Friday, February 26, 2010

Markets little changed on mixed economic news

Dow began the day lower, but then bounced back taking it into the black. Dow ended up 4 (with a modest gain in Feb), advancers over decliners 3-2 & NAZ rose 4. Banks had a good day as the Financial Index is putting more distance between it & the 190 floor of its recent trading range.


% Change

MLPs are building up a head of steam after a rest. The Alerian MLP Index was flat at 290 for more than a week, followed by a nice move in the last 2 days. Today the index gained 2 to the 295s & has its eyes on the 300 high from last month (342 was its all time high reached 2½ years ago). Enbridge Partners (EEP) just announced a successful $500M offering at a rate of 5.205% for a 10 year senior note. Money is available to finance MLP expansion. EEP slipped 7¢. The Dow Jones REIT Index was down pennies at the 180ish level, at its Sep high (shown in the 6 month chart). Junk bond funds are under their Jan highs, but not by much. Today they were fractionally higher. Greek debt worries & a slowing economic recovery sent Treasuries higher. The yield on the 10-year Treasury bond fell 5 basis points to 3.60%, still in its multi month trading range.

Alerian MLP Index --- 2 months

Dow Jones REIT Index --- 6 months

NYC Central Park

Photo: Bloomberg

Nothing like a big snowstorm on the east coast to raise oil prices. Oil was also helped by an upward revision of Q4 GDP growth from 5.7% to 5.9%, although that is very much a lagging indicator. Going forward, the growth rate will slow significantly when inventory restocking slows (& stops). Gold also had a good day.

CLJ10.NYM..Crude Oil Apr 10..79.47 ..Up 1.30

GCH10.CMX..Gold Mar 10..1,118.30 ..Up 10.50

Gold Super Cycle!! Click Here

Find out what's inside Trend TV! Click Here

Markets got bogged down in the snowstorm which hit NYC & no encouraging news kept them treading water. The 2 month chart for Dow & NAZ shows there was an attempt in Feb to head back in the black for 2010, but that was not to be. More dreary economic data will keep markets under pressure. Housing & autos traditionally are supposed to lead an economic rebound, but that is not happening. Now there is talk of higher interest rates approaching. Already the Federal Reserve raised the bank lending rate & is making other moves which are the beginning of increasing interest rates back to where they have been historically. Of course, that should go hand in hand with a decent economic recovery. The Greek debt problem drones on, the EU told Greece to come up with a tougher austerity plan. The € is back at $1.35, but remains down from recent highs & some pros are betting even lower.

Dow Jones Industrials --- 2 months

Nasdaq --- 2 months

Markets waffle after dismal January home sales

Dow is up 12, advancers 4-3 ahead of decliners & NAZ rose 3. Stocks are down slightly this week. Banks are up a tad, not meaningful.


% Change

The Alerian MLP Index found support, gaining 1+ to the 294s & may want to take out the recent 300 high. The REIT index was flat, staying near its Sep high. Junk bond funds were slightly higher. The yield on the Treasury 10-year Treasury bond slipped 2 basis points to 3.62%. Treasuries got through another week of massive Treasury borrowing in good shape thanks to greater concerns about foreign debts.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil was able to advance in a quiet market while gold was even, remaining over 1100.

CLJ10.NYM...Crude Oil Apr 10...78.94 ...Up 0.77


Gold Super Cycle Link! Click Here

In Jan sales of previously occupied homes took a large drop for the 2nd straight month, falling to the lowest level since summer. This is another sign that the housing market's recovery is faltering. The National Association of Realtors said sales fell 7.2% to an annual rate of 5.05M from a downwardly revised pace of 5.44M in Dec (the forecast was for a 5.5M rate). The median sales price at $164K was unchanged from a year earlier & down 3.4% from Dec.

