“Phillips 66 (NYSE: PSX) reported first-quarter 2013 results before markets opened this morning. The oil refiner posted adjusted diluted earnings per share (EPS) of $2.19. In the same period a year ago, the company reported EPS of $1.20. First-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.89 and $41.44 billion in revenues. Phillips 66 did not include revenues in its press release…”
Comments »Monthly Archives: May 2013
Crude Supplies Rise by 6.7m Barrels, Much More Than Expected
distillates rose by 474m barrels
Gazoline inventories fall by 1.82m barrels
WTI remains under serious pressure…currently down $2.93
Comments »$F and $GM Sales Rise Thanx to Pick Up Truck Sales
Another Chart Indicating Equities are Rigged by the Fed
“The Citigroup Economic Surprise Index, which tracks how various economic data releases come in relative to expectations, is now below zero.
That means recent economic data releases have been disappointing relative to the market consensus.
Just in the past week, we’ve seen some nasty surprises – flash PMI, durable goods orders, GDP, and Chicago PMI have all come in below consensus.
Yet stocks keep moving higher, and it seems like lately “good news is bad news” (in that if the economy doesn’t strengthen, continued monetary easing from the Federal Reserve should keep markets afloat).
In a note out last night, Mike O’Rourke of Jones Trading wrote:
The US equity market has given up even the appearance of caring about economic data. Throughout Q1, as the S&P 500 garnered an impressive 10% return, high hopes were pinned on a 3.5% GDP print, then expectations retrenched to 3% before the actual print of 2.5% emerged. The chart below illustrates that the economy continues to trudge along at a 2% year over year GDP growth rate.
Not to say that a single data point like the Dallas Fed Manufacturing index merits a market move, but it is surprising when the 3rd worst print since the recession is met by another push higher in Equities. Few would describe earnings season as anything but a disappointment. Obviously, the Central Bank Benevolence trade continues to dominate the tape.
The chart below shows the Citigroup Economic Surprise Index and the S&P 500….”
Comments »Republicans Introduce a Bill to Go Dark
Many people complain that most economic data distributed by uncle Sam is doctored and tinkered with to produce a better outcome.
Well now Republican Congressman would have no statistics released at all if his bill passes.
Being dubbed as insane; thankfully the bill is getting shot down.
Perhaps going dark is better than lying…..
“You can’t handle the truth”
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Pimco’s El-Erian: Unwinding Fed’s Bond Buying Will Have ‘Collateral Damage’
“The Federal Reserve will struggle to unwind its giant bond-buying program, says Pimco CEO Mohamed El-Erian.
Although the Fed’s program of purchasing $85 billion of Treasurys and mortgage securities has benefits, it also poses risks and unintended consequences, El-Erian warned while speaking at a panel discussion at the Milken Institute Global Conference in Los Angeles.
It may not be able to end its massive bond buying without “collateral damage,” he said.
“Right now we are seeing distortions in markets,” he explained. “Resources are being misallocated. And already, there are already concerns about bubbles. That’s what gets broken in this journey.”
If genuine, unassisted growth returns, those concerns will fade, but the Fed’s bond buying may not be effective in restarting genuine growth.
“It’s a fifty-fifty proposition,” El-Erian cautioned, saying that explains why there’s so much excitement and anxiety in the market now.
“The Fed will exit under two conditions: either because they are successful or because they become ineffective,” El-Erian noted.
Other speakers on the panel also expressed concerns about the Fed’s bond purchasing.
“I don’t think the central banks or the Fed have thought about how they’re going to get out of the trade,” said Terry Duffy, the executive chairman of CME Group. “I started trading at 21 years old. You always have to have a vision of how to get out of a trade before you get in. The Fed needs to do that before they get in any deeper.”
Minutes of the Federal Reserve meeting last month indicated that policymakers seemed headed to winding down their bond purchasing before a weak March jobs report took them by surprise, according to Reuters. A few of the 12 Fed members hoped to start decreasing the purchases this summer and end them by the end of the year. …”
Comments »ISM Index: Prior 51.3, Market Expects 51, Actual 50.7, Construction Spending Down 1.7%
U.S. PMI Posts a 0.1% Gain Over Flash Estimates
“Markit’s April U.S. manufacturing PMI survey results are out.
The headline index came in at 52.1, slightly above the flash estimate of 52.0 published earlier this month, but down from March’s 54.6 reading.
Any reading above 50 on the index signals expansion, so the 52.1 reading in today’s release suggests that American manufacturing is still expanding, but at a markedly slower pace than in March.
The new orders sub-component of the index fell to 51.5 from March’s 55.4 reading. The output sub-component fell to 53.7 from 56.6, and the employment sub-component fell to 53.2 from 54.6.
Below is a complete breakdown of the sub-components from the release…”
Comments »Bill Gross: THERE WILL BE HAIRCUTS
“Bill Gross’ latest monthly letter is out, and the title is There Will Be Haircuts.
