Monday, March 21, 2011

Easing Japanese worries take markets higher

Stocks didn't give up gains made at the start of trading.  Dow finished up 178 (keeping it above 12K again), advancers ahead of decliners 4-1 & NAZ was rose 48.  Bank stocks (market leaders) had limited gains, not a positive for an advancing market.


Value220.34One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  1.38  (0.6%)

The MLP index shot up almost 7 to 373, very big by its standards, taking it within 10 of its recent record highs.  The REIT index gained 3 to nearly 233 & junk bond funds had good gains.  Treasuries fell on easing concerns that Japan would suffer a nuclear meltdown & after the US said it plans to sell holdings of agency-guaranteed mortgage - backed securities bought during the 2008 financial crisis. Oil climbed on warnings that Libya's oil exports could be off the world market longer than expected, & countries including the US enforced a no-fly zone over Libya.  Increased uncertainties in Asia raised gold prices.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

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

CLJ11.NYM....Crude Oil Apr 11...102.33 .....Up 1.27  (1.3%)

GCH11.CMX...Gold Mar 11.......1,426.20 ...Up 10.30  (0.7%)

Tiffany (TIF) reduced its Q1 earnings forecast as it deals with some store closings & limited hours in Japan in the wake of the earthquake & tsunami.  This guidance came as strong holiday demand domestically & abroad pushed Q4 net income up 29%.  TIF is one of the US retailers most exposed to Japan's economy & appetite for luxury goods. Of its 233 stores, 56 are in Japan.  Q1 EPS is guided at 57¢, down from a previous forecast of 62¢ but ahead of 55¢ forecasts by analysts.  Company stores in the Kanto & Tohoku regions, which make up more than half of Japanese sales, were closed or had reduced hours after the disasters but physical damage was limited to only a few stores.  The retailer expects Japanese sales (18% of its business in 2010), will drop 15% in Q1.  For 2011, TIF anticipates adjusted EPS of $3.35-3.45, below forecasts by analysts of $3.70.  TIF predicts 2011 worldwide sales will climb 12-14%, with Japanese sales facing a mid-single-digit percent decline.  Honesty pays, the stock was up 2.93 to just over 60.

Tiffany & Co. (TIF)

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Warren Buffett said that the Japanese earthquake is creating buying opportunities.  “If I owned Japanese stocks, I would certainly not be selling them because of the events of the past 10 days or so,” said Buffett. “Something out of the blue like this, an extraordinary event, really creates a buying opportunity.”  The chart for Nikkei 225 indicates there is a lot of upside left amid all the uncertainties about how the dsiaster will play out.

Nikkei 225 Index Chart
March 2010 to March 2011

Nikkei 225 Historical Chart March 2010 to March 2011

Dow rebounded 450 off its lows 3 days ago, an impressive gain.  But not sure how much reality is behind that optimism.  Intl companies are adjusting to supply ineruptions from Japan, the Libya situation could drag on for some time & the Mideast is bubbling, demanding change.  But the US economy is reasonably strong as long as housing & the unemployment are forgotten.  Gas at the pumps remains at $3.54 but current crude prices will bring another round of price increases as the summer driving season nears.  Consumers will have to make hard choices about what to spend & where.

Dow Industrials (INDU)

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