Tuesday, November 30, 2010

Markets fluctuate, but Dow holds above 11,000

Stocks sold off at the start, taking the Dow below 11K, but recovered with only limited losses.  Dow fell 46, decliners over advancers 2-1 & NAZ fell a bigger 27.  Banks stocks edged lower, but nothing serious.  Even though Nov was a dreary month for banks, the Financial Index ended essentially where it started (while remaining stuck in its longer term sideways rut).


Value194.14One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -1.38  (-0.7%)

The Alerian MLP Index was up fractionally to the 357s & gained 4 in Nov.  The Dow Jones REIT Index fell 1½ to 215 & is down 5 in Nov.  Junk bond funds slipped today & fell about 3% in the month.  Treasuries lost ground even though the Federal Reserve is buying  The yield on the 10 year Treasury bond fell 2 basis points to 2.80% today but is up 20 basis points in Nov. 

Treasury yields:

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

Alerian MLP Index   ---   YTD

Dow Jones REIT Index   ---   YTD

10-Year Treasury Yield Index   ---   YTD

Oil fell today but remains where it started the month.  Because of today's big gain, gold rose about 2% in the month & may be heading for its record highs above 1400.

CLF11.NYM...Crude Oil Jan 11...84.13 ...Down 1.60  (1.9%)

GCZ10.CMX...Gold Dec 10...1,382.30 ...Up 16.30  (1.2%)

***Gold Super Cycle***  

President Obama said he still disagreed with Reps on whether to extend Bush-era tax cuts for the wealthiest Americans, but the 2 sides agreed to negotiate a deal in the coming days.  Treasury Sec Tim Geithner & budget director Jack Lew were appointed to work with congressional Reps & Dems to come up with a compromise to prevent broad tax increases from occurring next year.  Finding common ground before year end will be tricky.  Obama said he & many Dems continued to believe that it would be "unwise and unfair" to spend $700B to extend tax cuts for the wealthiest Americans while also trying to bring down the US deficit.  Reps argued that it would be better for the economy if tax cuts for all Americans were extended.  Either way, taxes will go up for all workers in Jan when new payroll tax tables based on previous tax rates are used.  That means the typical worker will find the paycheck reduced because of additional federal taxers withheld.  

Obama and Republicans Agree to Negotiate on Taxes- Reuters

Here's a quick look at major stocks in Nov which has been a sideways but drifting lower month.  Citi (C) is about even while banks have were weak & the Treasury has been selling large amounts of stock.  Bank of America (BAC) & Cisco (CSCO), both Dow stocks, lost ground with CSCO getting hit hard when it gave lower guidance going forward.  Apple (AAPL), with the 2nd largest market cap in the world, gained ground although has not taken out its recent highs reached after it announced excellent earnings & a slew of sexy, new products.  Overall they present a mixed picture with a negative bias (like the Dow).

Citigroup   ---   1 month

Bank of America   ---   1 month

Cisco   ---   1 month

Apple   ---   1 month

Once again, late day buying limited losses for stocks.  But Euro debt concerns haunt stock buyers & Dec is shaping up as a tough month.  Dow slipped 1% in the month & is sitting on the 11K support level.  Bulls like to see that it held.  But pressure to go lower is still in the air & the big monthly jobs report, which is not expected to be pretty, is coming on Fri.

Dow Jones Industrials   ---   1 month

Dow Jones Industrials   ---   YTD

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Euro debt concerns sink markets

Stocks sold off at the start but are trying to rally.  The Dow fell 52 taking it near 11K, decliners over advancers 5-2 & NAZ was down 27.  Banks are giving back yesterday's gains.


Value 194.02 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -1.50  (-0.8%)

The MLP index fell 1½ to the 355s where it has been all month while the REIT index was off 1½ to the 214s.  Junk bond funds were slightly lower.  Treasuries rose on growing worries about European debts. The yield on the 10 year Treasury bond fell 5 basis points to 2.77%, a 2 week low.

