Thursday, April 7, 2011

Lower markets after a second Japanese earthquake

After Japan suffered a major aftershock, which caused injuries & renewed concerns about industrial supply disruptions, stocks fell modestly. Dow lost 17, decliners ahead of advancers 3-2 & NAZ was off 3. Banks also fell, the Financial index has made little progress in the last 2 months.

S&P 500 FINANCIALS INDEX

Value	223.63
Change	-0.99 (-0.4%)

The Alerian MLP Index inched up to a new record close, up 0.91 at 382.91 while the REIT index fell 2¾ to the 234s. Junk bond funds lost a penny or 2 & Treasuries were slightly lower. The yield on the 10 year Treasury rose 1 basis point to 3.55½% Oil rose above $110 a barrel for the first time in 30 months as a fire burned at Libya's Sarir field, bolstering concern that unrest in North Africa & the MidEast will spread, curbing shipments.

Photo: Bloomberg

Gold, little changed near its record, may climb as concerns about European debt &rising inflation spur demand for an alternative investment. The flat line for the last 2 days in the chart below is at the all time record price above $1460.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.04%
U.S. 2-year		0.78%
U.S. 10-year		3.55%

CLK11.NYM

...Crude Oil May 11

...110.33

...

1.50 (1.4%)

With time running out, an ideological battle over abortion & environmental issues threatened to scuttle a congressional deal to avert a looming gov shutdown. The mood shifted from optimism to pessimism as Dem &Rep leaders blamed each other for a failure to agree on $B in spending cuts to keep the gov operating beyond the midnight Fri deadline. Reps in the House approved a stop-gap bill to push the deadline back a week that includes $12B in additional spending cuts & assures Pentagon funding through Sep 30. Senate leader Reid called the extension a "non-starter" because Obama promised to veto it.

House Passes 1-Week Budget Extension; Obama Would Veto

Consumer borrowing rose for a 5th straight month in Feb on an increase in non-revolving credit as education loans expanded according to the Federal Reserve. Credit climbed $7.6B, the most since Jun 2008, to $2.4T after increasing a revised $4.4B in Jan. Revolving debt, which includes credit cards, decreased $2.7B in Feb. Non-revolving debt, including educational loans & borrowing for autos & mobile homes, rose $10.3B. This was the 2nd consecutive drop in revolving credit & indicates Americans remain reluctant to take on more debt even as the economy & job market improve. In addition, rising fuel & food prices are limiting people’s buying power. The total increase reflected an $8.2B rise, to $349B, in the federal gov category of borrowing, which includes school loans.

U.S. Consumer Credit Rises More Than Forecast on Student Loans

The average price for gas at the pump is pushing to set a new record (above $4.11):

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.725	$3.858	$3.987	$4.017	$3.131	$4.120
Yesterday Avg.	$3.707	$3.839	$3.968	$4.003	$3.119	$4.104
Week Ago Avg.	$3.606	$3.740	$3.872	$3.963	$3.049	$4.013
Month Ago Avg.	$3.517	$3.649	$3.779	$3.889	$2.951	$3.884
Year Ago Avg.	$2.844	$3.019	$3.128	$3.006	$2.533	$3.334

Source: AAA

Based on early reports, the Japanese quake looks to have caused only limited damage. Of course they have a lot to rebuild & adding to that work is not a plus. DC is at center stage as the poiticos try to come up with a budget for a fiscal year that is more than half over. Then comes increasing the debt ceiling above the present limit of $14T followed by working on next year's budget which starts in Oct. The mood in DC is becoming ugly, not good for markets. I keep worrying about the rising price of gas which will be a drag on the economy at a time when the economic recovery is vulnerable to shocks.