Author: Dennes Lupastean, LSW Investing
Covestor model: Macro Themes
The markets calmed down in July relative to the large swings of May and June. The Dow Jones Industrial Average (INDU) ended the month up 1%, marking the ninth time in 10 months that the index has risen. Although the world economy seems to be slowing, the Dow is now up nearly 10% for the year.
Despite the major indices rising slightly, it has been an underwhelming month for earnings reports for the quarter ended June 30 for many companies. Many of the major international companies have noted that the economic slowdowns in Asia and Europe have impacted their bottom lines.
Carmakers have consistently reported lower sales figures in Europe, while shipping giant United Parcel Service (UPS) has cut its earnings outlook for the year partly due to a decrease in shipping volume in Asia.
During July, stocks, bonds, commodities, and the dollar all gained, which is presumably related to expectations for the Fed to boost asset markets. Recent reports show that the housing market in the United States increased in May, marking the fourth consecutive month of rises in home values.
The Fed met in early August and signaled more strongly it will take action as needed to boost the economy but held back from immediately starting a new round of bond buying or taking other steps. Central bankers led by Ben S. Bernanke concluded their two- day meeting saying they “will provide additional accommodation as needed” to bolster the expansion.
The Federal Open Market Committee also said it will “closely monitor” economic data and financial developments, suggesting it is focused on the economy’s near-term performance.
In economic news, total nonfarm payroll employment rose by 163,000 in July and the unemployment rate was essentially unchanged at 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in professional and business services, food services and drinking places, and manufacturing
Regarding some of our model’s holdings, Vantage Drilling (VTG) reported a net loss of $10 million compared to a net loss of $40 million from a year ago. In April 2012, Vantage acquired the Titanium Explorer and has mobilized the vessel to the United States Gulf of Mexico where it is currently undergoing customer acceptance testing.
Teekay LNG Partners declared a cash distribution of $0.675 per unit for the quarter ended June 30, 2012. And Seadrill (SDRL) received a $4 billion commitment for work on 3 ultra-deepwater units. The company has received a commitment from a major oil company for new contracts on new building drillships West Auriga, West Vela and a third drilling unit