Stocks sink led by weak financials

Dow dropped 158 (barely above 11k) with selling into the close, decliners over advancers 2-1 & NAZ fell a big 50. Stocks sold off all day because of a weaker than expected GDP report & a mushy report on consumer sentiment. Banks led the way down 7 & closed at the lows, as shown by the large fall for the Financial Index. However, it's still only 10 below its 2010 high.

S&P 500 FINANCIALS INDEX

Value 217.54

Change -5.52

% Change -2.5%

MLPs fell again today (off 1¼ to the 311s), but have a had another good month (up 4%). The index is hurt at this time of the year by ex-distributions, but the oil spill can be bleeding over to MLPs. While not directly connected, it does remind investors that even these companies with excellent fundamentals are subject to massive outside forces over which there is no control. The REIT index gave back most of yesterday's enormous gains (down 6½), although the month has also been a good month for them. Junk bond funds were mixed, still at their lofty levels. Treasuries advanced, the yield on the 10-year Treasury bond fell a very big 7 basis points to 3.66%.

Alerian MLP Index --- 1 month




Dow Jones REIT Index -- 1 month





Oil buying may come from the oil spill in the Gulf. Supply is be reduced because of all the waste which encourages buyers. Gold keeps creeping up, just needing another 40 to top its former record highs. The chart below looks pretty.

CLM10.NYM

..Crude Oil Jun 10

..86.02

.. 0.85 ......(1.0%)

GCK10.CMX

..Gold May 10

..1,179.50

.. 11.10 ......(1.0%)

Gold Super Cycle!!
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GLD (ETF) --- 2 weeks





Talk about falling off a cliff, the chart for Goldman Sachs (GS), now a bank, has been under severe pressure for 2 weeks. Even those multimillionaires who will go on criminal trial are feeling this sell-off. The thinking is it will take a monumental amount of evidence for a conviction, but the hassle is something nobody wants to go thru. Today GS fell 16½ to 143s.

Goldman Sachs --- 1 month





The oil spill is getting more attention, with greater worries about the damage it could do to the industry & entire economy. The home buyer tax credit ends today, home builders will have to find other ways to attract buyers. Goldman Sachs is operating under a cloud, hurting not only the banking industry, but, today, the Senate is talking about strengthening the regulation bill it wants to pass (in May!). Greece is facing loan repayments in a couple of weeks. If it is unable to tap a joint European Union & IMF bailout package (now it's talking about $158B) before May 19, it could default. But a European Union led bailout would be in exchange for budget cuts (denounced by unions). A default has the potential to stunt global economic recovery. The Dow managed a small gain for the month, its string of weekly gains was halted. Earnings season is winding down, it has gotten medium grades with high tech biggies generally giving disappointing outlooks. But Apple (AAPL) keeps soaring to new heights despite today's drop of almost 7.


Dow Jones Industrials -- 1 month

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Markets drift lower following a GDP growth rate of 3.2% in Q1

Dow is off 11, decliners over advancers 3-2 & NAZ dropped 13. GDP growth & another set of consumer confidence data did little for stocks. Banks were lower, but the Financial Index is still near its recent highs in the 226s.


S&P 500 FINANCIALS INDEX

Value 220.90

Change -2.16

% Change -1.0%

The Alerian MLP Index dropped another 2½ to 310. Selling could be prompted by the oil spill in the Gulf, although few MLPs should be hurt by it (other than the psychological effect). The REIT index dropped 2 to the 216s after yesterday's enormous gain. Junk bond funds were a tad lower, nothing serious. The yield on the Treasury 10-year bond fell another 3 basis points to 3.70%, with bond buying coming from worried European investors.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil is drifting although bulls are happy to see it remain above 85. The charts show gold has been doing very well in the last 2 months & is within 50 of its record high reached in Dec.

CLM10.NYM

...Crude Oil Jun 10

...85.32

... 0.10 .......(0.1%)

GCK10.CMX

...Gold May 10

...1,179.20

... 10.80 .......(1.0%)

Gold Super Cycle Link!
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GLD (ETF) --- 2 months





The economy (measured by GDP) grew at a solid 3.2% annual rate in Q1 as consumers boosted spending by the most in 3 years. This was the 3rd straight quarterly gain as the US heals from the longest & deepest recession since the 1930s. Still, growth was weaker than in Q4 of last year, when the economy grew at a 5.6% rate. Consumers powered growth in Q1, increasing spending at a 3.6% pace, the strongest showing since early 2007 (before the economy tipped into a recession). That marked a big improvement from Q4 when consumer spending grew at a lackluster 1.6% rate. Consumers spent more on home furnishings & household appliances, recreational goods & vehicles, clothing, & going out to bars & restaurants. But there is a belief consumers will be wary of stepping up spending much further with the unemployment rate at 9.7% & expected to stay elevated for much of 2010 (at a minimum).

