Markets begin with a downward bias

Stocks were slipping slightly ahead of the opening bell at the NYSE. Today might be another quiet kind of day. Oil & gold off to a good start as both are leaving their support levels behind.


CLK10.NYM
Crude Oil May 10...83.11
__0.74__(0.9%)


GCJ10.CMX
Gold Apr 10...1,109.90
__5.50__(0.5%)




Employers shed 23K jobs in Mar, below expectations for an increase in jobs. However, the numbers were still less than the adjusted 24K jobs lost in Feb. Statistics are from a report by a private employment service. This follows a rise of 40K private-sector jobs last month. After suggesting a weak recovery, this will give a negative bias at that the opening.



Greece is planning another offering of bonds to help pay off their debts. There is not a lot of news expected on the last day of Mar & qtr. The averages had a good month, Dow is up 6% but the advance has been fading in recent days. I'm taking the rest of the day off, have a good day.

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Markets struggle for direction

Stocks hardly budged from break even all day. Dow ended with a gain of 11, advancers were slightly ahead of decliners & NAZ was up 6. Inconclusive economic reports along with more European debt problems failed to attract buyers. Banks slipped back but the Financial Index remains near its 2010 highs.


Value____214.39
Change____-1.57
% Change__-0.7%


The Alerian MLP Index is recovering lost territory from the last 2 weeks, up 1.82 to 301.87. REITs were soft, the REIT index slipped back pennies in the 200s. Junk bond funds were a little soft, not really significant. The yield on the 10-year Treasury bond was flatish at 3.87%, but at a worrisome high level.

On this uneventful day, oil was up a little while gold pulled back slightly. Traders consider oil holding above 82 to be important (for the bulls).

CLK10.NYM
Crude Oil May 10__82.40__0.23 (0.3%)

GCJ10.CMX
Gold Apr 10___1,103.90___6.40 (0.6%)



The Conference Board’s consumer confidence index rose in Mar to 52.5, from 46.4 in Feb & exceeding forecasts. However, the increase was greeted with a muted response by the markets. Rising stock prices, a stabilizing housing market & fewer layoffs may be giving hope that the recovery will be sustained. The measure averaged 45 in 2009 & 97 during the expansion period ending in 2007.


•Consumer Confidence in U.S. Improves, Home Prices Climb Amid Job Optimism



Ireland’s banks, just another European country with major debt problems, may need at least $42B in new capital after a severe real estate slump brought on a substantial number of bad loans. Greek debt problems linger on while Portugal & Spain, with their own problems, may be looking for bailout money soon. The € is worth a shade above $1.34, little changed from its low level of recent days & down from a high of $1.51 last year. Economic data today was bland. Dow eked out another 2010 high but these gains are not coming easily. It's up just 19 in the last 5 trading days. However Dow is up 6% this month, encouraging for the bulls who are still hoping to see 11K very soon.

Markets flounder looking for direction.

Stocks aren't sure what to do. Dow is up 20 going over 10.9K, advancers ahead of decliners 2-1 & NAZ is up 5. Banks are doing little, the Financial Index remains at recent high levels.

S&P 500 FINANCIALS INDEX

Value_____215.68
Change_____-0.28
% Change___-0.1%



The Alerian MLP Index is up a fraction but still in the 300s (off 5 from its recent high). The Dow Jones REIT Index is up a few pennies. Junk bond funds are little changed at their lofty levels. But the important yield on the 10-year Treasury bond is up another 2 basis points to 3.89%. Oil & gold are edging higher with nothing dramatic going on.

CLK10.NYM
Crude Oil May 10...82.3__0.20__(0.2%)

GCJ10.CMX
Gold Apr 10....1,106.50__3.80__ (0.3%)

In Jan, home prices had their smallest annual decline in almost 3 years. The Standard & Poor's/Case-Shiller 20-city home price index fell just 0.7% from last year. In addition, prices rose 0.3% from Dec to Jan for the 8th consecutive monthly gain. The index is up nearly 4% from its bottom in May 2009, but is still almost 30% below the May 2006 peak. This report gives more of the same kind of news about housing.

