Dow gains over 1200 in 3 months

Dow was strong out of the gate & remained higher all day while NAZ succumbed to selling in the PM.  Dow was up 95 (near its highs), advancers ahead of decliners 2-1 but NAZ only eked out a gain of 1 despite Apple (AAPL) gaining almost 5.  The Financial Index had a good day & a very good month.

S&P 500 FINANCIALS INDEX

Value	226.78
Change	1.05  (0.5%)

The MLP index rose almost 2 to 382+, setting another record high, which brings the index yield below 6%.  It's up 17 YTD, not too shabby after a 2 year extraordinary run.  The REIT popped 5+, to the 241s, on the announced acquisition.  Junk bond funds were a little higher as were Treasuries.  The yield on the 10 year Treasury bond fell 1 basis point to 3.41% & has fallen 35 basis points from its highs 3 weeks ago (largely related to turmoil in the Mideast). 

Treasury yields:

U.S. 3-month		0.13%
U.S. 2-year		0.68%
U.S. 10-year		3.41%

Alerian MLP Index   ---   YTD



Dow Jones REIT Index   ---   YTD



10-Year Treasury Yield Index   ---   YTD




Oil has settled "back" to the 98s, but its chart below shows it is still up substantially from the low 80s (& even high 70s) where it was recently. Gold gained capping the best monthly increase since Apr, as rising inflation & Mideast conditions boosted demand for an alternative asset.

CLJ11.NYM

....Crude Oil Apr 11

...97.08

... 0.80  (0.8%)

GCH11.CMX

...Gold Mar 11

.....1,410.00

... 1.30

(0.1%)

$$ Gold Super Cycle $$  

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CLJ11  (oil contract)  --  2 weeks




Prices for gas at the pump keep rising, a hidden tax on drivers.  Higher prices mean either less driving or cutbacks elsewhere.  The summer driving season still is 3 months away.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.368	$3.468	$3.613	$3.713	$2.840	$3.737
Yesterday Avg.	$3.354	$3.460	$3.595	$3.699	$2.824	$3.717
Week Ago Avg.	$3.171	$3.307	$3.436	$3.566	$2.760	$3.633
Month Ago Avg.	$3.101	$3.293	$3.411	$3.429	$2.659	$3.499
Year Ago Avg.	$2.704	$2.871	$2.975	$2.874	$2.329	$3.065

Source:   AAA


US auto sales in Feb could approach the fastest pace since the “cash for clunkers” program as rising consumer confidence spurred purchases. Data, will be released tomorrow, are estimated to show sales ran at a 12½M annual rate.  The annual rate in Jan & Dec was calculated at 12.6M, the fastest since the 14.2M rate during “cash for clunkers” in Aug 2009.  Trucks & sport-utility vehicles continue to drive sales, with increases of more than 35% in Feb, according to JD Power. But it's too early to determine how oil prices, at the highest in more than 2 years, will affect these gains going forward.

Auto Sales May Approach ‘Clunkers’ Highs as U.S. Rebounds


Bill Dudley, President of the NY Federal Reserve Bank (FED), said the “considerably brighter” economic outlook isn’t yet reason for the central bank to withdraw its record monetary stimulus. “We provided additional monetary policy stimulus via the asset purchase program in order to help ensure the recovery did regain momentum,” Dudley continued. “A stronger recovery with more rapid progress toward our dual mandate objectives is what we have been seeking. This is welcome and not a reason to reverse course.”  He said the economy is “finally showing more signs of life” because household and financial- company balance sheets are improving, monetary and fiscal policy have “provided support” and growth overseas has led to increased demand for US goods & services.  Now the FED needs to reassess its QE2 program.

Fed's Dudley Says Growth Not Reason to `Reverse' Stimulus


The high yielding sectors had an up month while Treasuries fell & then rose on unsettled global conditions with yields ending little changed in Feb.  Dow had a modest net gain in Feb, but is up a solid 1200 (11%) in the last 3 months!  That wouldn't be a bad yearly gain in other times.  Now markets enter a new month with more headwinds to face.  Rising oil prices are being felt by the public today & that will affect buying habits.  The Mideast is becoming very unstable, conditions that show no sign of early resoultion. So far markets have largely ignored these problems, encouraged by prospects of rising US & world economies lifting about all boats.  That notion will be tested in Mar.  The jobs report for Feb comes out Fri, a reminder that fundamental problems in the US economy are not going away soon.

