Thursday, March 17, 2011

HIgher markets on lower jobless claims

Stocks started with good gains which have held. Dow rose 145, advancers over decliners 4-1 & NAZ added 30. Bank stocks are also having a good day.

S&P 500 FINANCIALS INDEX

Value	215.88
Change	2.32 (1.1%)

The MLP index shot up 3+ to the 366s & the REIT index gained 1 to 227. Junk bond funds were up 1% but Treasuries lost ground. The yield on the 10 year Treasury bond fell 7 basis points to 3.28%. Oil went back over $100 & Gold rose above $1400.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.08%
U.S. 2-year		0.60%
U.S. 10-year		3.28%

CLJ11.NYM

Crude Oil Apr 11

100.31

2.33 (2.4%)

Manufacturing Probably Bolstered U.S. Expansion February

Photo: Bloomberg

Factories produced more cars, appliances, computers & furniture in Feb, lifting manufacturing output for the 6th straight month & helping the jobs market heal. Overall output at factories, mines & utilities dipped 0.1% last month according to the Federal Reserve. But the first decline in industrial production since Oct was caused by unseasonably warmer weather that cut demand for gas & electric utilities. Industrial production has risen 12% since hitting its recession low in Jun 2009 & remains about 6% below its pre-recession peak in Sep 2007. Factory production rose 0.4% last month as manufacturers have increased production in 17 of the 21 months since the recession ended. They are expected to keep boosting economic growth, despite the nuclear crisis in Japan. Manufacturing activity has been supported by stronger demand at home & abroad. Sales of exports to foreign buyers have been rising. Until Japan's rebuilding phase kicks it, the country is likely to buy fewer goods & services from the US which may be offset by increasing demand from other nations. U.S. exporters are expected to fill orders typically placed with Japanese companies, until those companies are able to resume more normal operations. Another piece of good news for the recovery in the US.

Industrial Production in U.S. Falls 0.1%; Manufacturing Gains

Fewer people applied for unemployment benefits last week as applications fell to 385K, marking the 3rd decline in the past 4 weeks according to the Labor Department. The 4-week average dropped to 386K, the lowest level since Jul 2008. Companies are finally hiring more after months of sluggish job creation as employers added 192K jobs in Feb, the biggest gain in nearly a year. However there are a number of worries ranging from a surge in oil prices to a devastating earthquake & ongoing nuclear crisis in Japan. The report showed that the number receiving regular unemployment benefits fell 80K to 3.7M, the lowest level since Sep 2008. An additional 4.36M unemployed received benefits under the extended programs, an increase of 53K from the prior week. In total, 8.95M were on the benefit rolls. More encouraging news on the jobs front.

Initial Jobless Claims in U.S. Fell 16,000 Last Week to 385,000

Consumer confidence plunged last week to the lowest level since Aug. Rising gas prices made Americans more pessimistic about the economic outlook & their finances. The Bloomberg Consumer Comfort Index dropped to minus 48.5 ending Mar 13 from a minus 44.5 the prior week. Sentiment fell across most income, age groups & worsened for all education levels. Confidence among households with annual incomes exceeding $100K fell to the lowest level in Nov. The Bloomberg comfort index, which began in 1985, fell to a record low of minus 54 in Nov 2008, while the peak of 38 was reached in Jan 2000. Readings averaged minus 45.7 last year. The latest results for the comfort index reflected worsening results for all 3 subcomponents. Not all news was good today, but other consumer confidence readings are giving more favorable results.

Consumer Comfort in U.S. Drops to Lowest Level Since August

Bloomberg Consumer Comfort Index

Current value	( 17 March 2011 )	-48.5 -4.0
Last week	-44.5
4 Weeks Ago	-43.4

Markets are having a relief rally. But problems in the MidEast drone on while the nuclear disaster in Japan is getting worse with no end in sight. MLPs are having a rally but the index remains 15 below its recent record highs & has been underperforming the markets all year. Dow is up a meager 160 YTD in a year when the analysts were forecasting a 3rd consecutive yearly gain. Major questions remain open about what's going on in Japan & North Africa. Until they are resolved, markets will have a tough time advancing.