VerySmartInvesting: Markets remained lower on growing international tensions

Tuesday, November 23, 2010

Markets remained lower on growing international tensions

Stocks dropped at the opening & were never able to get ahead. Dow ended down 142, decliners ahead of advancers better than 3-1 (the spread narrowed in late trading) & NAZ fell 37. Banks led the way down. The Financial Index is where it was at 6 months ago when the markets took a spill from their yearly highs.

S&P 500 FINANCIALS INDEX

Value	193.47
Change	-3.18 (-1.6%)

The Alerian MLP Index was up pocket change in the 359s (that's called outperforming) but the REIT index was down 2 to the 212s. Junk bond funds were mixed, helped by a buying in Treasuries. Treasuries had a good day, but it should have been better considering all the intl problems. The yield on the 10 year Treasury bond fell a relatively modest 5 basis points to 2.76%.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.45%
U.S. 10-year		2.76%

Alerian MLP Index --- 3 months

Dow Jones REIT Index --- 3 months

10 Year Treasury Yield Index --- 3 months

Crude oil futures declined in the last half-hour of trading. However, 80+ is solidly ahead of where it was for most of last year. As expected, gold had a good day with growing intl tensions.

CLF11.NYM

....Crude Oil Jan 11

..................81.36

....

0.34 (0.4%)

GCX10.CMX

...Gold Futures,Nov-2010

...1,364.50

...

6.80

(0.5%)

+++ Gold Super Cycle +++

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Ben S. Bernanke
Photo: Bloomberg

Federal Reserve (FED) policymakers clashed over the benefits & risks of launching a $600B program to rejuvenate the economy, but voted for it anyway. Despite a 10-1 vote in support of the program, the minutes from the Nov 3 meeting show that some FED officials had concerns about embarking on a 2nd round of stimulus. The minutes also reveal that the FED held a secret meeting in mid-Oct to talk about its communications strategy. Some officials thought the additional purchases of gov debt would have limited effect in revving up the economy. Some also worried about risks, unleashing inflation or causing a destabilizing slide in the value of the U.S. dollar. But in the end, Chairman Ben Bernanke persuaded all but one to back the plan. Explaining the need for more stimulus, the FED said that progress on its key dual mission of maximizing employment & making sure prices are on an even keel had been "disappointingly slow." The Fed also downgraded its forecasts for this year & next, saying that economic growth would be weaker & unemployment higher than previously estimated in Jun. FED officials also weighed at the Oct meeting whether it needed to adopt an explicit inflation target. Inflation has been running below the Fed's comfort zone of between 1½-2%. That spurred concerns of deflation, a prolonged & dangerous drop in prices, wages & in the values of homes & stocks.

Fed Officials Disagreed Over Benefits of $600 Billion Stimulus

Acer, the Taiwanese laptop maker (including the one I use to write this blog), debuted its first tablet computers, becoming the latest company to challenge the market-leading iPad from Apple (AAPL). 2 tablets will have 7" & 10.1"screens & be based on Android software platform from Google (GOOG). A 3rd tablet, also with a 10.1" screen, will be based on Windows software. Acer expects 40-50M tablets will be sold worldwide next year with Acer hoping to take 10% of the market. The 2 Android tablets will be available in Apr & the Microsoft device will go on sale in Feb. All 3 will offer Wi-Fi connectivity & allow users to surf the Internet using a 3G connection. The tablets would likely be priced at $299-699. Acer also today released a smartphone with a 4.8" screen based on Android that they touted as a phone with the “soul of a tablet.” The competition for the iPad is growing & it's coming from big companies. AAPL may have to learn how to live with increased competition on its profitable products. AAPL fell almost 4+ to the 308s (in a down market) & has lost its upward momentum since announcing the latest round of new products last month.

Acer Seeks Piece of IPad Market With Introduction of Three Tablet Devices

Apple --- 3 months

A holiday trading mood is in the air. Volume was light (1B shares on the NYSE floor) & should be even lighter on Wed & Fri, so market swings have less meaning than usual. Nov is turning into a difficult month. Dow is down 1% this month. Meanwhile, dreary housing numbers keep coming with the unemployment rate stuck in a rut near 10%. The chart shows Dow is back where it was 5 weeks ago. Its challenge for the rest of the week will be to hold above 11K.

Dow Jones Industrials --- 3 months