Dow Jones Industrials   ---   YTD

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Higher markets on merger Monday

Stocks are in a rebound mode after last week, decline.  Dow rose 93, advancers ahead of decliners 3-1 & NAZ gained 10.  Bank stocks are also higher.

S&P 500 FINANCIALS INDEX

Value	227.06
Change	1.33  (0.6%)

Rising stock markets took the MLP index to another record high, up 1 to the 381s.  The REIT index rose 3½ to the 239s, on merger news, to a new post Sep 2008 high.  Junk bond funds rose & Treasuries were a tad higher.  The yield on the 10 year Treasury bond fell 1+ basis point to 3.41%.

BONDS

U.S. 3-month		0.13%
U.S. 2-year		0.70%
U.S. 10-year		3.41%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil continues near $100 on the unrest in Libya & the rest of the Mideast while the same news is driving investors into gold.

CLJ11.NYM

....Crude Oil Apr 11

...97.35

... 0.53 (0.5%)

GCH11.CMX

...Gold Mar 11

.....1,413.00

... 4.30

(0.3%)

Gold Super Cycle Link! Click Here

Photo:   Bloomberg

The tax cut that began last month gave consumers the biggest jump in incomes in nearly 2 years, but spending was boosted only slightly, a sign that many are being cautious even as the economy improves.  Consumers increased spending 0.2% in Jan, the smallest gain since Jun, according to, the Commerce Dept. Personal incomes jumped 1%, reflecting the 2 percentage point reduction from the Social Security tax cut.  The small spending gain pushed total spending to an annual rate of $10.59T, up 7.4% from the recession low hit in Dec 2008. Poor weather may have played a role in slowing spending growth in Jan.  The modest 0.2% rise in spending was even weaker when inflation was taken into account. After adjusting for price changes, particularly a steep rise in energy costs, spending dipped 0.1% in Jan, the poorest showing since inflation-adjusted spending had fallen 0.8% in Sep 2009.  For Jan, spending was boosted on durable & nondurable goods while spending on services was trimmed.

Consumer Spending in U.S. Rose Less Than Forecast in January

Photo:  Bloomberg

Fewer Americans signed contracts to buy homes in Jan, evidence the housing market is still struggling.  The National Association of Realtors said its index of sales agreements for previously occupied homes fell 2.8% last month to a reading of 88.9, the 2nd straight monthly decline.  The reading was higher than the 75.9 reading from the Jun low point, but remains below 100, which is considered a healthy level. Sales of previously owned homes fell last year to the lowest level in 13 years.

Pending Sales of U.S. Existing Homes Fell 2.8% in January


Ventas (VTR) will buy Nationwide Health Properties (NHP) for $5.8B in stock, creating the nation's largest health care REIT.  The purchase solidifies VTR position as a leading owner of senior housing communities & makes the company more diverse, combining health care facilities with  senior housing & long-term care facilities.  The company will have more than 1,300 assets in 47 states & 2 Canadian provinces. As is typical in buyout deals, NHP rose 3 to 42 while VTR, the acquirer, dropped 2½.

Ventas Agrees to Acquire Nationwide Health in $5.7 Billion Deal


Nationwide Health Properties  --  YTD




Ventas   ---   YTD




The markets look like they want to recover the losses from last week.  The market news was not that great, but a major buyout can bring out more buyers.  The sharp increase in gas prices at the pump is starting to be felt by consumers, not reflected in prior spending data.  Meanwhile, the unrest in Libya & the rest of the Mideast is unsettling to say the least.  The Libya situation may drag on for days, if not weeks. 

Dow Jones Industrials   ---   2 weeks

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Markets rise after suffering one bad week

Stocks were strong out of the gate & remained near those levels for the rest of the day.  Dow finished up 61 (although it was still down 260 for the week), advancers ahead of decliners 4-1 & NAZ gained 43 (again, down 52 this week).  Bank stocks also were in recovery mode today, which limited the weekly loss for the Financial Index to about 6 points.

