Thursday, February 18, 2010

Favorable economic data lifts stocks

Stocks started higher but found extending the gains difficult until the PM when buyers returned. Dow gained 83, advancers 2-1 over decliners & NAZ shot up 15 (helped by a good earnings report from HPQ). Banks also did well, but the Financial Index can't break away from the 190 trend line which goes back 6 months.


% Change

The Alerian MLP Index was down a few pennies, not helped by the general market trends, but still in the 190s. The index has barely fluctuated in the last 2 days. The REIT Index had a big day, up 2¼ (also a 10% move off its lows 2 weeks ago). Junk bond funds were a little soft. But Treasuries sold off ahead of another big auction next week (see below). The yield on the 10-year Treasury bond rose 6 basis points to 3.80%. 4% was last year's high & it's in danger of being topped shortly on lower bond prices from massive Treasury auctions.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Oil had a good advance while gold was about even. Oil has increased over 10% in the last 2 weeks (shown in its chart), largely after the snow storm news was over.

CLH10.NYM..Crude Oil Mar 10..78.99 ..Up 1.66

GCG10.CMX..Gold Feb 10..1,118.00 ..Down 1.50


The yield curve, difference in yield between Treasury 2- & 10-year notes, steepened to a record, 293 basis points! This comes ahead of $126B in notes & bonds being auctioned next week. The Federal Reserve is keeping short rates very low to help the economy at the same time as increased Treasury borrowings are pushing long rates up. High long rates are also anticipating higher inflation down the road.

Treasury Yield Curve Steepens to Record as Reports Show Growth

Yield spread - 1 year

Hewlett-Packard (HPQ), a Dow stock & world's #1 computer maker, had another great qtr. Net income was 96¢ per share, in the qtr ended Jan 31, 25% above last year's 75¢. Excluding one-time items, it earned $1.10 per share, beating the average estimate of $1.06. Revenue jumped 8% to $31.2B, exceeding forecasts for $30B. Corps are spending more on tech & sales of personal computers were higher driven by consumers lured from the roll-out of Microsoft's Windows 7. HPQ rose 69¢.

HP net jumps 25 percent on cost cuts, PC strength AP

Hewlett-Packard --- 2 years

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Dow has moved up 500 in the last 2 weeks, largely a post earnings season rally. But it will need another 400 to reach a new interim high. On the margin, money flowing out of Treasuries is seeking greater risk & bidding up stocks.

Dow Jones Industrials --- YTD

Nasdaq --- YTD

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