Bears Find Their Voice

ADP said May private sector jobs fell by 532k, about in line with expectations of a drop of 525k.

The good news is that the level of job losses has clearly stabilized; the bad news is that we are still not seeing much of an increase in hiring. Bottom line: unemployment rate will continue to rise, at least in the near future.

Futures are down today, and the dollar has actually gained. Still, as the markets have advanced, bears have become more vocal:

1) Stock bears have noted that U.S. stocks are no bargain, with the S&P now tradingat roughly 16 times forward earnings, above the historic average of about 15 times forward earnings.

Credit Suisse today became the latest firm to turn more cautious on stocks, taking its equity weighting down to in-line rather than overweight.

2) U.S. Treasury bondbears have been pouring money into corporate bonds. The Vanguard Short-Term Corporate Bond fund (VFSTX), for example, has recovered two-thirds of the value it lost from September to November. It currently yields 4.6 percent.

Australia's economy grew up 0.4 percentin the first quarter, better than the expected 0.1 percent growth. They too have cut interest rates and implemented a stimulus program.


1) Refiners: a real mess. Valero, the largest independent gasoline refiner in the U.S., down 11 percent pre-open as it guides second quarter to a loss of $0.50 a share ($0.74 expected!), much of which they blamed on extended downtime at 2 refineries and lower crack spreads.

Oddly, they also annouced a fairly large secondary offer (about 8 percent of its share count), only a few months after a significant buyback. The company has announced a significant cut in capital expenditures, as well.

BMO Capital Markets summarized the feeling on the Street: "It seems then that the condition of refining fundamentals might be far worse than we anticipated and/or the company is fearful of the length and severity of this downturn."

I'll put it simply: demand for gasoline is way down, and there is plenty of supply coming in from overseas. Add to that a big up move in crude, and you have the makings of a real mess for refiners.

2) More secondaries. Companies taking advantage of this window to raise money: JetBlue, Lazard, and Prudential all announced secondaries.

3) Williams-Sonomaposted a smaller-than-expected Q1 loss. Despite seeing revenues "stabilize," the home furnishings retailer still experienced a sharp drop in same-store sales (down 21%) and a modest decline in margins. While it remains cautious in the months ahead, full-year guidance is reaffirmed

4) Aetna is down 9 percent pre-open after reducing its full-year earningsoutlook to $3.55-$3.70 from $3.85-$3.95 per share. The health insurer blames the continuing trend of higher medical costs and lower Medicare revenues for the disappointing earnings forecast.

5) Toll Brothersdown 1 percent pre-open despite posting a significantly narrower-than-expected Q2 loss. Revenues fell sharply (down 51 percent) and cancellations fell 48 percent, but "appear to be leveling off." However, homebuyer deposits have risen in 9 of the past 11 weeks.

While the homebuilder didn't provide any earnings guidance, it narrowed its forecast of home deliveries, but cut its average price expectations to $590,000-$620,000.

6) Shares of TiVO surge 46 percent pre-open after being awarded and additional $103 million in damages in a patent infringement casewith EchoStar Communications. The surge in its shares today will bring the TV recording device provider to levels it hasn't seen since 2004.




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