S&P 500 FINANCIALS INDEX

Value	225.51
Change	2.92  (1.3%)

The Alerian MLP Index shot up 4+ to 380, making for a very big daily gain.  It only needs pennies to set another new  record high.  Meanwhile the REIT index rose almost 5 (another large gain) to 236, needing another 2 to record another post Sep 2008 high.  Junk bond funds edged higher, not too far from highs recorded last year.  Treasuries also saw limited buying, taking the yield on the 10 year Treasury bond down 1+ basis point to 3.43%.  The yield has fallen over 25 basis points in 3 weeks.

BONDS

U.S. 3-month		0.12%
U.S. 2-year		0.72%
U.S. 10-year		3.43%

Alerian MLP Index   ---   YTD



Dow Jones REIT Index   ---   YTD



10-Year Treasury Yield Index   ---   YTD




Oil climbed by the end of the day after having one of its wildest weeks in some time (see chart below).  Gold fell for the first time in 2 weeks on sales by investors following the longest rally since Aug.

CLJ11.NYM

...Crude Oil Apr 11

...98.18

... 0.90 (0.9%)

GCH11.CMX

...Gold Mar 11

....1,408.70

... 6.50

(0.5%)

$$$ Gold Super Cycle $$$  

Click Here

CLJ11  (oil contract)   ---   1 week




Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, had another recall, this one caused by a typo that inserted a double negative into dosing instructions on more than 667K Sudafed packages.  Customers don’t need to return the products, which have the correct wording on the blister packs that hold the tablets & no adverse events have been reported as a result of the typo.  JNJ has had 16 product recalls (if my count is correct) recently which have cost the company almost $1B in lost sales.  These are ugly times when questions are raised about the competency of company management.  But JNJ is strong & will persevere.  Troubled times ahead could bring lower stock prices.  At some point, higher yields will win out & attract savvy investors.  Today the stock fell 4¢ (30¢ above its lows) to a 6 month low, at a time most stocks have been in a solid rally mode.


J&J Recall Watch: Sudafed Label Includes Double Negativeat The Wall Street Journal

Johnson & Johnson   ---   2 years




Constellation Energy Partners (CEP), another troubled company - only this is an MLP, reported Q4 & full year 2010 results. During Q4, the company completed 13 net wells & recompletions in the Cherokee Basin with total capital spending of $2.1M. Total capital spending in 2010 was $8.5M resulting in 31 net wells & recompletions in the Cherokee Basin.. CEP  had an additional 5 net wells & recompletions in progress at year end. CEP also acquired interests in 36 wells (8 net wells) in the Central Kansas Uplift for $5.9M. But the company had a net loss of $6.8M in Q4 & reported a net loss before charges of $4.4M for all of 2010, which excludes non-cash asset impairment charges of $272.5. Adjusted EBITDA for Q4 was $11.7M, which resulted in Adjusted EBITDA of $54.1M in 2010.The company has $30M of borrowing capacity under its loan agreement & expects capital expenditure to be $10-12M in 2011.  CEP said the distribution will remain suspended thru all of 2011.  The chart shows the units have gone nowhere in the last 2 years but they are a play for those who want ot bet on a long term recovery.  The units were up a few pennies, sloshing around $2.80.

Constellation Energy Partners Reports Fourth Quarter and Full Year 2010 ResultsBusiness Wire

Constellation Energy Partners  --  2 years




This was an unusually wild week, not only for oil, but for the stock markets as well.  On balance, oil & gold rose while stocks fell.  The reduced growth rate for GDP is a preview of things to come.  Reductions in state & local spending (not to mention federal budgets) & high prices will crimp the recovery in 2011.  Latest forecasts expect this to be a recovery year, but the expected rate of growth will be reduced which will aggravate problems with high unemployment  & the troubled housing markets.  In addition, oil supplies from the Mideast can not be taken for granted.  Next week could see more selling pressure in the stock  markets which remain very overbought.

Dow Jones Industrials   ---   YTD

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Markets rise as oil prices stabilize

Dow gained 60, advancers ahead of decliners 4-1 & NAZ a big 37.  Bank stocks were market leaders as the Financial Index recovered some of this week's 10 point loss.