•Home Prices in 20 U.S. Cities Unexpectedly Climb 0.3%, Case-Shiller Says


This is shaping up as another quiet days. The Greek debt situation muddles along. European countries & the IMF want to help but they have to make up the rules as they go along. The € is worth $1.34+, little changed from where it has been recently. Markets will probaly continue to drift for the balance of the day.

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Stocks rise on commodity gains

Stock advanced for no special reasons. OK, commodities had a good day which brought out stock buyers. Dow gained 45, advancers over decliners 5-2 & NAZ was up 9. Banks continued strong, with the Financial Index closing at another 2010 high.

S&P 500 FINANCIALS INDEX

Value___215.96
Change___0.41
% Change_0.2%


The Alerian MLP Index remained higher all day, ending up 3.21 to 300. The REIT index slipped pocket change to 200.62, still near its recent high of 204. Junk bond funds continue at high levels while the Treasury bond slipped back taking the yield up 1 basis point to 3.68%.


Oil had a very big gain, but remains near the 80 trend line while gold is firmly over 1100 (again).

CLK10.NYM..Crude Oil May 10__82.36__2.36 (3.0%)

GCH10.CMX..Gold Mar 10__1,110.30 6.10__(0.6%)



For the 5th straight month, consumer spending rose in Feb. It was up 0.3%, matching estimates & following a 0.4% increase in Jan. However, income was unchanged, falling short of expectations as winter storms hurt hiring & hours worked. This performance was rated as fairly good, although it will probably not lead to a significant increase in hirings.

•U.S. Consumer Spending Climbs a Fifth Straight Month as Recovery Quickens



The Treasury said it's getting ready to start selling almost 8B shares of Citigroup (C), the stock fell 13¢ to 4.18. For me, the most important story, on a day with little news, discussed the enormous rally in junk bonds (during the last year) & the willingness of investors to buy up more high risk bonds at even lower yields. Yields of 8½-10% are now common, levels not seen since the best days for junk bonds a few years ago. While the yield on the Treasury bond eked out a minor gain, it looks like it wants to go back over 4%. Higher yields on Treasuries would drag down corp debt prices, especially for high risk debt. With stocks advancing for no clear reasons (Dow is just under 10.9K, an inch below its 2010 high made last week), they would also be hurt with a rise in Treasury yields.

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Markets keep climbing

Dow rose 48, advancers over decliners 2-1 & NAZ is up 12. Banks are little changed.

S&P 500 FINANCIALS INDEX



Value.....215.49
Change.....0.06



The Alerian MLP Index had a very nice rebound after weakness last week, up 3.65 to 300. The REIT index slipped a fraction to 200, still near interim high levels with correspondingly low yields. Junk bond funds are mixed & the yield on the Treasury 10 year bond is up 2 basis points to 3.88% (still high).


Commodities were strong as oil is having a very good day, but still little changed from the 80 price level it has remained near in recent months.


CLK10.NYM...Crude Oil May 10__82.11__2.11 (2.6%)

GCH10.CMX...Gold Mar 10__1,109.40__5.20 (0.5%)



Demand for junk bonds is strong as sales are at record in Mar. Rising profits & record low Federal Reserve interest rates attract lending to lowest-rated borrowers. Companies issued $38B of junk (high yield) bonds in Mar, above the previous high of $36B in 2006. Yields fell 0.95 percentage points to within only 5.96% points of comparable government debt (narrowest gap in 2 years). This follows investors plowing a record $33.6B into speculative-grade funds this qtr.


•Junk Bonds Set Monthly Record in `Goldilocks' Environment: Credit Markets



Many aren't sure why the market keeps going up. At the same time, junk bonds keep rising. There may prove to be a connection, more interest in speculative investments is not good for the longer term stock market prospects.

