Monday, December 20, 2010

Markets are meandering without outside direction

Dow dropped 13, advancers ahead of decliners by 20% & NAZ was up 6.  Bank stocks added a little in the PM to their modest AM gains.  There was not a lot happening in the markets on light trading going into the end of the year.


Value209.50One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  0.78  (0.4%)

MLPs recovered in the PM giving the index a rise of 1 to 351 while the REIT shot up 3 to the 217s on a favorable report (see below).  Junk bond funds were mixed.  Treasuries lost ground after the Federal Reserve concluded purchases of $14.6B, the biggest amount in a single day under QE2. The yield on the 10 year Treasury bond gained 2 basis points to 3.35%.

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 rose on speculation US economic growth will accelerate next year, bolstering demand in the world’s biggest oil-consuming country. Gold had a modest rise as it is finishing its 10th consecutive yearly gain.

CLF11.NYM...Crude Oil Jan 11....88.81 ....Up 0.79  (0.9%)

GCZ10.CMX...Gold Dec 10.....1,385.50 ...Up 6.60  (0.5%)

$$ Gold Super Cycle $$  

Commercial property prices in the US rose 1.3% (above the prior month) in Oct, the 2nd consecutive monthly gain according to Moody’s Investors Service. The Moody’s/REAL Commercial Property Price Index climbed 3.2% from a year earlier as demand is rising for the best office buildings in major markets including New York, San Francisco & Washington.  Buyers are seeking returns higher than on fixed income.  Prices for eastern US office buildings gained 22% from a year earlier, according to Moody’s. Washington properties rose 17% & New York buildings climbed 9.1%. Investors may begin buying lower-quality buildings in major markets & top-tier buildings in secondary markets next year.  However, the index is still 42% below its Oct 2007 peak. The gauge measures overall commercial property values on a monthly basis.  Commercial property sales more than doubled to $16B in Q3 compared with a year earlier, according to Real Capital Analytics.  Low interest rates on competitive investments are driving more buyers into real estate, good news for REITs, especially those invested in commercial real estate.

U.S. Commercial Property Rises For Second Consecutive Month, Moody's Says

Commercial Prop Price Index - 1 year

One-Year Chart for National All Property (MDRMNAPR:IND)

The past year has been a good time for US business, but not the unemployed.  The unemployment rate is harldy lower than 10% reported in Nov 2009. Yet, business revenues have begun to recover.  GDP has grown consistently implying that firms are managing to increase sales without hiring many employees.  Today's report provides data that net sales & profits for major retailers have increased year-over-year, sales rose by 5.5%, & profits jumped by 7.5%. During this 12-month period, however, the industry added just 80K jobs which increased the retail sector's labor force by only 0.6%. Most retailers didn't need to bring on more workers to satisfy the consumer demand as they made more money by hiring fewer workers back. In other words, they were likely overstaffed to begin with. As demand continues to rise, hiring might not get much more aggressive. From the period when the recession began in Dec 2007 - October 2009, 1.2M jobs were eliminated by the retail sector & the 80K created since then doesn't nearly replace those while revenues in Q3 were at record levels for Q3.  The implications of this data on a recovery for those looking for work are not good.. 

This is another sleepy day which could be the story for the last few days in 2010.  Volume is light & traders are not looking to take major new positons as the old year closes.  MLPs are having another fabulous year.  After a gain of more than 60% in 2009, the index is up another 23% (what would be 2 good years in other times) YTD.  Little noticed was the Treasury rally in the AM which was due to a large buying program by the FED.  When it was finished, selling took over & brought prices down for the day.  Bulls say higher interest rates can coexist with higher stock prices.  I'm not sure, at least in 2011.

Dow Jones Industrials   ---   YTD

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