Wednesday, March 16, 2011

Markets decline on Japanese nuclear concerns

Stocks sold off on worries about growing nuclear problems in northeastern Japan.  Dow fell 120, decliners over advancers 2-1 & NAZ was down 21.  Uncertainty is on the rise, not good for stocks.  Bank stocks lost ground, taking the Financial Index 15 below its highs last month. 


Value 215.76 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change    -1.92  (-0.9%)

The Alerian MLP Index rebounded 5 to 364, little changed in the last 6 trading days although the ride has been very wild.  One important factor, their business is not affected by the disaster in Japan.  The REIT index fell a fraction into the 228s.  Junk bond funds also recovered lost ground.  Treasury 10-year notes rose for a 3rd day as tremors continued to rattle Japan & the nation’s nuclear crisis deepened, sustaining the refuge appeal of US debts.The yield on the 10 year Treasury dropped 7 basis points to 3.25%.  Oil maintained gains after the Energy Dept said stockpiles increased 1.75M barrels. Gold rose back over $1400 amid speculation that yesterday’s decline to a one-month low was overdone.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month
U.S. 2-year
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CLJ11.NYM...Crude Oil Apr 11...98.97 ...Up 1.82  (1.9%)

Live New York Gold Chart [Kitco Inc.]

U.S. Housing Starts Fell in February

Photo:  Bloomberg

Builders broke ground last month on the fewest homes in nearly 2 years, a reflection of declines in home prices & diminished demand that has made it difficult for them to compete.  Home construction plunged 22.5% in Feb from Jan to an annual rate of 479K homes according to the Commerce Dept, the lowest level in 2 years & the 2nd-lowest on records dating back more than a half-century.  The overall building pace has been far below the 1.2M units a year that is considered healthy.  Millions of foreclosures have forced home prices down & more are expected this year. Tight credit has made mortgage loans tough to come by & some potential buyers who could qualify for loans are hesitant to enter the market, worried that prices will fall further.  Single-family home construction fell 11.8% while apartment & condominium construction dropped 47%, reversing much of the gain in Jan.  Housing remains stuck in the mud.

U.S. Housing Starts Fell in February to Lowest Since April 2009

Higher energy costs & the steepest rise in food prices in nearly 4 decades drove wholesale prices up last month by the most in nearly 2 years, but excluding those categories inflation was tame.  The Producer Price Index rose a seasonally adjusted 1.6% in Feb according to the Labor Dept, double the 0.8% rise from the previous month. Outside of food & energy costs, the core index ticked up 0.2%, less than the 0.5% rise in Jan.  Food prices soared 3.9%, the biggest gain since 1974. Most of that increase was due to a sharp rise in vegetable costs, which increased nearly 50%.  Meat & dairy products also rose.  Energy prices rose 3.3% last month, led by a 3.7% increase in gasoline costs.  Gas prices spiked in Feb. The national average was $3.56 a gallon yesterday, up 43¢, from a month earlier. However, the earthquake in Japan may lower oil prices for the next few weeks, which should temper further increases in wholesale prices

U.S. Producer Prices Rise More than Forecast, Led by Food, Oil

Japanese stocks rose for the first time in 5 days on speculation a selloff that drove valuations to a 28-month low was excessive. Toyota., the world’s largest carmaker, surged 9.1%. Sony, the biggest exporter of consumer electronics, jumped 8.8%. Mizuho Financial, Japan’s #3 bank, surged 5.4%. However Tokyo Electric Power, Asia’s biggest power generator, tumbled by the daily limit for a 3rd day after the company said a new fire broke out at a reactor following the earthquake. The Nikkei 225 Stock Average rose 5.7% to 9,093, the biggest gain in 2½ years.  The broader Topix index climbed 6.6% to 817, with all of its 33 industry groups advancing.

Japanese Stocks Climb for First Time in Five Days After Post-Quake Selloff

^N225...Nikkei 225...9,093.72 ...Up 488.57  (5.7%)

Markets fell on weak economic reports & the Japanese crisis.  Economic reports could be soft going forward & the Japanese nuclear problem looks to be going from bad to worse.  Tokyo is seeing activity cut back as people are being ordered to leave the city.  American companies are affected.  Texas Instruments (TXN), down 3 to the 33s in Mar, has closed an important plant in Japan.  Apple (AAPL) is down 28 from its recent highs, Japan is an important market for their products.  The Mideast is a mess. Libyan forces advance on rebel strongholds & troops battle protests in Bahrain. Congress is working on another budget extension, this time for 3 weeks, which needs to be enacted by Fri.  Dow is 650 below its high last month & up only 180 YTD.  These are not conditions for a rising stock market.  

Dow Industrials (INDU)

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