VerySmartInvesting: Dow edges higher, trying fo extend its winning streak

Tuesday, February 8, 2011

Dow edges higher, trying fo extend its winning streak

Markets were flatish, but Dow wants to make it 8 days in a row for gains. Dow was up 16 to a new high since mid 2008, advancers & decliners were equal while NAZ fell 4. Bank stocks rose, taking the Financial Index near its highs last Apr.

S&P 500 FINANCIALS INDEX

Value	227.99
Change	0.99 (0.4%)

The Alerian MLP Index was down pennies in the 371s & the Dow Jones REIT Index edged up a fraction to a 2½ year high. Junk bond funds inched higher. Treasuries fell, with 3-year notes declining for a 7th straight day, as the Treasury prepared to sell $32B of these securities shortly.

Treasury yields:

U.S. 3-month		0.14%
U.S. 2-year		0.78%
U.S. 10-year		3.66%

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index --- 2 weeks

Oil fell for a 4th day as China raised key interest rates for the 3rd time since Oct, sparking concern that fuel demand will be curtailed in the world’s biggest energy-consuming country. Gold prices were shrugged off another rate hike from China as investors bought gold on inflation concerns.

CLH11.NYM

...Crude Oil Mar 11

...87.42

.....

0.06

(0.1%)

GCG11.CMX

...Gold Feb 11

......1,364.60

...

16.00

(1.29%)

Gold Super Cycle Link! Click Here

Job openings fell for the 2nd straight month in Dec, another sign that hiring is still weak even as the economy is gaining strength. The Labor Dept said employers advertised nearly 3.1M jobs, a drop of almost 140K from Nov (the lowest total since Sept). Openings have risen by more than 700K (31%) since they bottomed out in Jul 2009, one month after the recession ended but are still far below the 4.4M that were advertised in Dec 2007, when the recession began. Job openings dropped sharply in professional & business services, a category that includes temporary help agencies. They also fell in construction, manufacturing, & in education & health services. This is why the unemployment picture is not getting better in a meaningful way.

Job Openings in U.S. Decrease by 139,000 to 3.06 Million

McDonald’s January Store Sales Top Analysts’ Estimates

Photo: Bloomberg

McDonald's (MCD), a Dow stock & Dividend Aristocrat, reported a 5.3% rise in Jan sales at locations open more than a year (beating estimates of 4½%), giving credit to its McCafe hot chocolate, Chicken McNuggets & the addition of oatmeal to the menu. But US sales growth was weaker than the rest of the world, up 3.1%, Europe 7% & Asia/Pacific, Middle East & Africa 5.2%. Sales at locations open at least a year is an important gauge because it measures revenue from the company's existing restaurants rather than growth that came from opening new locations. The stock rose 2.43 to the 75s.

McDonald's January Same-Store Sales Beat Estimates

McDonald's --- 1 year

Avon Products (AVP) posted a steeper-than-expected drop in quarterly profit, hurt by weak sales & restructuring charges. Results suffered from service disruptions in Brazil, weak results in Russia & a sharp drop in the number of women selling its goods in China. Even sales growth in Latin America, Avon's biggest market, was weaker than in the previous three qtrs. AVP expects revenue, in constant dollars, to rise in a mid-single digit range this year after increasing 6% in 2010 & expects improving operating margins in mid-teens by 2013. Operating margin fell 1.8 percentage points to 11.2% in Q4. EPS was 53¢ in Q4, down from 62¢ in 2009. Restructuring charges (9¢ per share) were in line with what it said last week. Adjusted EPS fell to 59¢ from 68¢ a year earlier & below 67¢ forecasted by analysts. Revenue rose 1.3% to $3.18B led by an 8% rise in Latin America (13% in constant currency). The stock dropped 1.29 to the 28s.

Avon Drops After Fourth-Quarter Sales, Profit Trail Estimates

Avon --- 1 year

This is the heavy part of earnings season. Early results are mixed between earnings & guidance for 2011. The Treasury yields are at 9 month highs, today's auction will give an indication about buyer acceptance for more Treasury debt. Junk bond funds are near their multi year highs. REITs are doing well & the MLP index is just below its recent record high (few can make that statement). But a higher level of interest rates are new to this market & they can do damage. In the meantime, earnings reports will be the major driver as Egypt is quieting down.

Dow Jones Industrials --- 2 weeks