Thursday, October 21, 2010

Markets are climbing aftert excellent earnings reports

Stocks began with good gains but are giving some of that back.  Dow is up 62, advancers over decliners 2-1 & NAZ gained 14.  Higher bank stocks are lifting the Financial Index.


Value 197.60 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   0.76  (0.4%)

The Alerian MLP Index rose 1½ to the 351s, pretty much matching its record from last week.  The REIT index climbed 1+ to the 225s, another high for 2010.  Junk bond funds were generally high, near or at highs for this year. Treasury yields were pretty much flattish, not far from record lows.

Treasury Yields

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10-Year Treasury Yield Index   ---   2 weeks

Crude declined as China’s oil processing grew the least in 18 months.  Gold is taking a rest today.

CLZ10.NYM...Crude Oil Dec 10...82.13 ...Down 0.41  (0.5%)

GCV10.CMX...Gold Oct 10......1,345.10 ...Up 1.80 (0.1%)

Gold Super Cycle Link!  

Initial Jobless Claims in U.S. Fell 23,000

Photo:  Bloomberg

The Labor Dept reported that applications for jobless benefits fell 23K to 452K, but that comes after a substantial revision in the previous week's figure to show a rise of 26K (double the increase initially reported).  Even with the decline, applications remain stuck near the 450K level after having fluctuated around that point for most of this year.  The 4-week average dropped 4K to 458K, still above the figure from 2 weeks ago.  The number continuing to receive jobless benefits fell 9K to 4.44M, the lowest since Jun 26.  Claims fell steadily last year after the recession ended in Jun 2009, dropping from roughly 600K to about 470K. But not much progress has been made this year. Claims need to fall below 425K to signal that employers are stepping up hiring.  The charts are a grim reminder of a dismal year for unemployment.

Initial Jobless Claims in U.S. Fell 23,000 Last Week to 452,000

Jobless claims - 1 year

One-Year Chart for Claims (INJCJC:IND)

Continuing claims - 1 year

One-Year Chart for Emergency Unemployment (INJCEUC:IND)

Caterpillar (CAT), a Dow stock, had an excellent Q3 & raised its guidance.  Profit for 2010 will be $3.80-4.00 a share, up from a Jul forecast of $3.15-3.85. Revenue should be $41-42B, up from a previous outlook of $39-42B & sales will be “approaching” $50B in 2011.  CEO Goug Oberhelman announced plans in the past 5 months to build factories in Brazil & China, where economic growth is outpacing the US. Caterpillar is also selling more excavators & haul-trucks to mining companies as commodities prices increase.  The stock slipped a few pennies but is flirting with its record highs in the mid 80s made 3 years ago.

Caterpillar Raises Forecast on Emerging-Market Demand

Caterpillar   ---   2 years

McDonald's (MCD), a Dow stock & Dividend Aristocrat, also had an excellent Q3.  EPS rose to $1.29  from $1.15 last year as revenue grew 4.3% to $6.3B.  MCD has been outperforming the industry by giving people reasons to keep visiting its stores by creating new products, such as smoothies & frappes. It's also focusing on value, particularly its dollar menu, to appeal to people's wallets, not just their taste buds.  Revenue at stores around the world open at least 13 months rose 6%, led by 8.1% growth in Africa, Asia/Pacific & the Middle East. In the US the figure rose 5.3%, while in Europe it rose 4.1%.  CEO Jim Skinner said the company expects revenue at locations open at least 13 months to grow 5-6% in Oct.  The stock rose 2 to the 79s, a new record.

McDonald's Profit Rises 10% as Customers Snap Up Smoothies

McDonald's   ---   2 years

Stock markets are looking strong again like they want to go higher.  Dow went above its 11.2K high for the year, but was not able to hold that level.  MLPs remain on fire & REITs have been picking up steam recently.  For the time being bulls are in command as earnings are getting good grades.  However gold at record levels & low yields on Treasuries, 2 safe haven investments, should be kept in mind.

Dow Jones Industrials   ---   2 weeks

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