Haircuts, of course, are a popular topic of discussion ever since Cyprus clipped the savings of large depositors in order to recap the banks.
In his latest letter, Bill Gross points argues that there’s no way that governments will ever be able to reduce total debt to GDP unless they find creative ways to clip bondholders.
He comes up with four main ways.
——————————————————————————————————
(1) Negative Real Interest Rates – “Trimming the Bangs”
During and after World War II most countries with high debt overloads resorted to artificially capping interest rates below the rate of inflation. They forced savers to accept negative real interest rates which lowered the cost of government debt but prevented savers from keeping up with the cost of living. Long Treasuries, for instance, were capped at 2½% while inflation was soaring towards double-digits. The resulting negative real rates together with an accelerating economy allowed the U.S. economy to lower its Depression-era debt/GDP from 250% to a number almost half as much years later, but at a cost of capital market distortions.
 PIMCO |
Today, central banks are doing the same thing with near zero-bound yields and effective caps on higher rates via quantitative easing. The Treasury’s average cost of money is steadily grinding lower than 2%. If current policies continue to be enforced in future years it will eventually be less than 1% because of the inclusion of T-bill and short maturity financing. The government’s gain, however, is the saver’s loss. Investors are being haircutted by at least 200 basis points judged by historical standards, which in the past offered no QE and priced Fed Funds close to the level of inflation. Large holders of U.S. government bonds, including China and Japan, will be repaid, but in the interim they will be implicitly defaulted on or haircutted via negative real interest rates….”
Comments »Gapping Up and Down This Morning
Upgrades and Downgrades This Morning
Upgrades – AMGN, BRK-A, CTXS, DFRG, FRGI, FCX, LL, SCCO, WSTC
Downgrades – BIIB, EIX, FISV, LSI, MGLN, MSPD, NUAN, OIS, OKE, SCSS
Comments »In Play and On the Wires
Mortgage Applications Rose Last Week
“Applications for U.S. home mortgages rose last week, fueled by demand for refinancings as interest rates dropped, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 1.8 percent in the week ended April 26.
The MBA’s seasonally adjusted index of refinancing applications climbed 2.8 percent. But the gauge of loan requests for home purchases, a leading indicator of home sales, slipped 1.4 percent…..”
Comments »ADP Private Payroll Numbers Miss Huge, Futures Fall Further
“The gloomy news continued for jobs as ADP reported Wednesday that private companies created just 119,000 new positions in April.
That was well below expectations and confirmation that the labor market is slowing heading into late spring and early summer.
Economists surveyed by Reuters expected the ADP report to show the private sector created 150,000 jobs in April, down from 158,000 in March.
“Nearly every industry has seen slower growth since the beginning of the year,” Moody’s economist Mark Zandi said on CNBC. “Smaller businesses are experiencing much weaker growth.”
Moody’s Analytics conducts the survey in conjunction with ADP.
The report comes two days before the government releases its nonfarm payrolls growth count for April. Economists recently have been nudging down their projections, which is pegged around 150,000 after March’s dismal 88,000 reading.
The weakness from the ADP report could cause expectations to dim even further.
Small businesses accounted for 50,000 of the new positions, but Zandi noted that the sector is seeing a slowdown likely attributable to the onset of the Affordable Care Act national healthcare plan.
Companies with more than 50 employees will fall under the umbrella of the plan, also known as Obamacare…..”
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$MRK Hurts DOW Futures as They Miss and Guide Lower
“Merck & Co. (MRK) reported first quarter 2013 earnings of 85 cents per share, well above the Zacks Consensus Estimate of 78 cents. Tax benefits boosted first quarter 2013 earnings by 6 cents. Earnings, however, declined 14.1% from the year-ago period.
Revenues for the quarter fell 9.0% to $10,671 million and missed the Zacks Consensus Estimate of $10,997 million. Revenues were hit by the genericization of Singulair and a few other products and negative currency fluctuation (2%).
Including one-time items, first quarter 2013 earnings declined 7.1% to 52 cents per share.
The Quarter in Details
Merck’s Pharmaceutical segment posted sales of $8.9 billion, down 12%. Negative currency movement impacted Pharmaceutical segment sales by 2%. Products like Remicade, Simponi, Isentress, Zostavax and Gardasil performed well.
However, the strong performance of these products was offset by lower sales of Singulair, Maxalt, and Clarinex.
Singulair sales experienced a severe decline following its US patent expiry in Aug 2012. Sales fell 75% from the year-ago period to $337 million. We note that Singulair lost exclusivity in the EU in Feb 2013 and is experiencing a sharp decline in sales. The drug retains exclusivity in Japan until 2016….”
Comments »$CMCSA Posts Better Than Expected Profits and Revenues
“(Reuters) – Comcast Corp posted higher quarterly profit on Wednesday, driven by strength on the cable side of the business.
The leading U.S. cable television provider, which also owns broadcaster NBC Universal, posted first-quarter profit of $1.4 billion, or 54 cents a share, up from $1.22 billion, or 45 cents a year ago.
