Thursday, February 24, 2011

Markets struggle while adjusting to higher oil prices

Dow dropped another 40 (over 400 in just 3 days), but advancers ahead of decliners 4-3 & NAZ added 4.  Bank stocks were weak.  The Financial Index is down 10 from an interim high set this week.


Value 221.81 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -1.28  (-0.6%)

The MLP index was up 1 to the 375s whle the REIT index fell 1 to the 231s.  Junk bond funds were a little higher & demand for Treasuries was strong, taking the yield on the 10 year Treasury bonds down 5 basis points to 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

Crude oil surged to the highest level in 29 months as the uprising in Libya reduced supplies from Africa’s 3rd-biggest oil-producing country.Gold is at a 7 week high on the unrest in the Mideast.

CLJ11.NYM...Crude Oil Apr 11...99.15....Up 1.05  (1.1%)

GCG11.CMX...Gold Feb 11.....1,415.30 ...Up 4.60  (0.3%)

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U.S. Initial Jobless Claims Fell 22,000 to 391,000

Photo:  Bloomberg

Jobless claims fell more than expected last week to a 2-1/2-year low.  Applications for jobless aid dropped to 391K, down from 413K a week earlier according to, the Labor Dept.  The 4-week moving average dropped to 402K, the lowest since mid-2008 before the financial crisis took a turn for the worse.  Claims have been bouncing around 400K for several weeks & the break below 400K is encouraging.  The report showed the number remaining on the jobless rolls after an initial week of benefits declined by 145K to 3.79M.  The total number of recipients, including those receiving assistance under an emergency federal program, edged down but remained around 9.2M.  More encouraging news, but the figures are not low enough to have a meaningful impact on reducing the unemployment rate.

Initial Unemployment Claims in U.S. Decline More Than Estimated to 391,000

Sales of New U.S. Homes Dropped More Than Forecast

Photo:  Bloomberg

Sales of new homes fell significantly to an annual rate of 284K homes in Jan, a dismal sign after the worst year for that sector in nearly a half-century.  That's down from 325K in Dec & less than half the 600K yearly pace that is viewed as healthy. Bad winter weather likely hampered some sales.  Last year was the 5th consecutive year that new-home sales have declined after hitting record highs during the housing boom. Buyers purchased 322K new homes last year, the fewest on records going back 47 years.  Poor sales of new homes mean fewer jobs in the construction industry, which normally powers economic recoveries. About 188K new homes were for sale at the end of Jan, the lowest level since 1967. The number of homes that have received permits to begin construction has held steady over the past year while the number of those under construction & finished has plummeted.  The median sales price of a new home in January was $230K, down 1.9% from the month before.  Housing clearly remains in the dumps..

Sales of New U.S. Homes Fell More Than Forecast in January

Target Fourth-Quarter Profit Rises 11%

Photo:  Bloomberg

Target (TGT), a Dividend Aristocrat, reported an 11% gain in Q4 profit, boosted by an improving credit card business & solid holiday sales.  But there are concerns that its expansion into food & its generous 5% discount offer for those paying with its store-brand credit & debit cards are eating away at profit margins.  EPS for the qtr ended Jan 29 was $1.45, above $1.24 in the prior year.  Revenue rose 2.4% to $20.66B & revenue at stores opened at least a year also rose 2.4%. During the qtr, gross margin rate slipped to 28.7% from 29.1% (considered a big problem).  The stock has been struggling for some time, but today it rose $1.

Target Fourth-Quarter Profit Rises 11%; Sales Miss Estimates

Target   ---   1 year

Jobless data is looking good, but oil is center stage.  There is an odd occurrence from the glut of oil in OK.  This is the center for oil going to the Midwest, with much shipped on Enbridge Energy (EEP) pipelines from Canada.  But this glut is not helping the rest of the country, accounting for oil bumping against $100, its highest price since the heady days of 2008.  Higher priced oil is important for the stock market, because this can crimp GDP growth rates.  Stock markets are nervous, for the time being, all news is not considered good.

Dow Jones Industrials   ---   2 weeks

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