Friday, December 3, 2010

Markets rise despite disappointing unemployment data

Stocks did not know what to make of the unsatisfactory unemployment figures.  So they drifted.  Dow finished up 19, advancers almost 2-1 ahead of decliners (breadth improved significantly during the trading session) & NAZ gained 12.  Markets edged higher during the day, closing near their highs.  Bank stocks had a similar story.


Value 203.97 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  0.60  (0.3%)

The MLP index & REIT index were each up small fractions while everybody is trying to figure out what the unemployment data really means.  Junk bond funds were a smidgen lower.  Treasuries lost ground as the 10 year Treasury bond yield rose another 2 basis points, going over 3%, to a 4 month high. 

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

The dollar tumbled against major currencies, boosting the investment appeal of commodities. Oil rose to a 25-month high & gold topped $1,400 an ounce (flirting with record highs). JPMorgan is forecasting oil will reach $120 within 2 years although others are split on oil's future..

CLF11.NYM...Crude Oil Jan 11...89.23 ......Up 1.23  (1.4%)

GCZ10.CMX...Gold Dec 10....1,408.30 ...Up 19.80  (1.4%)

$$$ Gold Super Cycle $$$  

This has been another excellent year for many stocks.  Below are the charts for a few of the higher yielding Dividend Aristocrats. At best, these have modest gains while others are lower.  Their yields are over 3% (at a time when banks are paying virtually nothing on deposits) & have excellent track records of raising divs over the years including thru the most difficult recession in many years.

Leggett Platt   ---   YTD

Kimberley Clark   ---   YTD

Abbott Labs   ---   YTD

Johnson & Johnson   ---   YTD

Clorox   ---   YTD

The best explanation for the market's performance is that traders did not believe the unemployment statistics.  There is a feeling that related data, such as improvement in the weekly jobless claims, tells the "real" story about the recovery & this is just misinformation which can be ignored.  Time will tell.  The retail holiday season will probably get decent grades if not better. However retail sales could get a jolt in Jan, typically a slow month, when all workers will see reduced paychecks because of higher withholding taxes.  That should be felt by retailers.  European debt problems are fading away once again although the fundamental problems have not been addressed.  Rising interest rates are causing mortgage rates to creep up at a time housing needs all the help it can get.  With higher rates, investors may demand higher rates on competitive yield securities (junk bonds, MLPs & REITs).  For the time being bulls are in charge & the market performance, especially this month, shows they are in command.

Dow Jones Industrials   ---   YTD

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