Wednesday, November 10, 2010

Lower markets ahead of G-20 meeting

Stocks pulled back from profit taking.  Dow fell 62, decliners over advancxers 2-1 & NAZ dropped 10.  Bank stocks slipped a smidgen.


Value 203.09 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -0.18  (-0.1%)

The MLP index dropped 3½ to the 362s, to be expected given its fabulous run in recent months.  The REIT index rose 1½ to the 221s, rebounding off yesterday's sell-off.  Junk bond funds slipped, hard to remember the last time they fell back.  Treasuries pulled back, the yield on the 10 year Treasury bond rose 5 basis points to 2.71%, high territory in the last 3 months, ahead of today's auction to sell more bonds.

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 rose after a gov report showed an unexpected decrease in inventories last week, dropping 3.27M barrels to 364.9M.  Gold fell ahead of unknown outcome of the G-20 meeting.

CLZ10.NYM...Crude Oil Dec 10...86.88 ......Up 0.16  (0.2%)

GCX10.CMX...Gold Nov 10.....1,398.40 ....Down 11.40  (0.8%)

Gold Super Cycle Link! Click Here

Fewer people applied for unemployment aid last week, the 3rd drop in 4 weeks suggesting that the job market is showing signs of life.  If the decline continues, it could signal more hiring.  The Labor Dept said that initial weekly claims dropped 24K to 435K.  The 4-week average fell 10K to 446K, the lowest level for the average since Sep 2008, just before the financial crisis intensified with the collapse of Lehman Brothers.  This is only the 2nd time the 4-week average has fallen below 450K this year.  The number continuing to receive jobless benefits dropped 86K to 4.3M, in line with projections.  But continuing claims does not include the number receiving extended benefits under federal programs. Those who’ve used up their traditional benefits & are collecting emergency & extended payments decreased 286K to 4.73M in the latest week.  The news is a little better, but nowhere encouraging enough to make a significant dent in the unemployment rate.

U.S. Jobless Claims Fell Last Week to Lowest Level Since July

Weekly jobless claims - 1 year

One-Year Chart for Claims (INJCJC:IND)

# continuing to receive benefits -1 year

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

World leaders gather in Seoul for the Group of 20 summit, with members disparaging US economic policies they say will weaken the dollar & stoke hot-money flows. The Federal Reserve (FED) decision lto pump $600B into the US economy has stolen the spotlight away from China’s currency. Member countries are worried today that the FED move may inflate commodities prices & are discussing not using the dollar as the main reserve currency for trade. G-20 unity displayed during the financial crisis has given way to national divisions as members chart their own recovery path.  China, the world’s biggest holder of foreign exchange, yesterday took steps to stem capital inflows that threaten to drive up stock & property prices & today raised bank reserve requirements. South Korea may revive a 14% tax on domestic Treasury & central bank bonds held by foreigners early next year to curb foreign-exchange volatility.  This discord is raising nervousness in stock markets.

G-20 Unity Born in Crisis Fractures as Leaders Pursue Own Ends

Macy’s Third-Quarter Earnings Beat Estimates

Photo:  Bloomberg

Macy's (M) had a better-than-expected quarterly profit as efforts to cater to local tastes & an uptick in spending at its upscale Bloomingdale's boosted sales.  M also credited its exclusive product lines by top names such as Madonna & Kenneth Cole for differentiating it from rivals to lure shoppers.  CEO Terry Lundgren said the company's performance "bodes well for our business as we enter the holiday selling season."  Sales rose 6.6% to $5.62B during Q3, beating forecasts of $5.56B. Same store sales rose 3.9%.  Online sales rose 24% during Q3 & gave same-store sales a 0.8 percentage point lift.  Macy's affirmed its forecast for Q4 same-store sales growth of 3-4%.  M reported EPS of 2¢ per share for Q3 compared to a loss of 8¢ last year.  Excluding one-item items, M had EPS of 8¢ - beating forecasts of 5¢.  Its full-year profit outlook was raised 5¢ to $1.94-1.99 per share, in line with estimates of $1.96.  M stock was down a few pennies.

Macy's Third-Quarter Earnings Beat Estimates as Sales Advance

Macy's   ---   2 years

Today's selling can be chalked up to routine although the favorable jobless numbers should have inspired buyers to return to the markets.  The G-20 meeting is important because cooperation among the countries is absent.  There is also frustration with the US & its efforts to keep interest rates very low which hurts economies in other countries.  But the Dow, up 8% YTD, has a beautiful chart this year.  Of course, MLPs are in their own world soaring to new record highs.  The G-20 meeting will probably be the major driver this week with a negative bias.

Dow Jones Industrials   ---   2 weeks

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