Markets lower after focusing on GDP's 2.2% growth rate

After gains in the first hour of trading, it was all downhill. Dow fell from +100 to close down 53, decliners over advancers 2-1 & NAZ was off a very big 31 following a week with generally gloomy news from some of its biggest stars. Banks were weak again. The Financial Index can't get away from the bottom of it trading range (190).


S&P 500 FINANCIALS INDEX

Value 190.92

Change -1.37

% Change -0.7%

The Alerian MLP index dropped 5½ to the 184s, bringing it down YTD. The REIT Index dropped a more modest 1. Junk bond funds continue to slide from their highs. The yield on the Treasury 10-year bond fell 5 basis points to 3.60% (a fairly big decline).

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil & gold were lower following weak stock markets. Things are tough for oil when very cold weather doesn't bring out buyers!

CLH10.NYM

..Crude Oil Mar 10

..72.78

.. 0.86 ......(1.2%)

GCG10.CMX

..Gold Feb 10

..1,078.60

.. 5.00 ......(0.5%)

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Microsoft (MSFT), Dow stock, reported earnings in Q4 jumped 60% due to success of its its new Windows operating system. However results in other divisions show that while consumers have resumed spending on new PCs, big corps have not. The company's other cash cow, Office, saw revenue slip 3% & revenue from its fast-growing server software group edged up just 2%. In both cases, MSFT blamed the ongoing lull in corp spending on technology & it expects corps to start spending this year, but that increase would be gradual. In FY Q2 MSFT net income rose to 74c per share from 47c per share last year. Revenue increased 14% to $19B. Windows revenue jumped 70% & net income nearly doubled to $5.4B. MSFT fell 98¢.

Microsoft Windows 7 Fuels Growth as Office, Xbox Lag

Microsoft --- 2 years









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Markets started the year on the wrong foot, Dow & NAZ had significant losses in Jan. Stocks were weak today after traders learned it was more important to concentrate on the 2.2% growth rate figure for GDP rather than the headline number of 5.7%. The former is more representative of what to expect in the rest of the year. Earnings continue to disappoint. Most Dow stocks which have already reported, sold off after reporting. This looks like it will be another tough year. Maybe not as bad as 2008, but tough nevertheless.


Dow Jones Industrials --- YTD




Nasdaq --- YTD

5.7% GDP growth rates takes stocks higher

Dow rose over 100 in the first hour after the "good" news about the GDP growth rate but that enthusiasm did not last. It is drifting lower to up only 36, advancers ahead of decliners 2-1 while NAZ is down 1 relating to recent dismal news from high profile techies. Banks have also seen selling after shooting up at the opening. The Financial Index keeps muddling along at the low end of a 6 month trading range.

S&P 500 FINANCIALS INDEX

Value 193.35

Change 1.06

% Change 0.6%

The MLP index recovered 1 to the 290s & the REIT index was up 1+. Junk bond funds were generally a little higher after selling in the last 2 weeks. The VIX, Volatility Index, dropped another 1 to the 22s, getting closer to the 18s it had been at before the spike up last week. The yield on the 10-year Treasury bond fell 2 basis points to 3.64% (little changed in the last month).


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- YTD





Oil is having a modest gain considering all the cold weather out there. Gold is trying to find a footing.

CLH10.NYM

...Crude Oil Mar 10

...74.30

... 0.66 .......(0.9%)

GCG10.CMX

...Gold Feb 10

...1,079.30

... 4.30 .......(0.4%)

OIL (ETF) --- 1 year




GLD (ETF) --- 1 year




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The economy grew faster than expected in Q4, though the engine of that growth (companies replenishing stockpiles) is likely to weaken as consumers keep a lid on spending. The 5.7% annual growth rate in Q4 was the fastest since 2003. Excluding inventory changes, the economy would have grown at a 2.2% rate, up from a 1.5% rate in Q3. Two straight quarters of growth followed a record 4 quarters of decline. But when restocking shelves slows, the recovery could stall. Contributing to growth was business spending on equipment & software jumped 13.3%. For the full year GDP declined 2.4%, the largest drop since 1946 & the first annual decline since 1991. The economy is forecasted to grow at a 2½-3%% in Q1 & a 2½% rate or below for the rest of the year, not fast enough to reduce the 10% unemployment rate in a meaningful way.

•Economy in U.S. Expanded at a 5.7% Annual Pace, Biggest Gain in Six Years

Photo: Bloomberg



Chevron (CVX), Dow stock, reported Q4 profits fell 37% as higher crude prices led to huge losses in its refining business. The nation's 2nd-largest oil company reported earnings of $1.53 per share in Q4 (below estimates of $1.70), down from $2.44 per share last year. Revenue increased 10.3% to $47.6B. For the full year, Chevron earned $5.24 per share, substantially lower than the record setting $11.67 per share in 2008. CEO John Watson blamed the drop in profits on a weak economy & a wild swing in energy prices from 2008 to 2009. Earlier this month, CVX said it would shrink its refining business & cut jobs throughout the company. The stock rose 18¢ & yields 3.7%.

