Thursday, January 27, 2011

Again, Dow couldn't top 12,000

Dow edged higher but couldn't hold above 12K. Earnings are giving a mixed picture but generally a plus. Dow rose 4 (needing 11 to go over 12K), advancers ahead of decliners 4-3 & NAZ was up a bigger 15.  Bank stocks did well, taking the Financial Index within 3 of its interim high reached 2 weeks ago.


Value 222.66 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  1.93  (0.9%)

The MLP index slipped a fraction to below 272 but the REIT index shot up 3+ to the 232s, a new high since Oct 2008.  ProLogis, the world’s largest warehouse operator, is in talks to combine with rival AMB Property (AMB) that would create a $14B real estate investment trust.  AMB was up 1¼ to 34+, as REITs were strong on buyout hopes (but enthusiasm did not last for the entire session)..

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

First-time claims for unemployment insurance payments jumped last week, indicating it will take more time for the labor market to mend.  Applications increased 51K to 454K in the week ended Jan 22, according to the Labor Dept (above forecasts of 405K). The number on unemployment benefit rolls rose, while those collecting extended payments fell.  Snow in 4 southern states in previous weeks created a backlog of claims that were processed last week. The 4 week moving average rose to 428K from 413K.  The number continuing to collect jobless benefits increased 94K to 4M (the continuing claims figure does not include the number of workers receiving extended benefits under federal programs)..  Those who’ve used up their traditional benefits & are now collecting emergency & extended payments decreased about 98K to 4.62M.  This data continues to be glum when the economy is supposed to be recovering..

Initial Jobless Claims in U.S. Rose Last Week to 454,000

Caterpillar (CAT), a Dow stock, more than quadrupled Q4 profit as stronger demand helped increase global sales of mining & construction equipment.  CAT had EPS  of $1.47, higher than the previous year's 36¢ (2009's Q4 was also hurt by layoff costs that consumed 5¢ per share).  Revenue jumped 62% to $12.8B in Q4, above last year's $7.9B. Machinery sales improved both because customer demand strengthened & dealers replenished their inventories.  Its outlook for 2011 doesn't include its pending acquisitions of Bucyrus International & German engine maker MWM Holding because those deals haven't closed.  CAT CEO Doug Oberhelman said the company expects the world's developing countries to keep growing in 2011 as the economies in North America & Europe continue improving. But developing areas like China, India & Latin America are likely to continue growing faster than developed nations.  "We have updated our strategy, aligned the organization and are clearly focused on our customers. Investments are being made in new product development, additional capacity and strategic acquisitions that position us well for long-term growth and profitability," Oberhelman said.  CAT hired about 19K in 2010, including 7½K in America, to respond to the increase in demand.  For all of 2010, CAT had EPS of $4.15 on revenue of $42.6B, considerably better than the previous year's $1.43 on revenue of $32.4B.  The stock rose 88¢ to the 96s, a new record.

Caterpillar   ---   1 year

Bulls will take sideways trading because Dow & the markets are overbought.  But today was no vote of confidence following the FOMC meeting yesterday.  Japan had its credit rating lowered 1 level to AA-, same as China, which is weighing on Asian markets.  That may be bothering the markets, but it shouldn't be a major factor.  In the last few months, there have been a number of times when it looked like Dow maxed out.  But patient bulls were able to take it to new heights.

Dow Jones Industrials   ---   2 weeks

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