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Markets give up early gains

Markets failed again to hold onto early gains. Dow eked out a gain of 8, decliners were slightly ahead of advancers while NAZ was off 2. There was selling at lunchtime & markets weren't able to recover. Banks have been leading the way up in the recent rally & led the way down (as they did yesterday). The Financial Index finished off 2½ from its highs earlier in the day.


S&P 500 FINANCIALS INDEX

Value 215.55

Change 0.23

% Change 0.1%

MLPs are flattening out. All month, the Alerian MLP Index has been trying to crack the 300 ceiling but has failed to do that it a meaningful way. Today it slipped another ½ to the 296s. It began the year at 285, so it's showing a gain but that could disappear soon if more profit taking continues. The Dow Jones REIT Index fell 1 to 200, but is still up 10% YTD. Junk bond funds were flat to higher, offering less attractive high yields. Treasuries found buyers today. The yield on the 10-year Treasury bond fell 4 basis points to 3.86% remaining at high & worrisome levels.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- YTD





Traders gave up on oil. Selling took it below 80, but this move is not significant. Gold found some buyers to bring it back over 1100. Gold still has a bullish outlook, but as with stocks, there will be periods measured in weeks & even months when little happens.

CLK10.NYM

..Crude Oil May 10

..79.95

.. 0.62 ......(0.8%)

GCH10.CMX

..Gold Mar 10

..1,104.20

.. 11.50 ......(1.1%)

Johnson & Johnson (JNJ) & Merck (MRK) are the 2 pharmacy Dow stocks which are still Dividend Aristocrats. They have been held back this year by their traditional defensive nature. Investors are more interested in accepting risk with the hopes of greater rewards. Value players might give them a 2nd look.


Johnson & Johnson --- YTD




Merck --- YTD






AT&T (T), Dow stock, is taking a $1B non-cash charge in Q1 because of the added costs for the health care overhaul. Already AK Steel (AKS), Caterpillar (CAT & a Dow stock), Deere (DE) & Valero Energy (VLO) announced similar charges needed because this law will raise their expenses.

•AT&T Sees First-Quarter Charge of $1 Billion on U.S. Health-Care Overhaul



Dow tried hard to push on to 11K this week, but bulls weren't able to take it there. A rescue package for Greece helped today, but there wasn't conviction behind the buying. More stories about the dreary housing market hurt. Companies taking charges for costs related to the health care bill is an unexpected headache. The threat of higher interest rates is another kick in the head housing doesn't need (not to mention the markets in general). Dow managed a 1% gain for the week & is up 5% in Mar. Next week the bulls will show if they are still in charge of the stock markets.

Dow Jones Industrials --- YTD




Nasdaq --- YTD

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Stocks rise on Greek debt bailout

Dow gained 53 bringing it to the edge of 10.9K, advancers over decliner 2-1 & NAZ was up 8. Banks continue very hot. The Financial Index is working its way back to virtually 220 reached yesterday midday.


S&P 500 FINANCIALS INDEX

Value 217.77

Change 2.45

% Change 1.1%

The Alerian MLP Index has been on a bumpy road this week but gained a fraction today to the 298s. After a strong opening, the Dow Jones REIT Index fell back to up only pennies in the 201s. Junk bond funds were generally higher, bringing even lower yields. Treasuries finally saw buying, the yield on the 10-year Treasury bond backed off to 3.87%. But it's still in the upper end of its range for the last 2+ years.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




10-Year Treasury Yield Index - 3 years





Oil & gas are essentially even, remaining close to the midpoints of their sideways trading ranges.

