Monday, January 31, 2011

Markets rise despite unease over Egypt

Stocks weren't sure what to do in early trading, but bulls carried the day.  Dow finished up 68 (closing at its highs), advancers ahead of decliners 2-1 & NAZ gained 13.  Good earnings reports for the big oils & strength in bank stocks were big factors in today's rise


Value220.70One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  2.14  (1.0%)

The MLP index rose almost 3 to the 372s & the REIT jumped 3¼ to the 232s on merger news of AMB Properties (AMB) & ProLogis (2 large REITs).  Junk bond funds were higher while Treasuries were little changed.

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 was higher on worries about production interruptions from the Mideast.  Oddly, with growing uncertainty, gold dropped but that should not last long.

CLH11.NYM...Crude Oil Mar 11...91.96 .....Up 2.62  (3.0%)

GCG11.CMX...Gold Feb 11......1,329.80 ...Down 10.90 (0.8%)

** Gold Super Cycle **  

As 2011 began, banks were the most optimistic in years that they will not have to write off as many bad business & consumer loans this year  according to a survey issued by the Federal Reserve (FED).  Some US & foreign-controlled banks continued easing terms for commercial & industrial loans but they kept standards & terms for others like consumer loans & mortgages largely unchanged.  The survey covered 57 domestic banks & 22 US branches & agencies of foreign banks that do the great majority of lending in US markets.  "In the January survey, expectations were significantly more upbeat than in past years," the FED said. "Moderate to large net fractions of banks reported that they expected improvements in delinquency and charge-off rates during 2011 in every major loan category."  80% of survey respondents anticipated improvements in the quality of commercial & industrial loans to large & middle-market firms this year & 70% expected improvements in the quality of loans to small firms, making banks more willing to give better loan terms & standards.  This is consistent with an improving outlook for the US economy which has been taking the stock markets higher in recent months.

Egypt worries faded during the day, although they could become a massive problem for the markets.  The chart below shows Dow rose over 300 in Jan, although the gains were trimmed back last week.  The MLP index also gained, needing another 2 for new record.  Next month could be an important one for the markets. 

Dow Jones Industrials   ---   YTD

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