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

Oil dropped from the highest price in 2 weeks on concern that the European Union may have to bail out more member states after Ireland agreed to a rescue package. Gold gained for a 2nd day as speculation Europe’s debt woes will worsen.

CLF11.NYM...Crude Oil Jan 11...85.50 .....Down 0.23  (0.3%)

GCZ10.CMX...Gold Dec 10....1,384.60 ...Up 18.60  (1.4%)

Gold Super Cycle Link!! Click Here

A monthly survey shows Americans' confidence in the economy rose in Nov to the highest level in 5 months amid more hopeful signs, an encouraging sign at the beginning of the holiday shopping season. However confidence remains weak as Americans grapple with high unemployment.  The Conference Board said its Consumer Confidence Index now stands at 54.1, up from a revised 49.9 in Oct & above expectations of 52.0. This reading marks the highest point since a 54.3 in Jun.  The measure of sentiment about present conditions increased to 24 in Nov from 23.5 a month earlier & the gauge of expectations for the next 6 months rose to 74.2 (the highest since May) from 67.5 in Oct.  The share of consumers who said jobs are currently plentiful rose to 4% this month, while those who said jobs are hard to get increased to 46.5%.  Improvement sounds good, but they're coming off low levels & the increase for those who say jobs are hard to get is disturbing.  

U.S. Consumer Confidence Rose in November to a Five-Month High

Consumer confidence - 1 year

One-Year Chart for Confidence (CONCCONF:IND)

Present conditions - 1 year

One-Year Chart for Situation (CONCPSIT:IND)

Expectations for next 6 months - 1 year

One-Year Chart for Expectations (CONCEXP:IND)

Jobs are hard to get - 1 year

One-Year Chart for Jobs Hard to Get (CONCJOBH:IND)

Cyber Monday online sales rose 19% yesterday, the biggest internet shopping day of the year so far according to research firm Coremetrics.  The average order rose 8.3% to $194.89. Sales of luxury goods rose 24%.  Cyber Monday is an indicator of how the rest of the holiday season is shaping up.  Online retailers will account for 7% of total retail sales in the US this year, up from 6% last year, according to Forrester Research.

U.S. Online Sales on Cyber Monday Climbed 19%, Coremetrics Says

President Obama & Rep congressional will battle over taxes into a face-to-face meeting with no breakthrough expected soon as Reps show no sign of compromise.  Obama plans to host key Reps & Dems  at the White House & taxes are at the top of their agenda. Neither side anticipated the meeting would lead to an immediate agreement on extending Bush-era tax cuts that expire at the end of the year.  Reps went into the meeting insistent that tax cuts for all Americans be extended, even for the wealthiest ones.  If no agreement is reached, taxes on all Americans would increase, a new year shocker that would increase pressure on Washington to act.

Buyers should have come out after the consumer confidence numbers, but not today.  Markets are paying more attention to Euro debt problems which are getting larger every day.  Treasuries are benefiting but not as much as would be expected.  Gold shot up today, the kind of bounce Treasuries would receive if market conditions were better for them.  Meanwhile Dow is barely hanging in there above 11K where it was at the start of Oct & Apr.If Euro debt problems worsen, Dec could be another bad month (like May).. 

Dow Jones Industrials   ---   2 weeks

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Monday, November 29, 2010

Markets trimmed morning losses even with Euro debt worries

Stocks recovered much of the AM losses.  Dow finished down 39 (allowing it to remain above 11K), decliners ahead of advancers a more mild 3-2 & NAZ fell 9.  Bank stocks had a good day.  After trading about even in the AM, they rose in the PM giving the Financial Index a decent gain.


Value195.52One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   1.11  (0.6%)

MLPs rebounded in the PM reducing the loss on its index to 0.83 at 357 while the REIT index rose pocket change in the 216s.  Junk bond funds were mixed to higher.  Treasuries rose, with 10-year bonds up for a 3rd day in a row, on concern the rescue for Ireland will fail to contain Europe’s sovereign-debt crisis.  The yield on the 10-Year Treasury bond fell 3 basis points to 2.83%.  The Federal Reserve bought $9.4B of Treasuries as part of its plan to pump $600B into the economy.