•U.S. Economy Grew at a 3.2% Pace in First Quarter as Consumers Spent More

Consumer confidence declined in Apr from Mar according to a Reuters/University of Mich report. The final index of consumer sentiment dropped to 72.2 (projected to fall to 71) from 73.6 in Mar. This figure contrasts with Conference Board survey showing sentiment in Apr increased to the highest level since Sep 2008. Go figgah! Consumer confidence is recovering, but gradually.

•Consumer Sentiment Index for U.S. Drops to 72.2 After 73.6 March Reading


Consumer sentiment - 1 year





Chevron (CVX), a Dow stock. reported increased Q1 profits from higher oil prices. CVX had income of $2.27 per share, up from 92¢ last year. Excluding charges associated with employee reductions in its refining, marketing & chemicals business, CVX would have earned $2.36 a share. Revenue increased 33% to $48.18B. Analysts had been looking for $1.94 per share on revenue of $53.25B. Results were boosted by a surge in profits from its exploration & production operation. Oil prices more than doubled, from a low of around $33 a barrel in Q1 2009, to more than $80 a barrel in Q1 2010. The company increased production of oil equivalents, including natural gas, by 4.5% to 2.78M barrels per day. However, the refining business continued to struggle to pass higher crude costs along to customers. Sales of refined products fell 8.6%. The stock rose 36¢ after having a nice run in the last 2 months (up 8).

Chevron First-Quarter Profit Increases as Energy Demand Rises


Chevron --- 2 years





Enbridge Energy (EEP) raised its distribution to $1.0025 ($4.01 annualized) after reporting strong earnings in Q1. The North Dakota system- Phase VI expansion was placed in service Jan 1, 2010 & is running at capacity while the Alberta Clipper came on stream Apr 1. However EEP units were pretty much flat at $51.

Enbridge Energy Partners Reports Strong Earnings for First Quarter 2010 and Declares Higher Cash DistributionMarketwire


Enbridge Partners --- 2 years





Goldman Sachs (GS) execs will have to spread their wealth on legal fees defending against criminal charges. And the Greek drama plays on with no end in sight. Dow is up 3% in Apr. With buying in the PM, it will extend its weekly winning streak to 9.


Dow Jones Industrials --- 2 weeks

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Markets rally on jobless claims & earnings

Dow had its best rally in 2 months. But at lunchtime buyers went home & it drifted, just holding onto its gains for the rest of the session. Dow rose 122, advancers over decliners 3-1 & NAZ posted an impressive 40 point gain. Banks had another very good day. The Financial Index has recovered most of its 11 point loss in the first 2 days of the week, it's just 3 below where it began the week.

S&P 500 FINANCIALS INDEX

Value 223.06

Change 5.42

% Change 2.5%

The Alerian MLP Index gained 1.43, still in the 312s, but down 2 from its highs in the AM. The Dow Jones REIT Index rose an amazing 9½ to the 218s, a new yearly high. Junk bond funds were generally higher at their lofty levels. Buying returned to the 10-year Treasury bond, its yield fell 5 basis points to 3.73%.


Alerian MLP Index -- 2 months




Dow Jones REIT Index - 2 months





Oil had another good day, but once again the bulls have to show they can take it significantly above its 6 month trading range (i.e. the 85 ceiling). Gold was just resting.

CLM10.NYM

..Crude Oil Jun 10

..85.33

.. 2.11 ......(2.5%)

GCK10.CMX

..Gold May 10

..1,167.40

.. 1.70 ......(0.2%)

Germany is the main player in bailing out Greece & they are quibbling internally. A bill proposed by lawmakers for assistance would involve banks in the rescue. But Chancellor Angela Merkel is refusing to back down in her opposition, saying that would send a “fatal signal” to markets. Meanwhile the Greek Prime Minister is trying to sell the need for austerity (budget cuts which most will feel), but that is not & has not gone down well. The Greek drama plays on! The € at $1.324 is still near its its yearly lows (having reached $1.45 earlier this year).

