Friday, March 11, 2011

The president spoke and the markets listened

Pres Obama said Congress is running out of time to find a compromise on budget cuts & may have to pass another short-term extension to keep the gov operating beyond next week. He talked about a wide array of topics at a press conference & markets liked what they heard. Dow was about even at the beginning of he talk & ended up 59 (with a little selling at the close), advancers 2-1 over decliners & NAZ rose 14 (helped by Apple). The Financial Index had a similar reaction, going from even to up 2.

S&P 500 FINANCIALS INDEX

Value	222.56
Change	1.81 (0.8%)

The MLP index gained a fraction in the 366s while the REIT index shot up 2½ to 233. Junk bond funds were mostly higher with plenty of demand for junk bond offerings. Treasuries were little changed following the earthquake. Over the weekend, a better assessment will be made of the damage & how that will be reflected in financial markets. Japan is the largest holder of Treasuries & may find that it has to sell some Treasuries to pay for reconstruction.

Treasury yields

U.S. 3-month		0.07%
U.S. 2-year		0.62%
U.S. 10-year		3.39%

JPMorgan Chase Capital XVI (AMJ)

Oil had a off day, but remains over $100 which will be troubling for the global economic recovery. Gold found buyers today with uncertainties in Asia & has a chart for 2011 which look good. A button below is provided to learn more about the gold market.

CLJ11.NYM

....Crude Oil Apr 11

...100.96

...

1.74 (1.7%)

GCH11.CMX...

Gold Mar 11

.......1,421.50

...

9.30

(0.7%)

*** Gold Super Cycle ***

Click Here

Photo: Bloomberg

Apple (AAPL) said it may sell 600K of the iPad2 in its debut weekend (starting today). By way of comparison, the first iPad sold 300K in 24 hours. AAPL rose 5 to the 351s, but is still 13 below the high reached last week. I also pulled a chart for Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, which has a far different story. It has been stumbling along in the last year, hit with 16 product recalls by my account. These cost the company a good $1B in lost sales not to mention damage done to its reputation. JNJ faces more unsettled seas but has strong finances & will weather this tsunami. Unlike AAPL, it pays growing dividends & offers a 3.6% yield. Patient investors should keep JNJ in mind for buying opportunities when the yield becomes too attractive to pass up. Today it was flattish in the 59s..

Apple Poised to Sell 600,000 IPad 2s in Its Debut, Outpacing First Model

Johnson & Johnson (JNJ)

Apple Inc. (AAPL)

The price at the pumps keeps marching higher. Yesterday it was $3.54.

Source: AAA

Markets continue to absorb shocks with a sense of equanimity. But Dow has given up all the gains since early Feb (although it's above 12K). The chart for AMJ above (which mirrors the Alerian MLP index) has a similar pattern. Bulls point to this pause as strength, which it may be. But I think the markets need a better test. It's unclear what effect picking up the broken pieces in Japan will have on economic activity there & in the region. European debt problems are not going away & Congress still has to adopt a budget for this year so it can start on next year's (which begins in 6 months). The Reps want a lot of budget cuts. That means less spending, not good for stock markets. Then there's high gas prices. Ugh!!