Monday, January 10, 2011

Mixed markets ahead of Alcoa earnings

Dow dropped 37, advancers & decliners were about even & NAZ rose 4 (helped by Apple climbing another 6 to a new record).  Bank stocks slid in this lackluster market.


Value217.73One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -0.65   (-0.3%)

The Alerian MLP Index gained 1½ to the 366s, needing just 2 more to set a new record high.  Cold weather in the northern US could be responsible for this up market on an otherwise nothing day.  The REIT index was down pennies in the 222s.  Junk bond funds were higher.  Treasuries were a little stronger.  The yield on the 10 year Treasury bond slid 2 basis points to just over 3.30%. 

Treasury yields:

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

Alerian MLP Index   ---   1 year

Dow Jones REIT Index   ---   1 year

10-Year Treasury Yield Index   ---   1 year

Oil climbed for the first time in 3 days after an Alaskan pipeline carrying about 15% of US crude output was shut following a leak.  Gold rose, rebounding from the biggest weekly loss since Jul, as planned Portuguese & Spanish bond sales revived concern that the debt crisis in Europe will linger.

CLG11.NYM...Crude Oil Feb 11...89.25...Up 1.22  (1.4%)

GCF11.CMX...Gold Jan 11.......1,373.80 ...Up 5.30 (0.4%)

$$ Gold Super Cycle $$  

Companies in the S&P 500 Index that analysts loved the most rose 73% on average since the index started to recover in Mar 2009, while those with the fewest “buy” recommendations gained 165% according to Bloomberg. Now, favorites include retailers & restaurant chains, the industry that did best last year & are more expensive than the S&P 500 compared with their estimated 2011 profits.  But investors who look at the analysts as a contrary indicator are buying shares of utilities, with the highest yields after telephone stocks & banks, whose earnings are likely to grow 3 times as fast as the S&P 500 in 2011.  After completing its 6th straight weekly advance on Jan 7, the S&P 500 has gained 88% to 1,271 since Mar 9, 2009.  Analysts said health-care & technology companies would win in 2010. Instead, they had 2 of the 3 smallest rallies among 10 industries in the S&P 500, gaining less than 10%. The stocks analysts liked least, banks & real estate firms, rose 19% & 28%, respectively, in 2010.  S&P 500 companies with the most “buy” ratings gained 8.7% in 2010, while the ones with the fewest jumped 20%. A pharmaceutical analyst told clients to buy & Pfizer (PFE) & Merck (MRK). both Dow stocks, last year but they dropped 4% & 1% respectively.  Banks have been among the lowest-rated stocks in the S&P 500 even as they gained 172% since the rally began last year. 16 in the index may report average earnings growth of 44% in the 2011 as business recovers. Analysts are also bearish in 2011 on S&P 500 utilities, which offer a collective dividend yield of 4.3%, more than twice the 1.86% yield of the S&P 500. Only telephone companies, at 5.2%, pay more.  I like considering analysts as contrary indicators.

Analysts Prove Perilous as Contrarian Stocks Rise 165%

Duke Energy (DUK) will buy Progress Energy (PGN) for almost $14B in stock, creating the largest US power company (if it wins approval from regulators) with 7M electricity customers in North Carolina, South Carolina, Florida, Indiana, Kentucky & Ohio. A combined company would likely be able to increase its div, a key factor in attracting investors to the regulated utility sector."It really enhances our ability to grow the dividend going forward," Duke Energy Chief Executive Jim Rogers said. "Our plans are to grow the dividend at slightly less than the growth in our earnings."  Each stock fell 1% & offers a yield of 5.6%.

UPDATE 4-Duke Energy to buy Progress Energy for $13.7 blnat Reuters

Progress Energy   ---   1 year

Duke Energy   ---   1 year

Markets were under water but NAZ was able to break into the black in the PM. Merger news on Merger Mon should have brought out more buyers.  Maybe cold weather kept them home.  Alcoa (AA) kicks off earnings season shortly.  The latest estimates are for Q4 EPS of 19¢

Dow Jones Industrials   ---   1 year

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