Thursday, December 9, 2010

Better jobless numbers were not enough to lift markets

Stocks drifted again, largely underwater.  Dow was down 2, advancers 5-4 ahead of decliners & NAZ added 7.  Bank stocks are doing well in Dec.  The Financial Index began the month at 194 & quietly has put in a nice gain while the rest of the markets are drifting lower. 


Value209.82One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  2.67  (1.3%) 

Citigroup (C), no longer having the pressure of gov selling its stock, has been climbing along with other banks in Dec.  While stocks are muddling along, banks have returned to being market leaders.

Citigroup   ---   1 month

The MLP index was up a fraction to 356 but the its chart shows how flat its range has been for a few weeks.  The REIT index lost 2+ to the 215s & also has been going nowhere in recent weeks.  Junk bond funds continue mixed, doing little recently.  Treasuries rallied from bargain hunters but late day trading limited those gains.  The 30 year auction went reasonably well today, concluding $66B of debt sold this week.  But these markets are still recoiling from the sharp run up of yields in recent days & weeks.  The yield on the 10 year Treasury bond was off 1+ basis points to 3.22%, not that impressive considering its recent climb. 

Treasury yields:

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

Alerian MLP Index   ---   1 month

Dow Jones REIT Index   ---   1 month

10-Year Treasury Yield Index   ---   1 month

Commodity markets were relatively quiet.  Oil was even while gold found a few buyers before sellers limited its gain.

CLF11.NYM...Crude Oil Jan 11...88.38 ...Up 0.10  (0.1%)

GCZ10.CMX...Gold Dec 10....1,386.70 ...Up 4.20 (0.3%)

$$ Gold Super Cycle $$  

House Speaker Nancy Pelosi

Photo:   Bloomberg

House Dems voted by voice vote to reject the tax deal with Reps in its current form.  The vote will, at least temporarily, stall what had seemed to be a grudging movement toward accepting the tax package.  Nancy Pelosi said that House Dems share Obama's "commitment to providing the middle class with a tax cut to grow the economy and create jobs." She also noted that a House-passed bill, which Reps blocked in the Senate, did not include "a bonus tax cut to millionaires & billionaires."  "We will continue discussions with the president and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote," she said.  Everybody is playing hardball & digging in their heels.  More confusion over this important issue is not what the markets like to hear.

House Democrats Oppose Vote on Obama-GOP Tax Plan

Increased demand for food, paint & electronics will push DuPont (DD), a Dow stock, earnings & revenue higher thru 2015 & its CEO promised the diverse portfolio has yet to reach its potential.  DD forecast EPS of $3.30-$3.60 next year which compares with expectations of $3.45.  "Investors should expect consistent growth from us," CEO Ellen Kullman said. "Our portfolio has yet to hit its full potential."  DD affirmed its 2010 earnings guidance of $3.10 per share & forecasted 2011 revenue of $33-$34B, a little above expectations of $33.4B.  Agricultural unit sales should grow 8-10% annually thru 2015 & sales in electronics should grow 10-12%, Kullman said.  The company may use its available cash for acquisitions in 2011, including in the agricultural & safety industries.  This news was not greeted warmly, the stock dropped 56¢.

DuPont Sees 2011 EPS $3.30-$3.60at Bloomberg

DuPont   ---   2 years

Malaise markets are no fun to watch.  This has to be expected when yield & tax uncertainty are the dominant drivers.  The interest rate increases may be easier to take.  That's happened before & some point to the past when rates have risen along with rising stock markets.  But taxes are something else.  DC pols are in charge & the taxes for next year may not be known until the Reps come to town next year.  I know I keep saying this, but as long as the tax impasse drags on, markets will find it tough to make headway.  The jobless numbers should have given the markets a lift but the DD guidance, which wasn't all that bad, seemed more important (along with the Dems rejecting the tax proposal).  Dow keeps wandering just below its yearly highs, not a good sign.

Dow Jones Industrials   ---   1 month

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