Thursday, July 15, 2010

Markets retreat on weak manufacturing & mixed jobless claims data

Stocks dropped but are off the lows in the first hour of trading. Dow fell 83, decliners over advancers 3-1 & NAZ fell 18. Banks declined after the first Q2 earnings report gave a muddy picture, 2 more reports are due tomorrow.


Value 195.30 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -3.49 (-1.8%)

The MLP index opened lower but buying brought it back to break even in the 323s & is only 20 below setting a new record. But the REIT index fell 3½ to the 194s. Junk bond funds were a tad lower & the VIX jumped 2 to the 26s on increased nervousness in the markets. The yield on the 10-year Treasury bond fell 5 basis points to just under 3.0%. But the € gained more than a penny to almost $1.29 (shown in the graph below).

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index --- 2 week

€ --- 3 months


Oil fell back in sympathy with the stock market but gold is strong & is only 50 below its record highs reached last month (as shown in the graph).

CLQ10.NYM...Crude Oil Aug 10...75.76 ...Down 1.28

GCN10.CMX...Gold Jul 10...1,213.20 ...Up 6.40

***Gold Super Cycle***
Click Here

GLD (ETF) --- 3 months

The Labor Department reported that new jobless claims dropped by 29K to 429K, the lowest level since Aug 2008, but much of that was the result of seasonal factors (General Motors & other manufacturers skipped their usual summer shutdowns). It was the 2nd straight week that claims dropped sharply (a 17K drop last week) & the 3rd drop in the last 4 weeks. Separately, the Labor Dept said that wholesale prices fell for a 3rd consecutive month, pulled down by another drop in energy costs & the biggest plunge in food costs in 8 years. Excluding those 2 volatile commodities, inflation was relatively flat. Additionally, the Federal Reserve said industrial production rose 0.1% in Jun, the 4th straight monthly gain. But manufacturing activity (the largest component of production) fell 0.4% after rising for 3 months. That's called a mixed mouthful!

Generally, such a sharp drop in jobless claims would be seen as a positive sign that the job market is improving. But more data is needed to find out if the downward trend continues before drawing conclusions. Another concern is that the latest drop may be the result of temporary seasonal factors, there are doubts the drop in claims will last. Claims had been stuck above 450K all year, after dropping steadily last year from a peak of 651K in Mar 2009. The 4 week moving average fell to 455K last week from 467K & the number of people continuing to receive jobless benefits jumped by 247K in the week ended July 3 to 4.68M. This is more of the same dreary data markets have been absorbing all year.

U.S. Jobless Claims Fall as Fewer Factories Shut Down

Weekly jobless claims - 1 year

One-Year Chart for Claims (INJCJC:IND)

4 week moving average - 1 year

One-Year Chart for 4 Week Moving Avg (INJCJC4:IND)

# receiving continuing claims - 1 year

One-Year Chart for Unemployment SA (INJCSP:IND)

JPMorgan (JPM), Dow stock, posted better-than-expected quarterly earnings as it wrote off fewer bad loans. Much of JPM gains came from areas that cannot be a stable source of income in the future, such as reducing the amount of money set aside to cover bad loans. And in some areas, including prime mortgages, more loans stopped performing (making interest payments), boding poorly for other big banks reporting earnings tomorrow. Its results are viewed as only "OK." Jamie Dimon, CEO, said in Q1 that the US economic recovery could be solid, but sounded more pessimistic today. "It is too early to say how much improvement we will see from here" in the bank's consumer lending businesses, Dimon said in a statement, adding that returns there are "still unacceptable." Q2 EPS jumped to $1.09 from 28¢ last year. Excluding a benefit from lower loss reserves, earnings easily beat the 67¢ forecast. But the div increase will probably be postponed until next year. The stock dropped 66¢.

JPMorgan Profit Rises, Beating Estimates

JPMorgan --- 2 years

Bank of America (BAC), Dow stock, & Citigroup (C) report tomorrow & markets are already edgy about what to expect. Earnings should be higher (off depressed levels last year), but mixed data & less than favorable guidance will not be well received. My informal indicator that the health of the markets is related to progress in plugging the well & it's in a holding pattern for the time being.

Dow Jones Industrials --- 2 weeks

Find out what's inside Trend TV!!
Click Here

Get your favorite symbols' Trend Analysis TODAY!!
Click Here

No comments: