Friday, February 25, 2011

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.


Value 225.67 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
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
U.S. 2-year
U.S. 10-year

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 .....Down 0.08 (0.1%)

GCH11.CMX...Gold Mar 11....1,404.00 ...Down 10.80  (0.8%)

Gold Super Cycle Link! Click Here

U.S. Economy Expands 2.8% in Fourth Quarter

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

J. C. Penney ’s Full-Year Profit Forecast

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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