Tuesday, March 29, 2011

Markets advance despite lower consumer confidence readings

Dow rose 42, advancers ahead of decliners 3-2 & NAZ gained 15. Bank stocks were weak.

S&P 500 FINANCIALS INDEX

Value	218.84
Change	-0.55 (-0.2%)

The Alerian MLP Index fell 1 to the 375s & the REIT index was little changed at 331 as were junk bond funds & Treasuries. Oil fell to the lowest level in a week as Libyan rebels advanced against gov troops near the hometown of Qaddafi. Gold continues in its 1415-1425 range.

JPMorgan Chase Capital XVI (AMJ)

Treasury yield:

U.S. 3-month		0.09%
U.S. 2-year		0.79%
U.S. 10-year		3.44%

CLK11.NYM

...Crude Oil May 11

...103.87

...

0.11

(0.1%)

Consumer Confidence in U.S. Fell to a Three-Month Low

Photo: Bloomberg

A monthly survey said soaring prices in gas & other household costs pulled down consumer confidence in Mar. The Conference Board's Consumer Confidence Index fell more than expected to 63.4 from a revised 72.0 in Feb & below expectations of 65.4. The decline reverses 5 straight months of improvement & raises concern about shoppers' ability & willingness to spend in coming months. Consumers’ assessment of current conditions improved in Mar. Those claiming business conditions are “good” increased to 15.1% from 12.4%, while those claiming business conditions are “bad” decreased to 37.0% from 39.3%. But those saying jobs are “hard to get” edged up to 44.6% from 44.4%, while those stating jobs are “plentiful” dipped to 4.4% from 4.9%. The proportion of consumers expecting business conditions to improve over the next 6 months declined to 20.6% from 25.2%, while those anticipating business conditions will worsen increased to 16.2% from 10.3%. The proportion of consumers expecting an increase in their incomes declined to 15.3% from 17.4%. The effects of higher priced gas is being felt by consumers.

U.S. Consumer Confidence Fell to a Three-Month Low in March

The Federal Reserve may be able to cut about $100B from its plan to buy Treasuries as the economy rebounds, said James Bullard, St. Louis Fed President. “We are still feeding the fire at this moment, so I think we have to start thinking about turning this around in the near future,” Bullard said while attending a financial conference Europe. “If the economy is as strong as I think and hope it will be in 2011, I think it will be time for us to start to reverse our ultra-aggressive and ultra-easy monetary policy.” This brings selling to Treasuries, raising their yields.

Fed’s Bullard Says QE Cuts Could Be About $100 Billion

Photo: Bloomberg

The credit rating for Greece was cut 2 steps by Standard & Poor’s on concern the country may be required to restructure its debt & bondholders may lose out. The rating was lowered to BB- from BB+ by S&P & the outlook remains negative. In addition, S&P lowered sovereign credit ratings for Portugal to BBB-/A-3 (BBB- is the lowest investment grade). A meeting of EU leaders on Fri affirmed a decision earlier this month to ease the terms of 110B € ($155B) in emergency loans granted to Greece last year in return for a program of budget cuts. They also agreed that repayment of loans granted through the European Stability Mechanism, the region’s permanent debt crisis mechanism from 2013, would take a priority in the event of a debt restructuring. S&P said earlier in Mar that the agreement would be “detrimental” to existing bondholders. There is good reason for more European sovereign debt worries.

Greece's Rating Cut Two Levels to BB- by S&P on Debt-Restructuring Concern

Portugal Credit Rating Is Lowered by S&P to BBB-, Lowest Investment Grade

Markets are quiet again going into the end of Q1 on Thurs. But the health of European debts is being questioned which has the potential to drag down all stock markets if conditions get ugly (like they did last May). The lower readings for consumer confidence is troubling for the US economy & they is likely to get worse with further increases in gas prices. MLPs are doing well, the index is within striking distance of setting new record highs. Enterprise Products (EPD), the largest MLP, just announced increases in its capital projects (an indication of why the index is doing so well).