Thursday, March 24, 2011

Markets higher on improved jobless data

Stocks are strong. Dow rose 72, advancers ahead of decliners 2-1 & NAZ added 28. Bank stocks were lower, but the Financial Index crawled back into the black. The index has been weak for 2 weeks & is 12 below where it started Mar.

S&P 500 FINANCIALS INDEX

Value	218.88
Change	0.36 (0.2%)

The Alerian MLP Index rose 2 to 375, 8 short of its record highs reached early this month. But the REIT index was flat in the 228s. Junk bond funds were creeping higher while Treasuries were lower. The yield on the 10 year Treasury bond rose 3 basis points to 3.38%. The yield has been near 3.4% for months. Oil fluctuated near a 30-month high as unrest in the Mideast threatened crude exports & on concern that the US & European economies are struggling to recover. The chart below shows gold has been hovering around 1440, just below its record highs reached early in Mar.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.07%
U.S. 2-year		0.66%
U.S. 10-year		3.38%

CLK11.NYM

...Crude Oil May 11

...105.90

...

0.15 (0.1%)

Jobless Claims in U.S. Decreased by 5,000

Photo: Bloomberg

Fewer people applied for unemployment benefits last week, adding to evidence that layoffs are slowing & employers may be stepping up hiring. The number seeking benefits dropped 5K to 382K according to the Labor Dept. This was the 4th decline in 5 weeks & lowered the 4-week average to 385K (the fewest since Jul 2008). The 4-week average has fallen almost 11% in the past 7 weeks. The number receiving unemployment benefits fell for the 5th straight week to 3.7M, but that doesn't include 4.3M receiving extended benefits under emergency federal programs enacted during the recession. Still, more hiring is needed to rapidly reduce the unemployment rate. More than 18 months after the recession ended, the economy has 7.4M fewer jobs than it did before the recession began in Dec 2007. Mildly good news but dreary housing numbers are a reminder that there remains a lot of room for improvement.

Jobless Claims in U.S. Fell by 5,000 Last Week to 382,000

Orders for U.S. Durable Goods Unexpectedly Declined

Photo: Bloomberg

Companies trimmed orders for long-lasting manufactured goods in Feb, a key category that signals business investment fell for a 2nd month. The Commerce Dept reported that businesses reduced orders for durable goods 0.9% last month, the 4th decline in the past 5 months. Weakness was seen in a number of categories from heavy machinery & computers to primary metals such as steel. However, durable goods orders were still 24.6% above the recession low hit 2 years ago. There are concerns about what the disruptions in Japan might do to factory output in the US, auto & electronics companies are seen as the most vulnerable to potential shortages of critical component parts. One of the few sources of strength was a 26.7& rise in demand for commercial aircraft, a very volatile category that has soared in the past 2 months. Orders for autos rose 1.9% in Feb but demand for defense aircraft fell 18.4%. Excluding transportation, orders dropped 0.6% following a 3% decline outside of transportation in January. Weakness here should be watched as this is a leading indicator.

Orders for U.S. Durable Goods Unexpectedly Declined in February

Best Buy’s Profit Beats Analysts’ Estimates

Photo: Bloomberg

Best Buy (BBY) Q4 net income fell 16% as the company restructured & faced weaker sales of TVs & other electronics. EPS was $1.62 per share, below $1.82 in the prior year. BBY has been restructuring its intl operations, particularly in China, & cutting costs in its US supply chain. Excluding costs for those moves, EPS was $1.98, beating estimates of $1.84. Revenue edged down 2% to $16.26B. US revenue fell 4% to $12.1B, while intl revenue rose 4% to $4.1B. New TV technologies, such as 3-D & Internet-enabled TVs, have failed to lure shoppers to shell out for an upgrade in the US. "Overall demand for key consumer electronics products was a challenge for the industry last year," said CEO Brian Dunn. Revenue in stores open at least 14 months fell 4.6% during the qtr ending Feb 26, including a 5.5% decline in the US. For the year, EPS fell to $3.08 from $1.32 billion $3.10 in the prior year while revenue inched up 1% to $50.27B. In FY2012, the company expects EPS of $3.30-3.55, excluding costs related to restructuring its intl operations & cutting costs in its US supply chain. The stock fell 67¢.

Best Buy’s Profit Beats Analysts’ Estimates on Smartphone Sales

Best Buy Co., Inc. (BBY)

Markets continue to adjust very well to mushy news form overseas. Portugal may need a $99B bailout, more attacks on Libya with an unclear objective & the Japanese nuclear crisis lumbers on (among other problems) are not getting a lot of attention in the markets. The US economy is getting by or at least is giving "good enough" results. If the gains for today hold, Dow will have 5 up days & a tiny setback yesterday in last 6 days. MLPs have been tagging along with a similar rebound off their lows last week. Gold is back at record levels, very disturbing when stock markets advance.

Dow Industrials (INDU)