January Home Sales Fall 7.2 Percent- AP

American International Group (troubled AIG) had another ugly qtr. It reported a quarterly loss of $8.9B. Results were hurt by charges related to US loan payback, asset divestments & higher loss reserves. As a result, they may need additional gov aid. However it should have adequate liquidity to "finance and operate AIG's businesses and continue as a going concern for at least the next 12 months." AIG reported an adjusted loss of $53.23 per share, compared with an adjusted loss of $287.69 per share last year (analysts had been expecting a loss of $3.94 per share). It's difficult to tell how ugly the loss really is, but it's bad & spells more trouble for supporting any recovery in the US economy. The stock dropped 2 to 25½ & down sharply from the reverse stock split period in 2008.

AIG --- 2 years

Find out what's inside Trend TV Click Here

Stocks edged up in Feb, but just barely & remain lower YTD. Dreary housing numbers combined with AIG's losses reinforce the notion that the economic recovery is sputtering at best.

Dow Jones Industrials --- 2 weeks

Thursday, February 25, 2010

Stocks rebound after steep morning losses

Buyers in the PM limited the loss for the Dow to only 53 at the close, decliners ahead of advancers by a more modest 15% & NAZ fell 1+. The Financial Index tumbled more than 3 in the first hour of trading, but PM buying reduced damage. Below the chart for the Financial Index is another for JP Morgan (JPM), a Dow stock, representative of a highly regarded bank. Like the Financial Index, it has been treading water for over 6 months making the bull's case for the stock market difficult to understand.


% Change

JP Morgan --- 1 year

Like stocks, the Alerian MLP sold off badly at the opening but recovered 4 from the lows to end up 1.82 in the 293s & taking it further above the 190 plateau it has been on for almost 2 weeks. The Dow Jones REIT Index was up fractionally taking it essentially to the 181 Sep high. There is more excitement at REITs with the battle over General Growth & how much it's worth assuming it can emerge from bankruptcy. Junk bond funds were mixed again. Treasuries remained higher, the yield on the 10-year Treasury bond fell 5 basis points to 3.64%.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Oil followed the stock markets lower, but gold did well with investors looking for a "safe" investment.

CLJ10.NYM..Crude Oil Apr 10..78.10 ..Down 1.90

GCH10.CMX..Gold Mar 10..1,107.80 ..Up 11.30

Gold Super Cycle Link! Click Here

A new proposal by the administration would prohibit a referral to foreclosure until a borrower is evaluated & found ineligible for Home Affordable Modification Program (HAMP) or reasonable contact efforts have failed. But this proposal is just a proposal. Presently, lenders can initiate foreclosure proceedings on any loan that hasn't been submitted for HAMP eligibility & foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification. I'm not sure banks will take this one lying down.

Obama May Ban All Foreclosures Without Review by Loan-Modification Program

Find out what's inside Trend TV! Click Here

Little was expected from the Health care summit & it produced little agreement. The storm around troubled Toyota has quieted a bit with attention switching to health care. Greek's debt problems keep growing taking the € below $1.35 (down from a recent high of $1.51). The European Union is forcing harsh cutbacks in troubled countries (such as Greece, Ireland & Portugal) as Greece is looking at another credit down grade which would make matters even worse. Stocks recovered after Dow began the day down 200. But it remains lower YTD following season when an attempted rally did not succeed.

Dow Jones Industrials --- 1 week

Dow Jones Industrials --- YTD

Markets sink on weak economic data

Dismal figures for durable goods & jobless claims sent stock buyers home. The Dow tumbled 150 at the opening & remained weak. Dow is down 158, decliners over advancers 4-1 & NAZ fell 30. Banks are leaders, at least to the downside. The Financial Index may have to test the 190 low area of its multi month trading range.