•Merkel Is Pressed by Opposition to Enlist Banks in Greek Rescue Financing
•Papandreou Makes Austerity Pitch as Unions Slam Cuts Tied to Bailout Plan


BreitBurn Energy, an MLP which suspended its distribution in Q3 2009, restored a distribution. It will pay $.0375 ($1.50 annualized) in May. The intention had been announced recently, but unit-holders were glad to receive official word. The units gained 46¢ to 15.51.

BreitBurn Energy Partners L.P. Declares Cash DistributionBusiness Wire


BreitBurn Energy --- 2 years






Palm (PALM) agreed to be bought out by Hewlett-Packard (HPQ), a Dow stock, for about $1.4B in cash. HP will pay $5.70 for every Palm common share & certain preferred shares. Palm shot up 1.21 to 5.84 while HP was down 40¢ to 52.88.

•HP is Palm's Silicon Valley savior in $1.4B deal
AP


Palm --- 2 months




Hewlett-Packard --- 2 years






Stocks liked what they heard today. By now, they must have written off Greece & its debt problems. The jobless report wasn't all that great, especially when large numbers of laid off workers are facing expiration of their extended unemployment benefits. If Dow would have been able to extend its AM gains, it could have gone over 11.2K taking into the black for the week. It needs to do that tomorrow to keep its winning streak going (at 9). The streak feels good to stockholders, but all good things have to come to an end. And the end, after such a long run, could be unpleasant.

Dow Jones REIT Index - 2 months

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Markets soar on favorable job data

Dow added 129, advancers 5-2 over decliners & NAZ gained 26. Banks are having a big day, the Financial Index is recovering much of the losses in the first 2 days of this week.

S&P 500 FINANCIALS INDEX

Value 221.91

Change 4.27

% Change 2.0%

The Alerian MLP Index shot up 2½ to the 313s on the strength of market gains. The REIT index surged 6½ to the 215s, there is not shortage of enthusiasm here. As expected, junk bond funds were strong. The yield on the 10-year Treasury bond slipped 1 basis point to 3.76%, still in its sideways rut.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil is having a great day, but still in in its longer term trading range (80-85). Gold pulled back on greater hopes for a Greek debt bailout succeeding.

CLM10.NYM

...Crude Oil Jun 10

...85.07

... 1.85 .......(2.2%)

GCK10.CMX

...Gold May 10

...1,169.80

... 6.20 .......(0.5%)

The Labor Dept said applications for jobless benefits dropped 11K to 448K, the lowest level in 4 weeks (but slightly higher than expected). The 4-week average for claims edged up slightly to 462K, still above the level (around 425K) that signals sustained improvements in the job market. The number continuing to claim benefits fell 18K to 4.65M which doesn't include millions who have used up the regular 26 weeks of benefits typically provided by states & are receiving extended benefits of up to 73 additional weeks paid by the federal gov. About 5.4M were receiving extended benefits for the week ending Apr 10. The labor market is healing, but slowly.

Congress has extended the duration of weekly unemployment benefits 3 times since the recession began in Dec 2007. But even Congress may have reached its limit. The line is quietly being drawn at 99 weeks of aid which hundreds of thousands have already reached. In coming months, the number who will receive their final check is projected to top 1M. Dems who have pushed thru past extensions agree there’s insufficient backing to go beyond 99 weeks, largely because of mounting concern over a federal deficit projected to reach $1.5T.

Number of U.S. Jobless Claims Falls to One-Month Low
•More Than a Million May Lose Jobless Aid as Congress Seeks Spending Curbs


Weekly jobless claims - 1 year

Photo: Bloomberg


Exxon Mobil (XOM), Dow stock & Dividend Aristocrat, reported quarterly profits jumped 38% as oil prices rose in Q1. In Q1 XOM earned $1.33 per share versus 92¢ per share last year. But earnings are 40% below record levels of 2 years ago. Revenue jumped 41% to $90.25B. These results were below expectations. The stock rose 17¢.

•Exxon Profit Rises Less Than Estimated as Health Overhaul Increases Costs


Exxon Mobil --- 2 years

Photo: Bloomberg


Procter & Gamble (PG), another Dow stock & Dividend Aristocrat, reported profits fell 1% in its Q3, hurt by charges including those from the health care overhaul. But sales increased 7% as households around the world responded to new products, price cuts & stepped-up advertising. EPS was 83¢ per share compared to 84¢ last year, while sales rose to $19.2B. EPS came in slightly above projections of 82¢. Core EPS, excluding tax, legal & restructuring charges, were 89¢, up 10%. The company took a 5¢ per share charge for the recently passed health care reform. The low end of its guidance range for diluted EPS for the full year was lifted by 4¢ to a range of $4.06 - $4.12 (below expectations of $4.14). P&G expects sales to rise 6-7% in its Q4, with EPS in a range of 68-74¢ (below expectations of 76¢). The stock fell 1.69 after modest changes during the recession.