CLK10.NYM

...Crude Oil May 10

...80.29

... 0.24 .......(0.3%)

Gold

...1,094.00__

-0.10

__-0.0%

The Reuters/University of Michigan final consumer sentiment index for Mar held at 73.6. The forecast for sentiment had been it would fall to 73 & the preliminary reading for the measure was 72.5. The consumer sentiment index averaged 66.3 in 2009, compared with 63.8 in the previous year. But the measure is still less than the average 88.8 during the expansion from late 2001 until 2007. A measure of current conditions rose to 82.4, the highest in 2 years, from 81.8 in Feb. The index of expectations 6 months from now fell to 67.9 from 68.4 in the prior month. This is the usual assortment of blurry statistics

•Confidence Among U.S. Consumers Is Unchanged This Month in Michigan Index


Consumer confidence index - 1 year




Measure of current conditions - 1 year




Consumer expectations - 1 year

Photo: Bloomberg


European leaders agreed to a plan for rescuing Greece if it finds itself unable to borrow, by providing loans from other eurozone countries along with funding from the International Monetary Fund (IMF). However, it sets strict conditions, saying it could only be used as a last resort & requires unanimous agreement of all eurozone members. The Greek Prime Minister, George Papandreou, insisted that he did not believe Greece would ever have to use the mechanism. The € recovered from a 10-month low against the US dollar, to almost $1.34. Sounds good, but this agreement is still fragile.

Euro Rallies as Greece Wins Aid Agreement; Metals, Oil Advance


Yield premium for Greek debt - 1 year






Yesterday's market decline did not discourage the bulls. They want to take the Dow to 11K & may get there early next week. Even with an agreement to bail out Greece, European debt problems are not over. Spain & Portugal will also be looking for handouts. Plus the US economy still has to figure out how to reduce the stubbornly high unemployment rate.

Dow Jones Industrials --- 2 weeks

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Late day selling stopped stock market advance

Stocks began the day higher & went up from there. Dow had 11K in its sights. Buyers were encouraged when Ben Bernanke said interest rates would remain low to help the economy. But excitement dimmed during the day. Dow finished up only 5 (still below 10.9K), decliners ahead of advancers 3-2 while NAZ ended with a loss of 1. Banks stocks which had been leading the markets higher, suffered a similar fate. The Financial Index closed 4+ below its intra day high.


S&P 500 FINANCIALS INDEX

Value 215.32

Change 0.92

% Change 0.4%

MLPs have been under performing the stock averages this week, a rarity in recent months. The Alerian MLP Index fell 2+ to the 297s. Its 300 ceiling is proving tough to crack (even though it managed to reach 205 recently). Meanwhile the Dow Jones REIT Index went up a fraction, still in the 201s (good enough for an 18 month high). Junk bonds are HOT as funds are at levels not seen in 2-3 years. In contrast (or maybe it should be expected) Treasuries are selling off (discussed below). Risk fears are evaporating. The VIX, volatility Index, was up a .85 to 18.40 today after being in the 17s (levels not seen in almost 3 years before the financial meltdown).

Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months




VIX --- 6 months





After gains in the AM, oil settled back with a minor loss. Gold found a few supporters but not enough to take it over 1100.

CLK10.NYM

..Crude Oil May 10

..80.55

.. 0.06 ......(0.1%)

GCH10.CMX

..Gold Mar 10

..1,092.70

.. 4.10 ......(0.4%)

Treasuries are not having a good week. They declined again, pushing the yield on 10-year Treasury bond to 3.90% (highest level since Jun) after this week’s record-tying $118B auctions drew lower- than-average demand. Today's 7-year notes tumbled after the $32B auction attracted the lowest bid to cover ratio (2.6X) in 10 months. Indirect bidders, including foreign central banks, purchased 42% compared with an average of 54% over the past 10 auctions, yielding 3.374% (compared with the average forecast of 3.372%). Bill Gross, manager of PIMCO, said on Bloomberg radio, that the almost 3-decade bond market rally may be ending. He’s making an argument for investors to own fewer bonds.

Treasuries Fall as 7-Year Sale Draws Lowest Demand Since May



There is more information about how the gov will sell Citi (C) stock. The gov (that's us) owns 7.7B shares & the cost is figured at $3.25, so it's looking at a nice profit. They will select big brokers to sell huge blocks over a period of time in the coming months. Today Citi rose 12¢ to $4.27.

