Tuesday, January 12, 2010

Nervous markets lower on earnings expectations

Markets were off after disappointing earnings from Alcoa (AA). This Dow stock is the first major company to report earnings & its announcement sets a bearish tone for earnings season in the next few weeks. Dow was down 36, decliners over advancers 5-2 & NAZ fell a very big 30. Banks suffered, also hurt by the talk of imposing $Bs in penalty taxes after their recovery from the financial crisis. The Financial Index is hanging in there above 200, but may not be able to remain above it very long. The index has seen little change since the end of Aug while other popular averages have been extending their gains, very disturbing.


% Change

MLPs & REITs sold off today. The Alerian MLP Index fell 1.88 to the 292s but still has a terrific chart for the last 3 months. The Dow Jones REIT Index fell 3 with a less pretty chart. Junk bond funds saw a little selling after reaching post Lehman highs. With the uncertainty raised on AA earnings, Treasuries were in demand again today. The yield on the 10-year Treasury bond fell 9 basis points to 3.73%.

Alerian MLP Index --- 3 months

Dow Jones REIT Index --- 3 months

Oil & gold sold off, probably related to negative thoughts flowing from AA earnings. In addition, warmer winter weather kept buyers away from oil. Gold still has allure for the long term, but will be volatile in the short term.

CLG10.NYM..Crude Oil Feb 10..80.79 ..Down 1.73

GCF10.CMX..Gold Jan 10..1,127.20 ..Down 23.50

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Enterprise Products (EPD), now the largest MLP, & Duncan Energy Partners (DEP) each announced increased distributions (qtr over the prior qtr) for Q1. Each has a yield of about 7%, not far above the yield on the 10-year Treasury. A narrow spread signals there is less of a reward for the added risk for owning the MLP. But more increases from MLPs can be expected in the next 2 weeks. EPD was even while DEP dropped 51¢.

InPlay: Enterprise Products increases quarterly cash distribution rate to $0.56/unit from $0.53/unitBriefing.com
Duncan Energy Partners Increases Cash Distribution RateBusiness Wire

Enterprise Products --- 1 year

Duncan Energy Partners --- 1 year

Late day buying reduced losses for the Dow. The chart below shows the last 200 points have been very tough. Banks have been weak during this period & they represent an important part of the Dow. Banks will also have to contend with fears about even more bad news coming from real estate loans of which they own a lot & lower trading profits. Earning season began on an off note. If that continues, Dow may see its first correction in almost a year.

Dow Jones Industrials --- 3 months

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