S&P 500 FINANCIALS INDEX
The Alerian MLP Index is up pocket change in the 381s & the Dow Jones REIT Index is up 1+ to the 233s. Junk bond funds were down a penny or 2 while Treasuries were soft. The yield on the 10 year Treasury yield rose 2 basis points to 3.59% (a 2 month high). Oil fell from a 30-month high on worries after the IMF cut its growth forecasts for the US & Japan, indicating high oil prices pose a risk to global economic expansion. Gold slipped on profit taking after reaching new record highs late last week.
JPMorgan Chase Capital XVI (AMJ)
|CLK11.NYM||...Crude Oil May 11||...112.06 ||... 0.73||(0.7%)|
|GCJ11.CMX||....||Gold Apr 11||.........1,469.40 ||......4.00||(0.3%)|
PIMCO, the world's largest bond fund, began betting against US gov debt last month on the expectation that shaky finances will jolt interest rates higher. Bill Gross, co-chief investment officer, has been raising alarms about a lack of buyers for Treasuries once the Federal Reserve ends its bond purchase program QE2 in Jun. In Feb Gross revealed his view by dumping all of his fund's US gov-related debt holdings. The portion of PIMCO's $236B Total Return Fund (PTTRX) held in long-term US gov debt, including Treasuries, declined to "minus 3%" in Mar from zero in Feb & 12% in Jan. Cash equivalents rose to 31% of the fund's assets from 24% in Feb. PIMCO also expects the lingering US budget deficit & the FED's easy monetary policy will fuel faster inflation & hurt the dollar. "We are smelling $1 trillion deficits as far as the nose can sniff," if the gov fails to address the biggest entitlement programs: Medicare, Medicaid and Social Security, Gross said in his outlook. PTTRX is up from from 10.74 at mid Feb to 10.91 today. PIMCO's move mirrors a broader dislike of Treasuries. Treasury yields have moved higher since the FED began purchases of the securities in its QE2 program in Nov. Yields on 10-year Treasury notes have risen 80 basis points since then to 3.59%.
PIMCO Goes Short U.S. Government Debt- Reuters
Level 3 Communications (LVLT) will acquire another top long-distance internet carrier, Global Crossing (GLBC), in an all-stock transaction valued at $1.9B. Both companies operate vast networks of optical fiber, combined would reach 70 countries on 3 continents. GCBC shareholders would receive 16 shares of LVLT common stock for each share of Global Crossing common or preferred stock. LVLT will also assume $1.1B of GLBC debt. Last year the companies had combined revenue of over $6B. GLBC is based in Bermuda & its largest shareholder is Singapore Technologies Telemedia which has approved the deal. LVLT was up 17¢ (11%) to 1.61 while while BLBC jumped $8.28 to over $23.
Level 3 Agrees to Purchase Global Crossing in $1.9 Billion All-Stock Deal
Level 3 Communications, Inc. (LVLT)
The IMF lowered its forecast for US growth in 2011, predicting higher oil prices & the pace of job gains will restrain the recovery. Th US is expected to expand 2.8%, down from 3% in Jan. But global GDP will grow 4.4% in 2011, matching the previous estimate. “Recovery in the labor market remains lackluster,” the IMF said. “The drag on 2011 growth from oil price increases largely offsets the boost from the Federal Reserve's unconventional policies & from stronger net exports.” The jobless rate in the US will average 8.5% this year & 7.8% in 2012. Job creation has recently accelerated, but the pace of improvement in the labor market remains disappointing considering the size of the job losses during the decline.” the fund said. It also highlighted several risks to the recovery, including a spike in oil & commodity prices that “could dampen confidence & weaken consumer spending.” The housing market may see home prices decline further, according to the report. There will be more sobering thoughts (i.e. downward revisions) about the recovery in 2011
IMF Cuts 2011 U.S. Growth Forecast on Oil, ‘Lackluster’ Pace of Job Gains
Not much is going on in the markets with very light volume. Earnings season begins tonight when Alcoa (AA), a Dow stock, reports what is is expected to be favorable earnings (off depressed levels last year). The MLP index is off slightly from its record highs last week. The reduction of the US economic growth rate for 2011 is significant. High oil prices will pinch hard & further increases will make matters worse. Lower growth prolongs dreary unemployment data.
Dow Industrials (INDU)
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