Excluding revenue from Comcast’s sale of spectrum, the company posted earnings of 51 per share and beat analyst estimates by a penny.
While the cable unit lost a worse-than-expected 60,000 customers, it added 433,000 high-speed Internet customers, slightly more than the 432,000 that analysts, on average, expected, according to StreetAccount. Analysts looked for Comcast to lose 29,000 video customers, according to Street Account.
Revenue at NBC Universal rose 2.4 percent year over to $5.4 billion. Operating cash flow at the broadcast television unit NBC was negative $14 million, better than a year ago, when it was negative $35 million….”
Comments »$VIA Misses Estimates Both Top and Bottom Line
“(Reuters) – Viacom Inc reported a 6 percent drop in revenue because of a weak slate of movies from its studio Paramount Pictures, but advertising revenue turned positive during the quarter.
The company said for the quarter that ended March 31, revenue was $3.14 billion, slightly lower than analysts’ expectations of $3.19 billion, according to Thomson Reuters I/B/E/S.
But its cable network properties, which include MTV and Nickelodeon, were climbing out of a slump as advertising revenue rose 2 percent in the United States.
Viacom has been struggling with a decline in TV ratings…”
Comments »$TWC Beat Estimates and Reaffirms Guidance
“(Reuters) – Time Warner Inc posted a higher first-quarter profit on Wednesday, as growth in its cable networks offset declines in the film, TV entertainment and publishing units.
The company also stood by its earnings growth outlook for the year, although that forecast does not include the planned spin-off of the publishing business.
Net income for the media company, which owns the CNN cable network, premium TV service HBO and a movie studio, rose to $720 million, or 75 cents per share, from $583 million, or 59 cents a share, a year ago.
Adjusted earnings of 82 cents per share easily beat the consensus Wall Street forecast of 75 cents, according to Thomson Reuters I/B/E/S. Earnings exceeded even the highest of the 28 estimates that made up the consensus.
But revenue came in below even the lowest Wall Street expectations….”
Comments »Brent and WTI Fall as Stockpiles Continue to Build and Consumption Falls
“Brent crude fell for a second day after OPEC’s production increased to a five-month high and an industry group said U.S. stockpiles climbed for the first time in three weeks.
Futures slid as much as 1.8 percent in London after dropping 1.4 percent yesterday. U.S. crude inventories rose by 5.2 million barrels last week, the American Petroleum Institute said. Government figures today are projected to show a gain of 1.1 million barrels, according to a Bloomberg News survey. Daily output by the Organization of Petroleum Exporting Countries increased in April by 194,000 barrels a day, a separate survey indicated. An index of manufacturing in China signaled weaker expansion in April.
“With inventories at the levels they are at, it is a question of how much demand there is, and there is growing evidence of a slowdown in economic activity with even China weaker than expected,” Michael Hewson, a market analyst at CMC Markets Plc in London, said today by telephone. “The direction of travel on oil is down, and I see no reason to change that view unless OPEC cuts production.”
Brent for June settlement slid as much as $1.83 to $100.54 a barrel on the London-based ICE Futures Europe exchange, the lowest intra-day level in a week, and was at $100.58 at 1:21 p.m. local time. Futures fell $1.44 to $102.37 yesterday, capping a 7 percent drop for April. Trading was 2 percent above the 100-day average for the time of day. Prices are down 9.5 percent this year.
Cushing Supplies
West Texas Intermediate for June delivery declined as much as $1.79 to $91.67 a barrel in electronic trading on the New York Mercantile Exchange and was at $91.81 at the same time today. Front-month Brent was at a premium of $8.73 to WTI, the narrowest gap since Dec. 30, 2011…..”
Comments »Copper Slips Over 1% as China Manufacturing Slows
“Copper fell for a second day in London on concern demand will take time to revive after an official manufacturing gauge was weaker than projected in China, the world’s biggest consumer of the metal.
A Purchasing Managers’ Index was at 50.6 in April, China’s statistics bureau and logistics federation said today, below the 50.7 median estimate in a Bloomberg News survey of economists. Markets in the country will reopen tomorrow after a three-day break. Copper rose in London trading last week after five weeks of declines, the longest streak since November.
“Chinese end-users were taking advantage of low prices to restock,” Nic Brown, head of commodities research at Natixis SA in London, said by e-mail today. “With China out for three days, the market is losing some of that positive impetus.”
Copper for delivery in three months lost 1.3 percent to $6,964 a metric ton by 9:22 a.m. on the London Metal Exchange after slumping for a third month in April. Copper for delivery in July dropped 1.1 percent to $3.151 a pound on the Comex in New York, where futures trading volumes were 48 percent lower than the average in the past 100 days for the time of day.
“Despite the poor macro data we’ve been seeing in recent weeks, I’d imagine there might also be some replenishment of inventories as demand for copper products begins to improve,” Brown said of China. Imports of refined copper into the country rose in March from a 19-month low, figures showed last week….”
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