Good news for MLPs, Kinder Morgan (KMP) just announced it plans to distribute $4.60 per unit in 2011, a 4.5% increase over its 2010 budget target of $4.40 per unit.  The units rose 11¢ to 70.14

Kinder Morgan Energy Partners Expects to Distribute $4.60 Per Unit for 2011 Business Wire

Treasury yields:

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

Alerian MLP Index   ---   2 months

Dow Jones REIT Index   ---   2 months

10-Years Treasury Yield Index   ---   2 months

Oil rose to a 2-week high as US consumers spent more over the Thanksgiving weekend than last year, a sign confidence in the economy is strengthening.  Gold rose for the first time in 3 sessions on speculation that Europe’s sovereign-debt crisis will boost demand for gold.

CLF11.NYM...Crude Oil Jan 11...85.73 .....Up 1.97  (2.4%)

GCZ10.CMX...Gold Dec 10.....1,368.40 ...Up 6.00  (0.4%)

$$$ Gold Super Cycle $$$  

Defaults on commercial property mortgages held at US banks rose in Q3, extending a pattern begun in late 2006 when real estate prices were close to a peak.  $604M of loans on office buildings, malls, hotels & other commercial properties went into default in Q3, pushing the default rate to 4.36% of outstanding loan balances, from 3.41% last year & 4.27% in Q2. The record default rate was 4.55% in 1992.  The global credit crunch & plunge in property values have prevented borrowers from refinancing while job losses have reduced rental demand. But property prices are starting to recover in many markets, easing the strain on banks. Commercial property prices rose 4.3% in Sep from the previous month as demand rose for the best office buildings in major markets such as New York & Washington, Moody’s Investors Service said last week (after the Moody’s/REAL Commercial Property Price Index had fallen to an 8-year low in Aug). Renewed sales of commercial mortgage-backed securities are helping banks clear loans from their books as they reduced their commercial-mortgage holdings by $8.8B in Q3 & $18.5B YTD. Banks hold $1.07T of commercial mortgages & $216B of apartment mortgages.  A total of $46.8B of commercial mortgages & $10.1B of apartment mortgages are now in default (past due by 90 days or more or in non-accrual status, meaning the bank doesn’t expect to make a full recovery on it).  This is one more reason bank stocks have been trudging along for much of this year.

Defaults on U.S. Commercial Mortgages Held by Banks Rose in Third Quarter

The 85B € ($113B) bailout package for Ireland failed to quench the market turmoil menacing the € (down more than a penny today in the $1.31s).  Irish 10-year bonds slid after an early advance, Spanish bonds slid by the most since the launch of the € & European shares sank.  6 months after the Greek rescue exposed flaws in the euro’s makeup & fueled doubts, policy makers again found themselves meeting in Brussels to calm markets. In addition to Ireland’s rescue package, finance chiefs also endorsed a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers. And Greece was told it could have an extra 4½ years to repay emergency loans to match the 7-year term in the Irish deal.  While Greece let its budget get out of hand & Ireland fell prey to a housing bust, Portugal suffers from a lack of competitiveness that kept average economic growth below 1% in the past decade. Its gov has also been slower to cut its deficit than others.  European loan problems are not going away soon.

EU's Irish Rescue Fails to Stem Contagion; Spain Bonds Drop

Buying in the PM enabled markets to recover most of their losses, Dow closed 123 above its lows (below 11K).  Late day buying was encouraging for the bulls but Dow remains stuck where it was 2 months ago while bank stocks have hardly moved for months.  The 11K support held today but pressure is building to take it lower. 

