Friday, January 29, 2010

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.


% Change

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 ...Up 0.66

GCG10.CMX...Gold Feb 10...1,079.30 ...Down 4.30

OIL (ETF) --- 1 year

GLD (ETF) --- 1 year

Gold Super Cycle Click Here

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

Find out what's inside Trend TV Click Here

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

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