Thursday, June 17, 2010

Markets fell on grim jobless claims news

Stocks dropped at the opening & continued lower. Dow fell 47, decliners over advancers 2-1 & NAZ was off 7. Continuing weekly jobless claims coming in over 450K calls into question the economy is mending. Bank stocks were weak but the Financial Index only had a mild retreat.


Value 198.22 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -0.84 (-0.4%)

The Alerian MLP Index settled back 2½ to 303, profit taking after its recent run up. The REIT index dropped 1+ to the 205s. Junk bond funds edged up. The VIX, volatility index, rose ½ to the 26s, high but off the very high levels in the last few weeks. Treasuries were strong! The yield on the 10-year Treasury bond dropped 9 basis points to 3.19% as "risk averse" is coming back into investment thinking.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index -- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index - 2 weeks

Oil fell on the dismal jobless claims report. But gold shot up to within a few dollars of its recent record. It will be bearish for the stock markets if gold breaks thru to new records. Brave investors might want to check out the links below to learn more about investing in gold.

CLN10.NYM...Crude Oil Jul 10...76.68 ...Down 0.99

GCM10.CMX...Gold Jun 10...1,248.00 ...Up 18.70

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Initial claims for jobless benefits rose 12K to 472K last week, the highest level in a month & overshadowed a report that consumer prices remain essentially flat. First-time jobless claims have hovered near 450K since the beginning of the year after falling steadily in the 2nd half of 2009, raising concerns that hiring is lackluster & could slow the recovery. The 4-week average for unemployment claims dipped slightly to 463K, down only 4K from the start of Jan. The number continuing to claim benefits rose 88K to 4.57K which doesn't include about 5.2M who receive extended benefits paid for by the federal gov. The long waiting period of a recovery in jobs is very worrying!

A separate Labor report said consumer prices fell for the 2nd straight month. The 0.2% decline in the CPI was pulled down by falling energy prices, most notably a 5.2% drop in gas prices. Declining energy bills were the main factor pulling down prices. But core consumer prices, excluding energy & food, edged up 0.1% in May after being flat in Apr. Core prices are up only 0.9% over the past year, below the FED's inflation target.

Jobless Claims in U.S. Increased 12,000 Last Week to 472,000

Weekly Jobless claims - 1 year

One-Year Chart for Claims (INJCJC:IND)

It took 10 days to plug the first cracks

Photo: Bloomberg

BP (BP) CEO, Tony Hayward, told Congress he was "deeply sorry" for his company's catastrophic oil disaster in the Gulf of Mexico. Hayward said he was "personally devastated" by the Apr explosion of the Deepwater Horizon oil rig that triggered the giant spill & understands the anger that Americans feel toward him & BP. Congress is out for blood, eager to blame BP for everything. I wish they would spend more time looking for ways to plug the leak & clean up the mess in the Gulf, where the pres & Congress have been lax. BP stock is up pennies after settling down to being a $30 stock, half its former value.

BP Rebounds on Deal to Phase in Payments to Oil Spill Fund

BP --- 2 weeks

The jobless claims report was gloomy, but selling is mild. Maybe it's nothing more than routine profit taking. The € is over $1.23½, encouraging for bulls. Getting BP to admit guilt & punishing them with essentially an enormous fine may make some feel better but it's not really solving the big problems involving plugging the leaks & cleaning up the mess. Cleaning the mess is largely the gov responsibility & it has done a lousy job! The big gains for gold & treasuries, money seeking safe havens, are troubling for the stock markets.

Dow Jones Industrials -- 2 weeks

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