limited vigor.  Unemployment remains stuck at its high levels which will be a big factor in net year's election.  Europe leaders patched together ideas which sound good, but fundamental problems have not gone away. It's unclear where all the money needed will come from (maybe China) & a final plan is still 6 months away.  But the stock market is saying, solve today's problems today & tomorrow will take care of itself. 

Dow Industrials (INDU)

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Markets rise while waiting for debt plan details

Dow rose 162 (all in the PM), advancers over decliners 4-1 & NAZ added 12 (the gain was limited by a 28 drop for Amazon).  Bank stocks led the way higher.  The Financial Index was up 3+ to the 178s, making another attempt to top its 3 month high of 181. 

The MLP index shot up 5+ to 372 while the REIT index gained 2+ to the 223s.  Each is having a stellar month, outpacing the Dow.  Junk bond funds were higher & Treasuries sold off with the rising stock market.  Oil dropped the most in more than 3 weeks after a gov report showed a larger-than- projected gain in US stockpiles.  Gold continues strong, recovering back to $1700+ on bets the European debt mess won't be worked out.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Click below for the latest market update:

CLZ11.NYM

...Crude Oil Dec 11

...90.42

... 2.75

(3.0%)

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.289%
U.S. 10-year	2.205%

Photo:   Bloomberg

The photo shows the Greek PM hugging the PM from Luxembourge.  Hmmmm!



Photo:   Yahoo

I like this picture of German Chancellor Merkel, it tells a more realistic story.  Poland's finance minister says big European banks will be required to raise their capital cushions to 9% of their risky investments by next Jun, in line with intl banking guidelines that come into effect in 2019.  This was announced after a meeting of 27 EU leaders.  European banks need to shore up their finances because they have significant exposure to debt by govs with shaky finances.  On Greece's debt they could soon be asked to take substantial losses, as leaders try to find a way to dig Europe out of its debt crisis by lightening Greece's debt load.  It's hard to believe that this is all that is required for a major sock market rally!  Oh yes, there is also a report that China will supply money for the European bailout.

• EU banks to boost capital buffers by June- AP

Photo:   Yahoo

With its 10th straight quarterly profit, Ford is becoming a victim of its own success.  A $1.6B profit in Q3, down 2% from a year earlier, beat expectations.  But the  stock sank, disappointed by slowing growth, rising costs & the decision to hold off on paying a div. There were expectations that Ford would reinstate its div which it stopped 5 years ago.  But CFO Lewis Booth said the company isn't ready to take that step despite having $8B in cash.  It still needs to focus on improving its finances.  "We want to return to paying a dividend as soon as we think our balance sheet can stand it," Booth said.  EPS was 41¢ versus 43¢ last.  Profit were lowered by a $350M non-cash charge to reflect falling prices of some commodities such as copper & aluminum.  Ford had bet those prices would be higher & the charges could reverse if commodity prices rise in the future.  Ford earned 46¢ excluding the costs of closing its Mercury brand, beating expectations of 45¢.  Revenue rose 14% to $33.1B.  The pretax profit was $1.6B in North America, unchanged from a year ago.  Higher prices & rising sales of more profitable vehicles like the Ford Explorer SUV & F-Series pickup trucks helped offset higher costs for materials.  But Ford lost money in Europe & Asia, where it recently embarked on an aggressive 4-year expansion plan.  Sales will be hurt in the Q4 by flooding in Thailand which has disrupted suppliers (expect more such announcements).  The stock fell 56¢ (5%).

Ford Declines as Commodity-Hedge Losses Squeeze Automaker’s Profit Margins

Ford Motor Credit Company (F)

Photo:   Yahoo

Corning profits rose 3% in Q3, lifted by surging sales of optical fiber & glass for flat-panel TVs, smartphones & touch-screen tablets, easily beating expectations. GLW signaled that US retail demand for liquid-crystal-display TVs has gathered pace in recent months & South Korean TV-panel makers are boosting glass production in Q4.  While worldwide demand for LCD TVs is up 20% this year, previously sluggish US sales climbed 10% in Jul & Aug & 13% in Sep, "which is actually the strongest growth rate we've seen all year," said CFO Jim Flaws.  "And for the first two weeks of October, sales in the U.S. are up 13 percent," Flaws said.  The world's largest maker of LCD glass, with more than 60% of the global market, had EPS of 51¢ in Q3, up from 50¢ last year.  Excluding special items, adjusted earnings were 48¢, well above expectations of 42¢.  Revenue jumped 30% to $2.08B from $1.6B (expectations were for $2.03B).  Sales of LCD glass bounded 26% higher in Q3 to $815M & sales of the telecommunications unit rose 21% to $560M.  GLW also saw double-digit growth in its other 3 units: Gorilla cover glass, auto-pollution filters & research labware.  "It's obviously a difficult economic environment and we're dealing with a difficult contraction in the supply chain in the second half," Flaws said. "But I'd remind people we're on pace to reach" a record $7.9B in sales this year & $10B by 2014.  The stock rose 41¢ (3%).

Corning's 3Q profit rises 3 percent AP

Corning Incorporated (GLW)

Stocks had another impressive gain after learning that European leaders may come up with another bailout plain.  Getting China involved in the finances would be a plus.  But this is all very fuzzy, details are not clear.  Nor have all 27 countries signed off on these vague plans.  I have my doubts, but Dow is up over 950 in Oct, not a bad month, especially when the US economic recovery is only sputtering.  GDP for Q3 should be out shortly.  Expectations are for limited growth which is probably already baked into the market.  The VIX has settled back during the rally, remaining elevated.  Earlier this year, when the market was rising, it was in the teens.