S&P 500 FINANCIALS INDEX

Value	225.67
Change	3.09  (1.4%)

The MLP index shot up 3 to 379, just 2 below establishing a new record high while the REIT index rose 3½ to the 234s (3 below its multi year high).  Junk bond funds were higher & Treasuries were flattish. The yield on the 10 year Treasury fell a fraction of a basis point to just under 3.44%.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.74%
U.S. 10-year		3.44%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil is heading for its biggest weekly gain in 2 years on concern the turmoil that has cut Libya's output may spread to other parts of the Mideast.  Gold is resting after bouncing $100 of its lows last month.,

CLJ11.NYM

...Crude Oil Apr 11

...97.20

..... 0.08 (0.1%)

GCH11.CMX

...Gold Mar 11

....1,404.00

... 10.80

(0.8%)

Gold Super Cycle Link! Click Here

Photo:  Bloomberg

Deeper spending cuts by state & local govs weighed down US economic growth in Q4.  The revised estimate for Q4 illustrates how growing state budget crises could hold back the economic recovery.  The Commerce Dept reported that economic growth increased at an annual rate of 2.8% in Q4, down from the initial estimate of a 3.2% rate.  State & local govs, wrestling with budget shortfalls, cut spending at a 2.4% pace, much deeper than the 0.9% annualized cut first estimated.  Also consumers spent a little less than first thought. Their spending rose at a rate of 4.1%, slightly smaller than the initial estimate of 4.4%, bur remains the best showing since 2006 & suggests Americans will play a larger role this year in helping the economy grow.  Overall GDP growth in Q4 was marginally better than the 2.6% pace logged in the prior qtr.  But rising energy prices pose a danger. If oil prices were to rise to $150 or more a barrel (with gas near $5 a gallon) & stay there for months, another recession is possible.  Analysts are predicting the economy will grow at a pace around 3.5% in Q1, down from an earlier estimates in the 4% plus range.

For all of 2010 the economy grew 2.8%, the most in 5 years, slightly under the 2.9% growth rate first estimated last month. However, it was an improvement from 2009 when the economy suffered its worst decline in more than 60 years.

U.S. Economy Grew 2.8% in Fourth Quarter, Revised From 3.2%



Consumer confidence increased more than forecast in Feb to the highest level in 3 years as a drop in unemployment helped overcome concern over increasing food & fuel costs. The Thomson Reuters/University of Michigan final sentiment index for the month climbed to 77.5 from 74.2 in the prior month. As households grow more optimistic, their spending may keep contributing to the expansion. However, a jobless rate at 9%, mounting foreclosures & a jump in fuel costs may restrain overall growth.  Today’s report mirrors other consumer gauges that have shown consumer optimism is climbing as Americans grow less pessimistic about their finances.

Consumer Sentiment Index in U.S. Increased to 77.5 in February

Photo:  Bloomberg

JC Penney (JCP) unveiled Q4 results that narrowly exceeded expectations, but the department-store operator’s financial guidance impressed shareholders.  It also announced plans to buy back $900M of its shares.  The retailer had EPS of $1.13, in Q4 compared with 84¢ a year earlier. Excluding one-time items, it earned $1.09, topping estimates by a penny.  Revenue increased 2.8% to $5.7B, while same-store sales climbed 4.5%.  JCP projected upbeat results for the coming year.  For the full year, it expects same-store sales up in the low-to-mid single digits & EPS of $2.00-2.10. Even the low end of that range would significantly exceed the EPS forecasts by analyst of $1.75.  Q1 same-store sales should increase 3-5%, translating to EPS of 18-23¢, including a charge of about 3¢ a share.  The stock fell $1.54 on the news.

J.C. Penney's Full-Year Profit Forecast Tops Analysts' Estimates

JC Penney   ---   1 year




This looks to be a relief rally.  Stock markets had been vastly overbought & a correction was long overdue.  But a few off days, hardly represent a significant pause.  Dow fell 400 to the 12K this week.  The 1000 levels are  important  floors or ceilings for the markets.  Next week, stocks will have to cope with more uncertainty coming from the Mideast & potential oil disruptions.  Current unrest does not look like it is going away soon.  MLPs continue super charged, probably benefiting from higher oil prices, although they have little or no affect on these companies (some don't even move petroleum)..

Dow Jones Industrials   ---   2 weeks

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