Thursday, August 26, 2010

Favorable jobless claims data does not inspire the markets

Stocks began the day higher on the jobless data, but not in a convincing fashion & drifted lower to around break even. Dow is down 11 & NAZ is off 2 while advancers are ahead of decliners almost 3-1. Banks are having a good day, but the Financial Index is still just above its recent yearly lows of 180.


Value 183.20 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change 1.205 (0.6%)

The MLP index is up a fraction to 320 & the REIT index rose 1¼ to the 201s. Junk bond funds were higher, near their best levels in almost 3 years. The VIX, volatility index, was down fractionally to 26 & hasn't done much after the spike up in May. The € is strong at $1.27¼. Treasuries & their rally continue to dominate the news. Today they're resting letting yields creep up, but they remain at very troubling low levels.

US Securities

U.S. 3-month 0.15 0.15
U.S. 2-year 99.73 0.51
U.S. 10-year 100.81 2.53

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index --- 2 weeks

Oil is extending its rally to 2 days, but really is just sloshing around in a longer term trading range. Gold is flattish & still has following winds behind it.

CLV10.NYM...Crude Oil Oct 10...73.31 ...Up 0.79

GCQ10.CMX...Gold Aug 10...1,237.50 ...Down 2.00

**Gold Super Cycle**
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Jobless Claims in U.S. Decrease More Than Forecast

Photo: Bloomberg

Jobless claims declined 31K to 473K, the first decline in a month according to the Labor Dept. Estimates were for 490K. The number receiving unemployment insurance decreased, while those getting extended benefits climbed. The 4 week moving average increased to 486K from 483K in the prior week. The number continuing to collect benefits dropped 62K to 4.46M from 4.52M in the prior week. The continuing claims figure does not include those receiving extended benefits under federal programs. That number rose by about 302K to 5.84M in the latest reporting week. The jobs picture remains bleak, this week a little less so.

U.S. Jobless Claims Decline More Than Forecast

Jobless claims - 1 year

One-Year Chart for Claims (INJCJC:IND)

4 week average of claims - 1 year

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

Freddie Mac said that the average rate for a 30-year fixed loan was 4.36% this week, down from 4.42% last week & setting a new low since tracking rates began in 1971. The average rate on 15-year fixed loan dropped to 3.86% from 3.90% the previous week, again the lowest on records starting in 1991. Low rates have fueled borrowers to refinance their home loans, as refinancing is at its highest level since May 2009 & made up 82.4% of all new loan activity. Unfortunately that activity does not help the economy recover, low rates haven't budged home sales stymied by high unemployment, slow job growth & strict credit standards. On a gloomier front, 1 in 10 households with a mortgage was at risk of foreclosure as gov efforts to help have had little impact stemming the housing crisis. The Mortgage Bankers Association says 9.9% of homeowners had missed at least 1 mortgage payment as of Jun 30, down slightly from a record-high of more than 10% as of Apr 30. This figure has a large impact on the economy & its recovery.

Enbridge Energy (EEP), a leading MLP, launched an open season to solicit additional shipper interest in the Bakken Expansion Program, a series of projects to expand crude oil pipeline capacity in North Dakota & Saskatchewan. These proposed projects, will provide incremental capacity to meet the crude oil transportation needs of Williston Basin producers. EEP had a major oil spill from its pipeline in Mich a month ago (shown in its chart) but has cleaned up & is moving forward with another expansion. The units are only 5 below the recent highs & much of that decline is attributable to a weak stock market in Aug. The units are off 14¢ today.

Enbridge Launches Bakken Expansion Program Binding Open SeasonMarketwire

Enbridge Energy --- 2 months

This is another quiet day of trading. The jobless claims report can only be considered mildly encouraging with the weekly number remaining in high territory, near 500K. M&A has been active in Aug & 2 of the big buyouts are having offers sweetened. But that interest is not affecting the stock market to any great degree. Dow is just plodding along in its sideways trading above 10K (not far from its yearly lows).

Dow Jones Industrials --- 2 weeks

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