P&G Fourth-Quarter Profit Forecast Trails Estimates


Procter & Gamble --- 2 years





Markets are feeling very good today. Greek debt problems are being pushed aside after receiving only so-so news on jobless claims. But bulls are in charge & it looks like they want to take Dow to new 2010 heights (just a few points away).


Dow Jones Industrials --- 2 weeks

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Dow rises after Federal Reserve keeps rates low

Dow gained 53, advancers over decliners 4-3 but NAZ was flat. The 3 big gainers in the Dow with gains of about 1 were Exxon Mobil (XOM), IBM (IBM) & JPMorgan (JPM). Banks remained in the black after the important rate decision, but the Financial Index was off its highs earlier in the day.

S&P 500 FINANCIALS INDEX

Value 217.64

Change 2.77

% Change 1.3%

Buying in the PM limited losses for the Alerian MLP Index to only 1¾ at 311 (8 below the highs on Mon). The REIT Index was up a fraction, still in the 209s. Junk bond funds were mixed as nervousness about European debts might be bleeding thru to the junk bond market. Treasuries sold off big time. The yield on the 10-year Treasury bond rose 8 basis points to 3.77%, recovering much of yesterday's plunge.


Alerian MLP Index --- YTD




Dow Jones REIT Index -- YTD




10-Year Treasury Yield Index - 1 week






Bulls are buying again oil but it remains in the 80-85 sideways trading band. Gold is a higher & has done very well in the last 10 weeks. If more frightened money flows out of Europe, it will have a good chance of taking out last year's record high.

CLM10.NYM

..Crude Oil Jun 10

..83.21

.. 0.77 ......(0.9%)

GCJ10.CMX

..Gold Apr 10

..1,171.80

.. 10.10 ......(0.9%)

Gold Super Cycle!!!
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GLD (ETF) --- YTD






Europe's debt crisis spread to another country when S&P downgraded Spain's credit rating, even as Germany grudgingly moved closer to bailing out Greece from imminent collapse.The agency said it was cutting Spain's rating to AA from AA+ amid concerns about the country's growth prospects following the collapse of a construction bubble. "We now believe that the Spanish economy's shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed," according to Standard & Poor's. Spain still has an investment grade rating but could pay more to borrow & may find itself under pressure to take tougher steps to cut spending. Meanwhile the extra yield investors demand to hold Portuguese 10-year bonds rose 59 basis points to 277 points, the most since 1997, before slipping slightly. Spreads for other European countries facing financial difficulties also widened. The € is at a 12 month low, below $1.32.

•Greece Turning Viral Sparks Search for EU Solutions as Aid Estimates Surge

Photo: Bloomberg


The Federal Reserve sounded more confident that the economy is strengthening but pledged to hold rates at record lows to make sure it gains traction. The FED in a 9-1 decision retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery. The FED offered a more upbeat view of the economy even as it noted that risks remain. It said the job market is "beginning to improve," an upgrade from its last meeting in mid-March. The FED observed then that the unemployment situation was merely "stabilizing." It also noted that consumer spending has "picked up," an improvement from its last observation that spending was expanding at a "moderate pace." However, even with the improvements, the FED said there was reason to be cautious. High unemployment, sluggish income gains & tight credit are still dampening consumer spending, a major contributor to economic activity. And commercial real estate remains fragile as housing activity is still at depressed levels. Bank lending continues to shrink.

•Fed Repeats Pledge to Maintain Low Rates, Sees Improvement in Labor Market

Extending low interest rates by the FED was expected, making markets happy. However earlier this year the FED said their intention was to start raising rates by year end & it's approaching. The Senate bill for increased banking regulation may get another test vote later today, its fate is still uncertain. The Greek debt drama plays on, sort of a Greek tragedy. Germany is the power player in any bailout & is playing hardball, demanding fiscal discipline which Greece really does not want. While not directly connected, the Spain credit downgrade did not help. The big worry is a 2nd country asking for a bailout (Spain, Portugal & Ireland are in the wings) could be too much for the markets to bear. But US markets are absorbing the news with a sense of calm. I wonder how long that will last! Dow is back over 11K, that recurring statement is getting boring.


Dow Jones Industrials -- YTD

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