Monday, March 28, 2011

Markets rise on higher consumer spending

Dow was up 26, advancers ahead of decliners 3-2 & NAZ gained 5. Bank stocks rose slightly.

S&P 500 FINANCIALS INDEX

Value	220.53
Change	0.47 (0.2%)

The MLP index rose 1+ to the 379s (384 is needed for another record) while the REIT index slipped a fraction to 230. Junk bond funds were pretty much even, near multi year highs. Treasuries fell, pushing 10-year note yields to the highest level in more than 2 weeks, as a gain in personal spending supported speculation the Federal Reserve may end its debt-purchase program early. Oil fell for a 3rd day on concerns that territorial gains by Libyan rebels may quicken a resolution to the country’s civil war. Gold declined for a 3rd day from profit taking & signs the U.S. economy is improving.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.08%
U.S. 2-year		0.76%
U.S. 10-year		3.46%

CLK11.NYM

...Crude Oil May 11

...104.18

.....

1.22

(1.2%)

GCH11.CMX

...Gold Mar 11

........1,415.60

...

10.50 (0.7%)

Consumer Spending in U.S. Rose More Than Forecast February

Photo: Bloomberg

Consumers spending rose in Feb at the fastest pace in 4 months, but a big part of the increase went to cover higher gas prices. The Commerce Dept said that consumer spending jumped 0.7%. Personal incomes rose 0.3% after a 1.2% Jan increase (the biggest in nearly 2 years). Both gains reflected a Social Security tax cut, which boosted take-home pay. Excluding inflation, the 0.7% spending rise was a more moderate 0.3%. Much of spending is being eaten up by higher priced goods (i.e. fuel). Incomes after taking into account required tax payments rose 0.3%, the same as the overall increase in incomes. But after adjusting for inflation, after-tax incomes slipped 0.1%. Because of higher gas prices, it is estimated that consumer spending will grow only 2-2.5% in Q1, down sharply from 4% in Q4 (fastest pace in 4 years). Higher oil prices are threatening to sap that momentum this year. In Feb, spending on durable goods rose 1.7% (largely on new cars) while spending on nondurable goods rose 1.5%, reflecting higher prices for gasoline. Over the past 12 months, core inflation, is up a modest 0.9%. Higher gas prices are pinching & this will get worse.

U.S. Consumer Spending Rose More Than Forecast in February

More Americans signed contracts to buy homes in Feb, but sales were uneven across the country & not enough to signal a rebound in the housing market. The National Association of Realtors said its index of sales agreements for previously occupied homes rose 2.1% last month to a reading of 90.8. Sales rose in every region but the Northeast. Signings were 19.6% above the Jun reading, the low point since the housing bust. Still, the index is below 100, which is considered a healthy level. The last time it reached that point was in Apr, the final month to qualify for a home-buying tax credit. Sales of previously owned homes fell last year to the lowest level in 13 years. Housing plods along in the dumps.

Pending Sales of U.S. Existing Homes Rose 2.1% in February

Wal-Mart to Open Half of Stores Hampered by Earthquake

Wal-Mart (WMT), a Dow stock & Dividend Aristocrat, is resuming normal operations at half the stores hampered by the earthquake in Japan as residents struggle to find water, food and other necessities.A dozen of its Seiyu stores in the quake-hit Sendai area are restarting full operations after being limited mostly to relief efforts for 2 weeks. Of the remaining 12 stores, 10 will be opened as soon as possible & 2 may take a “long time” because they’re covered in mud. Retailers are racing to open stores & replenish shelves after as hundreds of thousands in the Tohoku region are scrambling for shelter, food & water. The earthquake & tsunami knocked out more than 1,000 stores in the Tohoku &Kanto regions.

Wal-Mart to Open Half of Japanese Stores Hampered by Earthquake, Tsunami

Wal-Mart Stores, Inc. (WMT)

Some think of this as Merger Mon, not today. News is uninspiring but stocks are edging higher. MLPs are back in a rally mode & the index may want to take out its previous high made 4 weeks ago. Gold backed off, an indication not a lot is going. All markets are awaiting developments.