% Change

The Alerian MLP Index dropped 1, back to the 290 plateau. The Dow Jones REIT Index fell 1+ to 179, failing again to get over the 181 Sep high. Junk bond funds hardly changed, hurt by the weak economic data but also sort of a safe haven investment for overseas investors. There was buying in Treasuries. The yield on the 10-year Treasury bond fell 5 basis points to 3.65%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil just could not beak thru the 80 ceiling, it's heading back down to the 75 floor. Gold is hanging in fairly well given the turmoil, but bulls would like to see it above 1100.

CLJ10.NYM...Crude Oil Apr 10...77.83


Gold Super Cycle! Click Here

Orders for durable goods shot up in Jan by the largest amount in 6 months, but the strength came from a surge in demand for commercial aircraft. Demand for autos, machinery & other products fell last month, manufacturing still facing hurdles. The Commerce Dept reported that orders for durable manufactured goods jumped 3% in Jan, however excluding transportation, durable goods, orders fell 0.6%, weaker than expected. The drop in orders excluding transportation followed solid gains of 2% in Dec & Nov.

U.S. Durable Orders Ex-Aircraft Fall as Business-Equipment Demand Weakens

Bookings for durable goods - 1 year

Photo: Bloomberg

New claims for unemployment benefits jumped unexpectedly last week, mostly because state agencies processed a backlog of claims caused by snowstorms from the previous week. In addition, the severe weather also increased temporary layoffs in the weather-sensitive construction & transportation industries. The increase in claims underscored concerns that layoffs are no longer slowing as fast as they were in recent months. The Labor Dept said first-time claims for unemployment insurance rose by 22K to a seasonally adjusted 496K compared to an expected drop to 455K.

Jobless Claims in U.S. Unexpectedly Rose Last Week

New unemployment claims - 1 year

Bottles of Coca Cola are seen in a store display in New York February 9, 2010. REUTERS/Lucas Jackson

Photo: REUTERS/Lucas Jackson

Coca-Cola (KO), a Dow stock & Dividend Aristocrat) will buy its North American bottler, Coca-Cola Enterprises (CCE) in a substantially cashless deal that would cut costs & increase flexibility in its distribution. CCE's North American business accounts for 75% of its U.S. bottler-delivered sales volume & almost all of its Canadian bottler-delivered volume. Coke already owns a third of CCE worth $3.2B. The acquisition includes consideration of Coke's current stake, almost $9B of CCE debt & all North American assets & liabilities. In addition, the companies agreed in principle that CCE would buy Coke's bottling operations in Norway & Sweden for $822M & have the right to acquire the soft-drink maker's 83% equity stake in its German bottling operations after closing for fair value. CCE will pay its outside shareholders a special one-time dividend of $10 per share. CCE rose $6.40 as KO dropped $2 providing a more attractive opportunity for buying KO. I just published a Coca Cola article on Instablog at (link below) discussing KO's excellent track record of raising annual divs for almost 50 years.

Coca-Cola Buys Coca-Cola Enterprises' North America Unit for $12.3 Billion

Coca-Cola --- 2 years

Coca-Cola Enterprises - 2 Years

Find out what's inside Trend TV Click Here

Investors are having a tough time believing that this recovery is going well. Auto & retail sales will be reported next week & they may give more dreary data.

Dow Jones Industrials --- 2 weeks

Wednesday, February 24, 2010

Higher markets on low interest rate forecast

Stocks held on to their gains. Dow was up 91, advancers over decliners 5-2 & NAZ rose 22. Banks had a good day after hearing low rates will continue for some time.


% Change

MLPs picked up buying in the PM, the index gained .94 to the 291s. The Dow Jones REIT Index rose 1.79 to the 180s as buyers were encouraged by the prospects for General Growth to emerge from bankruptcy (see below). Junk bond funds ticked up. Treasuries were mixed, the yield on the 10-year Treasury bond was up a smidgen to almost 3.70%. Today's Treasury auction for a record tying $42B of 5 year notes went well with one more auction coming tomorrow under this week's program.

