Thursday, January 6, 2011

Markets dirft lower after weak jobs report

Dow dropped 25, decliners over advancers 3-2 & NAZ was up 7, probably on optimism from the CES show in Las Vegas. Selling pressure was felt by bank stocks.


Value 220.41One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -1.39  (-0.6%)

The MLP index was down pocket change in the 364s & only 1+ below its record high.  The REIT index fell 2 to 223.  Junk bond funds were mixed, call it even.  Investors are skittish about these funds (after selling in Q4) but there seems to be unlimited demand for new offerings of risky debt at lower yields.  In coming months, that will bring lower net income for these funds which means div cuts.  Ahead of the jobs report tomorrow, there was buying in Treasuries.  The yield on the 10 year Treasury bond fell 6 basis points to 3.42%, recovering some of yesterday's huge increase. 


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

Alerian MLP Index   ---   3 months

Dow Jones REIT Index   ---   3 months

10-Year Treasury Yield Index   ---   3 months

Oil fell to the lowest level in almost 3 weeks as the dollar strengthened against the € before the payrolls report tomorrow that’s forecast to show the economy is rebounding.  After recent weakness, gold was about even today & remains only about 4% below its record prices set early last month. 

CLG11.NYM...Crude Oil Feb 11...88.23 ...Down 2.07  (2.3%)

GCF11.CMX...Gold Jan 11......1,371.70 ...Down 1.70   (0.1%)

++ Gold Super Cycle ++  

Retailers sealed their strongest holiday sales increase since 2006.  A robust Nov more than offset spending that tapered off in Dec.  Results reported today suggest steadily improving consumer spending but with expectations riding high, the Dec figures were disappointing.  From Oct 31-Jan 1, holiday revenue at stores open at least a year rose 3.8% over last year, according to an index compiled by the International Council of Shopping Centers (ICSC), the biggest increase since 2006, when it rose 4.4%.  The index tailed off to a 3.1% increase in Dec after a 5.4% rise in the prior month. Early holiday discounts, which started in Oct, had shoppers finishing more of their shopping before the Dec rush.  But ICSC recently was forecasting 4% or more.  Dec spending is in line with a 3.3% growth rate averaged for the calendar 2010.  Earlier data from MasterCard Advisors' SpendingPulse & anecdotal evidence pointed to a strong Dec, which may have led expectations for retailers to overheat.  Strong online sales, which many retailers don't include in their monthly figures, brighten the holiday spending picture as well. Americans spent 13% more online this holiday season, totaling a record $30.8B, according to comScore (an internet research firm).

December increase seals strong holiday for retail- AP

Apartment vacancies fell to a 2 year low in Q4 & rents rose, extending a market recovery that began in early 2010, according to property research firm Reis Inc.  The national apartment vacancy rate dropped to 6.6% from 8% a year earlier & from 7.1% in Q3. It was the lowest since Q3 2008 when the rate was 6.2%. Apartment occupancies have risen as a surge in home foreclosures forced many people to lease apartments.  Effective rents (what tenants actually pay) rose to an average $986 a month from $964 a year earlier & $981 in the prior quarter. Asking rents also climbed, to $1,042 from $1,026 a year earlier & $1,037 in Q3.  Households appear to be returning to the rental market because of the weak economic recovery & problems in the housing market.  This is good news for REITs specializing in apartments.  Those specializing in commercial properties are still coping with the sluggish recovery.

Apartment Vacancies in U.S. Decline to Two-Year Low, Extending a Recovery

The CES has not stirred much excitement.  There are plenty of new tablets & Apple (AAPL) is launching an app store for Mac computer software.  Its stock was flat a new record highs of 333.  But these announcements are tame, nothing revolutionary. The jobs report is the center of investor attention & expectations are very high for the jobs created figure.  Disappointing news would be taken badly by the markets. 

Dow Jones Industrials   ---   3 months

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