Dow Jones Industrials   ---   2 months

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Markets tumble on European debt worries

Stocks fell at the opening & have remained under water.  Dow is down 143 taking it below the important 11K resistance level, decliners over advancers almost 4-1 & NAZ dropped 27.  Bank stocks were essentially even despite the negative news coming from Europe.


Value 194.34 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -0.07  (-0.0%)

The Aleriian MLP Index fell 2+ to the 355s, where it was at the start of the month, while the REIT index fell almost 2 the 214s (where it was at the start of Sep).  Junk bond funds were mixed with some still yielding less than 9%.  Treasuries rose, but not that much.  The yield on the 10 year Treasury bond fell only 2 basis points despite the negative news from Europe & the Federal Reserve purchases of Treasuries.

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

Oil has a good gain while gold fell for the 3rd straight session as a strengthening dollar eroded the appeal of the precious metal.

CLF11.NYM...Crude Oil Jan 11...84.52 ...Up 0.76 

GCZ10.CMX...Gold Dec 10....1,359.40 ...Down 3.00  (0.2%)

Gold Super Cycle Link! Click Here

Following are highlights from the Irish gov statement on its bailout loan package with the IMF & European Union.  The fund will total 85B €, 17½B € of which will be contributed by Ireland itself.
This will include:
* 50B € to fund Irish budget
* 35B € to recapitalise banks, including 10B € immediately & 25B € as a contingency fund.
The combined annual average interest rate would be of the order of 5.8% per annum & it will vary according to the timing of the drawdown & market conditions.  The statement said, "The assistance of our EU partners and the IMF has been required because of the present high yields on Irish bonds, which have curtailed the State's ability to borrow. Without this external support, the State would not be able to raise the funds required to pay for key public services for our citizens and to provide a functioning banking system to support economic activity."  In continued, "The funding will be provided in quarterly tranches on the achievement of agreed quarterly targets." "The Programme has two parts -- the first part deals with bank restructuring and reorganisation and the second part deals with fiscal policy and structural reform. The requirement for quarterly progress reports covers both parts of the programme."  Stock markets in Europe & here did not take this news well & headed lower.  Irish bonds sold off.  The € fell a penny & a half to under $1.31, 11¢ below its recent high.  There is talk that Portugal is next in line to receive a bailout.  Growth may weaken next year as budget cuts to stem a mounting debt crisis hurt consumer demand & faltering global expansion curbs exports, according to a report published by the European Commission.  GDP growth in the 16-nation euro region may weaken to 1.5% in 2011 from 1.7% this year. In particular, the economies of Ireland, Greece & Spain are expected to shrink.

Ireland Wins $113 Billion Aid; Germany Drops Threat on Bonds

EU Says Growth to Weaken as Crisis `Shadow' Remains

Thanksgiving Weekend Sales Climbs

Photo:  Bloomberg

The National Retail Federation said the average shopper in the US spent 6.4% more over Thanksgiving weekend than last year.  More people picked up jewelry & toys, encouraged by the economic rebound.  212M shoppers (including me) went to stores & websites over the holiday weekend, on average spending $365. The proportion of sales online rose to more than 1/3 of the total.  Retail sales during Thanksgiving weekend totaled about $45B. More people are scouring for deals earlier, with the number of customers shopping on Thanksgiving Day more than doubling over the past 5 years.  On Black Friday itself traffic rose 2.2%, ShopperTrak said & sales rose 0.3% to $10.7B.  The sales increase would be rated as modest. 

Thanksgiving Weekend Sales Rise 6.4% as Shoppers Splurge

European debt worries starting with Ireland dominate the news.  North Korea is rattling its swords & that situation has to be watched.  Retail sales were maybe good enough, but not great. Today is Cyber Mon which all retailers are using as an excuse for promotions, hoping to generate $1B in sales.  Stock markets are on defense  Dow is back to where it was at the start of Oct when it was approaching 11K. A close below 11K will be a negative sign, especially with all the economic problems worldwide.

Dow Jones Industrials   ---   2 weeks

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