Tuesday, March 29, 2011

Strong markets on high earnings expectations

Stocks advanced, boosted by strength in retail & tech stocks, but volume remained light as investors awaited a clearer picture of corp earnings & the labor market. Dow rose 81, advancers ahead of decliners 2-1 & NAZ went up 26. Bank stocks barely particiated & they're supposed to be the market leaders. All month, bank stocks have been hit with a lot of selling.

S&P 500 FINANCIALS INDEX

Value	220.07
Change	0.68 (0.3%)

The MLP index fell 1+ to 375 while the REIT index rose 1 to 232. Junk bond funds slipped pocket change & the yield on the 10 year Treasury bond rose to almost 3.5%. This is a significant rise yield after dipping below 3.2% at mid month. Oil rose as concerns about political upheaval in North Africa & the Mideast trumped economic data suggesting that consumers are worried about the cost of fuel & food. Gold futures fell (sloshing around 1420), capping the longest slump in 11 weeks, on bets that US interest rates will increase as the economy recovers, eroding demand for the metal as an alternative investment.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.10%
U.S. 2-year		0.82%
U.S. 10-year		3.48%

CLK11.NYM

...Crude Oil May 11

...104.75

...

0.77 (0.7%)

2 regional bank presidents from the Federal Reserve (FED) voiced support for the completion of the $600B Treasury securities-purchase program through Jun, saying it’s too soon to remove stimulus from the economy. Eric Rosengren, Boston FED President, said yesterday that high unemployment & low core inflation mean record monetary support is still necessary. Charles Evans, Chicago FED President, said he believes data suggesting a more sustainable recovery won’t prompt an alteration in the bond-purchase program. “It could be that $600 billion is just about the right number,” Evans said in a speech in South Carolina. “I won’t be surprised if that in fact is the decision. I still think it is a high hurdle to stop short of $600 billion. So far I haven’t seen it.” Their remarks highlight the difference of views that has emerged since the Mar 15 meeting, when policy makers kept in place the plan to buy bonds while concluding the recovery is on “a firmer footing” & the labor market is “improving gradually.” James Bullard, St. Louis FED President, said today that a decision on when to tighten monetary policy may need to be made before the outlook for the global economy clears up later this year. FED officials purchased $1.7T of mortgage debt & Treasuries through Mar 2010 to pull the US out of the recession. I used to think these speeches were coordinated ahead of time. So much for that thought!

Fed Presidents Say Economy Still Needs Support From Bond Purchase Program

The average price at the pump yesterday was $3.56 & current oil prices suggest it will keep going up.
State's Graph

Source: AAA

Apple (AAPL), darling of the street with the 2nd largest market cap in the world, has had a tougher time in the last 2 months. The stock began the year at 322 but has been range-bound between 330-360 for most of Q1. It's still well above the 200 moving average, but one quick sell-off could take it below.

Apple Inc. (AAPL)

Q1 is closing out with a whisper. Trading is light with not a lot being decided. Even gold & Treasuries, traditional safe havens, are not getting buying support. Dow is 750 above its recent lows (shown below), up 700 YTD & 100 shy of setting a new multi year high. Not sure it deserves all that attention. Earnings season starts in a couple of weeks which will show if the bulls were justified in this rally.