Monday, March 22, 2010

Markets feel healthy

Stocks took off in the first hour of trading & remained at those levels for the rest of the day. Dow rose 43 to another 2010 high (closing in on 10,800), advancers ahead of decliners better than 3-2 & NAZ was up 20. Pharma stocks led the rally, but banks also did very well taking the Financial Index towards its interim highs reached last week.


% Change

After beginning the day down 5, the Alerian MLP Index bounced back nicely to end with a gain of 0.74 in the 299s. The Dow Jones REIT Index was up 2½ to 200, very close to its interim highs recorded last week. Junk bond funds were down a smidgen, still doing quite well (discussed below). Treasuries advanced, the yield on the 10-year Treasury bond fell 2 basis points to 3.66%.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Oil & gold were also in a rally mode in the PM. There were enough buyers to take oil back into the black & firmly above 80, although it's been near 80 for several months. Gold pretty much held at the 1100 floor, encouraging for gold bulls.

CLJ10.NYM..Crude Oil Apr 10..81.29 Up 0.61

GCH10.CMX..Gold Mar 10..1,099.30 ..Down 8.10

High yield bonds are being sold by corps at the fastest pace since credit markets seized up in 2007. Demand is driven by signs the economic recovery is gaining momentum. Speculative-grade borrowers issued $24.2B of high-yield notes in Mar thru last week, putting Mar on course to be the busiest since Jun 2007, according to, when $34B in debt was sold. Bond sales were only $16.2B for all of Feb.

Junk Bonds Selling at Briskest Pace Since 2007: Credit Markets

Photo: Bloomberg

Rising sales, particularly during the holidays, helped quadruple Q4 profits at Tiffany (TIF). Luxury customers are willing to spend more as fears about the economy lessen. Q4 (ending Jan 31) produced more than half of TIF fiscal 2009 profits & the company forecast fiscal 2010 earnings ahead of estimates. TIF earned $1.10 per share in Q4 compared with 25¢ per share in the prior year. However excluding a restructuring charge TIF earned 86¢ per share in the year-ago quarter. Revenues rose 17% to $981M with growth in all regions. Sales in stores open at least one year rose 11%, helped by a 22% rise at its NYC flagship store. For the year, profit rose 20% to $2.11 per share but revenues fell 5% to $2.71B. In 2010, the company expects earnings from continuing operations of $2.45-$2.50 per share. The stock was up 16¢ to $47.41.

Tiffany Profit Trails Estimates as Expenses Rise

Tiffany --- 2 years

Considering health care reform will bring higher costs, markets took this news quite well. Of course, much of the added costs will be phased in over time. Markets may not take those changes so well when the campaign promise about "share the wealth around" starts to sink in. Macro problems persist. The Greek situation drones on & they are using the word default again. Housing is bogged down in the doldrums. But there is a "feeling" that the economy is on the mend which is encouraging buyers. Dow is near 10.8K. This could be a critical level since it represents the high end of a longer term range in 2010. NAZ is at a new 2010 high & shooting for 2400. A greater acceptance of risk is shown by the strong performance of NAZ & the junk bond sector.

Dow Jones Industrials --- YTD

Nasdaq --- YTD

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