Thursday, April 28, 2011

Markets continue rising despite weaker economic data

Dow rose 40 (after stumbling at the start of trading) to a new multi year high, advancers ahead of decliner 3-2 & NAZ was flat at its highest level since Dec 2000.  Bank stocks edged higher.


Value 220.01 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change    0.83   (0.4%)

The MLP index slipped a fraction in the 388s while the REIT index shot up 2+ to 250, a new high since the collapse in mid 2008.  Junk bond funds were flattish while Treasuries rose on weak jobless claims data.  But the yield on the 10 year Treasury bond remains close to the 3.4% rut it's been in for months.  Oil fluctuated after the US said the economy grew at a slower pace than forecast in Q1 & gas prices surged after a report that US supplies fell to the lowest level since 2009.  Gloomier economic news sent gold to a fresh record high. Just 2 months ago, it was at 1410!

JPMorgan Chase Capital XVI (AMJ)

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Tredasury yields:

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CLM11.NYM...Crude Oil Jun 11...113.06 ....Up 0.30  (0.3%)

GCK11.CMX....Gold May 11......1,533.70 ...Up 17.10  (1.1%)

Jobless Claims in U.S. Unexpectedly Rise

Photo:   Bloomberg

More people sought unemployment benefits last week, the 2nd rise in 3 weeks.  Applications for unemployment benefits jumped 25K to 429K according to the Labor Dept, the highest in 3 months.  The 4-week average rose to 408K, its 3rd straight rise & the first time it has topped 400K in 2 months.  Auto factory shutdowns, stemming from supply disruptions in Japan, could have caused applications to rise, but only one state reported auto-related layoffs & the increase was modest. Unemployment benefit applications trended down for about 6 months, but have leveled off in recent weeks suggesting companies could be cutting more workers.  More than 3.6M are receiving unemployment benefits from state unemployment programs. Millions more are receiving aid under emergency programs put in place by Congress during the recession. All told, 8.2M are receiving unemployment benefits.  The recovery is slow & uneven.

Jobless Claims in U.S. Unexpectedly Rise to Three-Month High

Economy in U.S. Grew 1.8% in First Quarter

Photo:   Bloomberg

The economy slowed sharply in Q1 as high gas prices cut into consumer spending, bad weather delayed construction projects & the federal gov slashed defense spending by the most in 6 years.  The Commerce Dept said the economy grew at a 1.8% annual rate in Q1, weaker than the 3.1% growth rate for Q4 2010 & the worst showing since last spring when the European debt crisis slowed growth to a 1.7% pace.  An inflation gauge in the report showed consumer prices rose at the fastest pace in nearly 3 years, with most of the increase coming from higher fuel costs.  Consumers boosted spending at a 2.7% pace, down from a 4% pace in the prior qtr, the weakest pace since last summer.  All is not well in this recovery.

Economy in U.S. Grew 1.8% in First Quarter, Less Than Forecast

Exxon Mobil, a Dow stock & Dividend Aristocrat which raised the div yesterday, reported big jumps in Q1 results (the best since 2008), beating forecasts thanks to high oil prices & healthy refining margins.  Q1 net income rose 69% to $10.65, ahead of an average forecast of $9.99B (helped by its takeover of XTO Energy last year).  Brent crude was 38% higher in Q1 compared with the 2010 period  Oil & gas production rose 10% to 4.82M barrels of oil equivalent per day (boepd), thanks to the XTO takeover.  EPS was $2.14 but the stock fell $1.10 after a great run in recent months.

Exxon Mobil First-Quarter Profit Rises as Oil Demand Fuels Price Increases

Exxon Mobil Corporation (XOM)

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Procter & Gamble’s Profit Rises 11%, Trailing Some Estimat

Photo:   Bloomberg

Procter & Gamble, a Dow stock & Dividend Aristocrat, tempered earnings outlook for 2011 because of fast-rising costs for raw materials & fuel along with sluggish economies in the US & other developed countries.  Profits & sales rose in its Q3, led by sales in emerging markets. Plans for more price increases were announced.  EPS was 96¢ on revenue of $20.2B. Analysts were expecting 97¢ on sales of $20.24B.  PG reported double-digit sales increases in Asia, Brazil, & India, areas the company is increasingly relying on for sales growth. Developed market sales, accounting for 2/3 of business, continued to be nearly flat.  "The results show that consumers in developed markets are struggling," CEO Bob McDonald said. "They're struggling with higher gasoline prices ... which is causing them to make choices."  Prices were increased on Gillette blades & razors, Duracell batteries, Pampers diapers & wipes, Charmin toilet paper & Bounty paper towels because pulp costs are up 10% for the paper-related products. Diesel oil is up 25%, adding to transportation costs, while resin used in packaging rose 15%.  PG dropped the high end of its earnings outlook for 2011, to $3.91-3.96 per share from $4.01. Analysts are expecting $3.96 on $82B in revenue. It also narrowed its outlook for organic sales, excluding impacts of currency fluctuations & acquisitions or divestitures, to 4-5% from 4-6%.  For overall sales, PG expects overall sales growth of 4-5%, analysts are projecting 3% to $82B.  The stock was up 23¢.

Procter & Gamble’s Profit Rises 11%, Trailing Some Estimates

Procter & Gamble Company (The) (PG)

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A disappointing report on jobless claims & dreary numbers about the economic recovery in Q1 are being ignored.  Buyers are eager to pay higher prices even as earnings guidance is subdued.  Most disturbing for me is the continued rise in gold prices, bets on higher inflation & weaker economic data.  As has been the case for months, 2 opposites, stock averages & gold, are rising simultaneously.

Dow Industrials (INDU)

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