Volatility Index (^VIX)

Dow Industrials (INDU)

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Markets waffle on worries about European debt summit

Stocks are losing steam after a strong opening.  Dow is up 27, decliners barely ahead of advancers & NAZ fell 27 (hurt by a dreary report form Amazon).  Bank stocks are higher, but the Financial Index is taking a pause after unsuccessfully trying to top its interim highs of 181 last week.

S&P 500 Financials Sector Index

Value	175.65
Change	0.78   (0.4%)

The MLP index rose 2 to the 368s while the REIT index fell a fraction to 221.  Junk bond funds were about 1% higher & Treasuries inched higher.  The VIX, volatility index, went up 1 to the 33s on greater nervousness about stocks.  Oil extended losses after the Energy Dept said stockpiles gained 4.74B barrels last week.  Gold is hot again on increased worries over the European debt mess.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.281%
U.S. 10-year	2.162%

CLZ11.NYM

....Crude Oil Dec 11

...91.96

... 1.21

(1.3%)

GCV11.CMX

...Gold Oct 11

......1,709.30

... 9.70

(0.6%)

Click below for the latest market update:

• 

Photo:   Yahoo

Demand for a range of long- lasting US manufactured goods rose more than expected in Sep, the largest increase in 6 months.  The Commerce Dept said durable goods orders (excluding transportation) rose 1.7% after falling 0.4% in Aug, beating expectations for a 0.4% increase.  But a drop in transportation equipment, as bookings for motor vehicles & civilian aircraft declined, pulled down overall orders 0.8%, following a 0.1% dip in Aug (in line with expectations for a 0.9% fall).  Transportation orders fell 7.5%, the largest decline since Apr.  The report was further strengthened by a 2.4% jump in non-defense capital goods orders excluding aircraft (closely watched as a proxy for business spending), the largest increase since Mar.  That category increased 0.5% in Aug & last month's increase was well above expectations for a 0.5% rise.  The report was additional evidence that economic activity picked up in Q3 after a weak H1.  Though manufacturing slowed in recent months, the durable goods report points to underlying resilience. 

U.S. Goods Orders Ex-Aircraft Rise by Most in Six Months

Photo:   Bloomberg

Sales of new homes in the US rose in Sep after 4 monthly declines, largely because builders cut their prices.  The Commerce Dept said that sales rose 5.7% to an annual rate of 313K homes.  But that's less than half the 700K that must be sold to sustain a healthy housing market.  A big reason for the gain was that the median sales price fell 3.1% to $204K, the lowest in a year.  The number of new homes on the market was also unchanged at 163K, a record low.  While new homes represent less than 20% of the housing market, they have an outsize impact on the economy as each home built creates an average of 3 jobs for a year & generates about $90K in taxes.  Last year was also the 5th straight year that sales of have fallen, following 5 straight years of record highs when housing was booming.  Home builders started projects in Sep at the fastest pace in 17 months, a hopeful sign.  But most of the gain was driven by a surge in volatile apartment construction, a sign that many are choosing to rent rather than own a home.  Single-family home construction, 70% of homes built, rose only slightly.  Building permits, a gauge of future construction, fell to a 5-month low.  Housing data continues to be dismal.

Sales of New U.S. Homes Hits Five-Month High


Boeing, a Dow stock, posted larger Q3 profits, topping forecasts, on strong commercial & military sales.  In addition, the company raised earnings forecast for 2011.  BA recently began making deliveries of 787 Dreamliners & 747-8 Freighters, 2 of its highest-profile airplanes, which are years behind schedule.  Q3 EPS rose to $1.46 from $1.12 last year beating the earnings forecast of $1.10.  For the full year, EPS guidance was raised to $4.30-$4.40, "reflecting strong core performance."  Its previous forecast was $3.90-$4.10.  The company, however, narrowed its 2011 revenue forecast to $68-$70B, from $68-$71B previously.  The stock rose 2.31 (4%).

Boeing Beats Quarterly Profit Estimate, Spreads 787 Costs Over 1,100 Jets

Boeing Company (The) (BA)

Amazon shocked everybody with a far weaker-than-expected outlook for the crucial holiday season qtr as it spent heavily on its new Kindle Fire tablet computer.  The stock tumbled on concern that AMZN was losing some of the revenue momentum.  It forecast Q4 revenue of $16.34-$18.65B, weak compared with the average estimate of $18.15B.  This forecast suggests 27-44% growth from a year earlier.  In Q3, sales grew 44%, less than the 51% gain in Q2.  AMZN said it could report a $200M operating loss to a $250M operating profit in the holiday quarter as it spends on the Fire & other initiatives.  That forecast was "materially" below expectations.  Q3 EPS was 14¢ versus 51¢ a year earlier.  Revenue was $10.88B, up 44% from Q3 2010.  Expectations were for EPS of 24¢ on revenue of $10.95.  The high flying stock plunged 25 (11%).

Amazon Profit Plunges After New Products Increase Expenses; Shares Tumble

Amazon.com, Inc. (AMZN)

One headline is France & Germany come closer to a bailout fund deal.  The picture below shows a happy couple, but I don't know.  Being real, there are major differences, especially about the haircuts (loan loosses) financial institutions will have to take on Greek debt. The situation remains fluid & noboy knows where this will lead.  The VIX rose.  Earnings continue mixed, but the AMZN data could be telling for other stocks.  The markets look like they are stumbling, maybe rethinking the Oct rally.

Photo:  Yahoo

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