Chevron Profit Dips on $278,000-an-Hour Refining Loss


Chevron --- 1 year









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Ben Bernanke was allowed to keep his job for a 2nd term beginning Mon. But the vote was close by Senate standards & he will be under a lot of pressure when interest rates are hiked, probably later this year. The high GDP growth rate was greeted with a sigh of relief, however a majority of it was attributable to inventory rebuilding which is more of a timing issue & not recurring. Dow looks like it will be down 4% for Jan.

Dow Jones Industrials --- 2 weeks

Markets sold off on disappointing forecasts

Stocks sank at the beginning & were never able to break into the black. Dow fell 115 to another YTD low, decliners ahead of advancers 5-2 & NAZ dropped 42 on gloomy tech announcements. Banks drifted lower in late day trading. It's been 6 months since the Financial Index was able to make any headway.


S&P 500 FINANCIALS INDEX

Value 192.29

Change -0.78

% Change -0.4%

The Alerian MLP Index fell almost 1, taking it below 290 while the REIT index fell 1½. Junk bond funds were slightly lower today & down along with the stock markets YTD. The VIX was little changed in the 23s. The yield on the 10-year Treasury bond rose another 1+ basis point to 3.66%.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil & gold each inched up. It's surprising that the cold weather hasn't had more of an impact on oil.

CLH10.NYM

..Crude Oil Mar 10

..73.72

.. 0.05 ......(0.1%)

GCG10.CMX

..Gold Feb 10

..1,088.00

.. 3.50 ......(0.3%)

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Photo: Bloomberg




Apple (AAPL) is getting only lukewarm response on its new iPad. The thinking is it will will need more apps (beyond just gaming) & that may take time, 1+ years. For the same price, somebody can buy 2 netbooks which are useful on day 1. Apple was down 8½ to the 199s, this may be the start of significant selling in the stock.

Apple’s IPad May Take Year to Become Breakout Product


Apple --- 1 year





Qualcomm (QCOM) sounded a cautious note on the economy when it said a "subdued" recovery forced it to slightly dial back expectations for 2010 based on a lagging recovery in Europe & Japan plus greater demand for cheap phones. QCOM had expected sales of $10.5B - $11.3B for the fiscal year, which ends in Sep. It's new guidance is for $10.4B - $11B. But it's keeping the full-year earnings estimate at $1.56 - $1.76 per share. In addition QCOM gave a forecast for the current quarter that came in under the expectations with earnings of 49¢ - 53¢ excluding items & revenue between $2.4B - $2.6B. Analysts had been expecting earnings of 57¢ per share, excluding items, on revenue of $2.75B. The stock plunged almost 7 to prices not seen since Apr. Motorola also had a dreary report, down 92¢ (12%).

Qualcomm stock tumbles on cautious forecast
AP


Qualcomm --- 1 year




Motorola --- 1 year










Jan has been a difficult time for stocks, a bad sign for the rest of the year. Ben Bernanke is expected to get a 2nd term starting next week, but the vote will be fairly close. Tech stocks, MLPs & junk bonds have one thing in common, after a red hot year they are sinking this year. OK, MLPs are up YTD but they look like they could break into the red soon. The bears out there are getting more attention!

Dow Jones Industrials --- YTD




Nasdaq --- YTD

President's speech does not inspire the markets

Dow fell 101 to another low for 2010, decliners over advancers 2-1 & NAZ dropped 37 as Apple (AAPL) is weak following its big announcement yesterday. Banks sold off after the big speech last night. They remain under pressure with new tax/fees & worries about their portfolios of loans.


S&P 500 FINANCIALS INDEX

Value 191.22

Change -0.85

% Change -1.0%

The MLP index was up pennies while the REIT index fell another 1. Junk bond funds rose slightly. The VIX was flattish in the 23s, still above 18 early last week. The yield on the 10-year Treasury bond was up 2 basis pints to 3.64%.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- YTD






Despite all the cold weather, oil went below 74. Worries about the economic recovery around the world could be holding back buyers. Meanwhile gold is trying to find a floor.

CLH10.NYM

...Crude Oil Mar 10

...73.52

... 0.15 .......(0.2%)

GCG10.CMX

...Gold Feb 10

...1,086.20

... 1.70 ......(0.2%)

A drop in new jobless claims came in short of expectations & factory orders rose only slightly, fresh evidence the economy is recovering at a slow, uneven pace. First-time jobless claims dropped 8K to 470K, a 450K figure was expected. The 4 week average rose for a 2nd straight week to 456K after falling for 19 straight weeks. However the Labor Dept cautioned that current figures could be artificially inflated. Continuing claims fell 57K to 4.6M.