Alerian MLP Index --- 3 months

Dow Jones REIT Index --- 3 months

Oil managed a rally, joining with stocks, taking it back near 80. But gold fell, slipping below 1100. It could be gold is getting ready to follow thru on the prediction that Mar is traditionally a bad month.

CLJ10.NYM..Crude Oil Apr 10..79.88 ..Up 1.02


Gold Super Cycle!! Click Here

Freddie Mac after losing $B & $B warned of a "potential large wave of foreclosures" still to come. Uh, Oh!! Freddie & Fannie have already cost taxpayers $111B which could rise to $200B by next year. This is just one more gloomy indicator for the troubled housing sector.

General Growth Properties is proposing to split into 2 companies to escape from Chapter II. They claim shareholders will get $10 stock in the first company & $5 in the 2nd. Such a plan remains iffy but brings to light to underlying value of REITs. They own property & buildings which should, at least, retain value even in the worst of times (like now).

General Growth Plans Split, Brookfield to Take Stake

The Senate passed a $15B jobs bill (small by DC standards). This has to be blended with a $150 bill passed by the House. The Senate bill would give employers a tax benefit of a one year holiday from paying Social Security taxes for each unemployed worker who is hired.

Senate Passes $15 Billion Job Bill, Sends It to House

Find out what's inside Trend TV!!
Click Here

Toyota tried to explain that they are sorry about the problems, hoping they won't happen again. Stockholders liked what they heard, the stock advanced a very big 2.78! The Bernanke rally lasted. While giving testimony, it was apparent that everybody agreed high unemployment is at the root of the recession & lowering that rate is key to any economic recovery. A new unemployment bill may prove to be a step forward.

Dow Jones Industrials --- 3 months

Low interest rate rally

Dow is having a good day, up 102, advancers over decliners 3-1 & NAZ rose 26. Banks responded to favorable testimony by Ben Bernanke & the Financial Index is putting more space between it & the important 190 resistance level. Nothing like testifying before congress about keeping interest rates low for boosting stock prices, especially bank stocks.


% Change

MLPs are stuck in a rut, the index has hardly budged from 291 for 7 days (up pennies today). The REIT index was up 1 to the 179s, staying close to the 281 Sep high. Junk bond funds inched higher as did Treasuries. The yield on the 10-year Treasury bond was down 1 basis point to 3.68%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil & gold were essentially even.

CLJ10.NYM...Crude Oil Apr 10...78.92 ...Up 0.06


Gold Super Cycle Link!
Click Here

Sales of newly built homes unexpectedly fell to a record low in Jan hinting at potential trouble for the fragile housing market recovery. The Commerce Dept reported sales dropped 11.2% to a 309K unit annual rate (not included on the graph below), the lowest level since records started in Jan 1963, from an upwardly revised 348K in Dec. This was the 3rd straight month that new home sales fell & the percentage decline in Jan was the largest in a year. Compared to last Jan, sales fell 6.1%. The drop in sales last month came despite the extension of a popular tax credit for first-time buyers, which was also expanded for repeat buyers.

Sales of New Homes in U.S. Unexpectedly Declined in January to Record Low

Home purchases - 1 year

Ben Bernanke told Congress that record-low interest rates are still needed to ensure that the economic recovery will last & to help cushion the sting of high unemployment. He struck a confident tone that the recovery should endure, but he also sought to tamp down expectations. Moderate economic growth will lead to only a slow decline in the nation's nearly double-digit unemployment rate. There were no new clues about the timing of an interest rate increase, many think that is months away. Treasuries rose slightly. A graph of the Treasury yield curve is shown below.

Bernanke Says `Nascent' Recovery in U.S. Still Requires Low Interest Rates

Source: Bloomberg

Find out what's inside Trend TV!! Click Here

Dow has been treading water for the last week but gained today despite more dismal housing numbers. Bernanke & Toyota officials are testifying, nothing new is expected. Let's wee what the PM brings.

Dow Jones Industrials --- 2 weeks