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Markets took time to pause & rest for a second day. Bulls are happy & can accept this slow period. While the European countries may be figuring out a way to bailout Greece, the Treasury markets here look very soggy. The 10 year Treasury yield is only 10 basis points away from the magic peak of 4.0% reached last year. Bill Gross's thoughts about the long term bond rally ending is beginning to shake even the stock markets.


Dow Jones Industrials --- 6 months




Nasdaq --- 6 months

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Dow tops 10,900

Dow is up 91 at the session's highs, taking it above 10,900 for a new 2010 high. Advancers are ahead up decliners 2-1 & NAZ is up 28. Banks continue VERY strong with the Financial Index reaching another 2010 high. A change of 5 for this index is eye popping!

S&P 500 FINANCIALS INDEX

Value 219.22

Change 4.82

% Change 2.5%

MLPs have been on a rocky road after the sell-off on last week's witching Fri. Today the Alerian MLP Index is down a fraction to the 298s. But the Dow Jones REIT Index is up 2+ to the 203s. Strong stock markets bring more demand for junk bonds. Many funds are at prices (with correspondingly low yields) that haven't been seen in a few years). Meanwhile the yield on the 10-year Treasury bond is up another 2 basis points to 3.85% & taking it nearer the important 4% level. The yield on the 2 year Treasury is up to 1.07%, another high & troubling number.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil & gas a barely up, not worth a mention unless you are a day trader.

CLK10.NYM

...Crude Oil May 10

...81.03

... 0.52 .......(0.7%)

Gold

...1,089.20

___0.40

__0.0%

Photo: Bloomberg

New unemployment claims fell more than expected last week as layoffs eased & hiring slowly recovered. The Labor Dept said first-time claims for jobless benefits dropped 14K to 442K, below estimates of 450K. But most of the drop resulted from a change in the calculations made in seasonally adjusted data. Excluding the effect of those adjustments, claims would have fallen by only 4K. The 4-week average of claims dropped 11K to 453K, the lowest since 2008 when the financial crisis intensified. While the news is encouraging, companies are still not rehiring in a major way, keeping the important jobless rate near 10%.

Jobless Claims in U.S. Decreased Last Week to 442,000

Weekly unemployment claims - 1 year

Photo: Bloomberg

Best Buy (BBY) beat estimates for profits & sales in Q4 & forecast stronger-than-expected earnings for 2010. The key holiday quarter was helped by demand for notebook computers, mobile phones & flat-screen televisions. BBY has benefited from investing in customer service, such as promoting Twelpforce to answer queries on Twitter & providing its Geek Squad repair assistance to shoppers. EPS rose to $1.82 in Q4 ended Feb 27, up from $1.35 in the prior year. Net revenue rose 12% to $16.55B. For FY2011, it expects to earn $3.45-$3.60 a share on revenue of $52-$53B. The stock was up 2.49 to 43.67.

Best Buy Surges as Profit Tops Analysts’ Estimates on TVs


Best Buy --- 2 years






The Treasury will unveil a trading plan next month for the sale of its 27% in Citigroup (C). The plan will give the gov a schedule for selling shares with the aim of eliminating any concerns that the sales are based on non-public information. Citi was up 18¢ to $4.33 & looks like it wants to shoot for its yearly high above 5.

U.S. Treasury Said to Have Plan for Citigroup Shares


Citigroup --- 1 year










Bulls have taken control of the markets as risk is being ignored in the pursuit of capital & trading gains. On the fringe, Treasuries are being sold to buy more junk bonds with dwindling yields. The European Union wants to work out some sort of bailout package for Greece which encourages the bulls. Dow should take out 11K, probably by tomorrow at the latest. Just not sure how long this euphoria can last.

Dow Jones Industrials --- 2 weeks

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