Jobless Claims in U.S. Declined Last Week to 470,000


Initial jobless claims - 1 year




Continuing Claims - 1 year

Photo: Bloomberg




Procter & Gamble (PG), a Dow stock & Dividend Aristocrat, posted a better-than-expected profit, as promotional price cuts & increased advertising helped bring more shoppers back to its brands. It forecasted that sales should rise more than expected in 2010. Earnings were $1.49 per share in FY Q2, down from $1.58 per share a year earlier. As is so common, results beat expectations ($1.42). Sales rose 6.4% to $21B while the volume of goods sold rose 5%. P&G still expects to earn $4.02 - $4.12 per share in the current FY & expects organic sales to rise 3 - 5% up from its prior forecast of 2 - 4%. PG gained 1.80 to 62.61.


P&G Tops Estimates as Price Cuts Spur Volume Gains


Procter & Gamble --- 2 years

Photo: Bloomberg

AT&T (T), Dow stock, reported a 26% rise in Q4 profits, fueled by solid growth from a wireless business that is adding customers who want to connect their e-readers, smartphones & netbook computers to the Web. Quarterly earnings rose to 51¢ a share from 41¢ a share a year earlier. Earnings matched expectations. However revenue fell 1% to $30.9B, in line with estimates. Wireless service revenue rose 9.2% as it added 2.7M net subscribers. The figure, 2nd highest quarterly total in AT&T's history, was far ahead of the 1.8M net subscribers expected. The success was partly due to the popular iPhone. In Q4 alone, 3.1M iPhone activations were recorded. The stock was up pennies after having a quiet time during the recession.

AT&T Fourth-Quarter Subscriber Gains Top Some Estimates


AT&T --- 2 years






After all the excitement yesterday, Apple is selling off, down 8 to 200 in response to the old saying about buy on the rumor but sell on the news. For what it's worth, I don't see their new iPad is much different than my netbook. A much higher price brings a few extra features.

Apple --- YTD










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Markets are solidly back on defense again. Jan is closing out & it looks like it will give an indication that this will be a down year for the stock markets. Today's earnings were better received. It looks like Ben Bernanke will have a job next week, his renomination vote should come today.

Dow Jones Industrials --- 2 weeks

Markets encouraged by Federal Reserve statement

Dow gained 41 from buying in the last hour, but decliners were ahead of advancers by 10% & NAZ was up 17 (helped by Apple). Bank stocks liked the news from the Federal Reserve followed by buying but the Financial Index can't break away from trading sideways.


S&P 500 FINANCIALS INDEX

Value 193.07

Change 4.37

% Change 2.3%

The Alerian MLP Index got a major haircut, down 7 to the 290s, it's still up YTD. The Dow Jones REIT Index gained 1+ to 175, remaining in its sideways trading zone. Junk bond funds were slightly lower. The VIX pulled back 1+ into the 23s as fears have eased from the start of the week. The yield on the 10-year Treasury bond was flattish, up 1 basis point to 3.64%.


Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




VIX --- 2 months











Commodities sold off. Cold temps should have brought out buyers for oil, but they stayed home. Oil saw its 75 floor revert back to a ceiling while the same is happening for gold's 1100 former floor.

CLH10.NYM

..Crude Oil Mar 10

..73.67

.. 1.04 ......(1.4%)

GCF10.CMX

..Gold Jan 10

..1,084.40

.. 13.50 ......(1.2%)

Photo: Bloomberg



It was no surprise that the Federal Reserve kept interest rates near zero & restated its intention to cease buying mortgage backed securities in Mar. They said“the Committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets.”

•Fed Sees End to Mortgage-Debt Buying; Hoenig Dissents on Low-Rate Policy

Photo: Bloomberg


Apple (AAPL) will sell its tablet-style iPad starting at $499. The iPad, which is larger in size but similar in design the popular iPhone, was billed by Steve Jobs as "so much more intimate than a laptop and so much more capable than a smart phone." It has a 9.7" touch screen (a little bigger than the netbook screen I'm using now), is a half-inch thick, weighs 1½ pounds & comes with 16, 32 or 64 GB of flash memory storage. The basic models will cost $499, $599 & $699, depending on storage size. All models have Wi-Fi & Bluetooth connectivity built in, its battery lasts 10 hours & can sit for a month on standby without needing a charge. There is also a version with pay-as-you-go data plans from AT&T in the US which will cost more. The well advertised announcement did little for the stock, up 2 to 208.

•Apple Unveils $499 IPad Tablet in Challenge to Dedicated E-Book Readers


Apple --- YTD










After the announcements by the FED & AAPL, buyers returned to the markets but not in a major way. The housing news in the AM was more telling & Caterpillar's (down 2.41 today) admission that the economies in the developed countries are not rebounding was most significant for me. The chart below shows Dow has returned to its starting point 2 months ago while NAZ has a nice gain. Earnings season is not going well.


Dow Jones Industrials --- 2 months




Nasdaq --- 2 months