Wednesday, April 27, 2011

Markets zoom after FOMC meeting

Dow almost had another triple digit gain (up 95), advancers ahead of decliners 2-1 & NAZ jumped 22. Stock markets liked what they heard from the Federal Reserve although Treasuries sold off. Bank stocks were in the black, but continue to have problems moving ahead (as they've had all year).

S&P 500 FINANCIALS INDEX

Value	219.18
Change	1.39 (0.6%)

MLPs found buying after AM losses. The index finished with a small loss, 2½ above session lows. The REIT index rose 1½ to 247, yet another post Sep 2008 high. Junk bond funds were flattish, they're somewhat different than Treasuries which sold off in the PM. The yield on the 10 year Treasury bond rose 5 basis points on selling following the FOMC meeting. Oil rose to a 2-week high after a report showed that gasoline stockpiles tumbled to the lowest level since Aug 2009. Gold climbed to a record $1524 on speculation that the Federal Reserve will be slow to raise borrowing costs, weakening the dollar & boosting the appeal of the precious metal as an alternative asset. The green line in the chart below shows the spike up after the meeting (following quiet trading in prior days).

ALERIAN MLP INDEX

Value	388.90
Change	-0.30 (-0.1%)

Treasury yields:

U.S. 3-month		0.05%
U.S. 2-year		0.66%
U.S. 10-year		3.37%

CLM11.NYM

...Crude Oil Jun 11

...112.81

...

0.60 (0.5%)

Photo: Yahoo

The Federal Reserve (FED) signaled that there is in no rush to scale back its support for the US recovery as it cut its forecast for 2011 economic growth. The FOMC said it intends to complete the $600B bond buying program in Jun as scheduled & suggested it would not let its balance sheet run down immediately. In the face of headwinds from high oil prices, the FED said the economic recovery was proceeding at a "moderate pace," a change from a statement in Mar when it said the economy was on "firmer footing." At a news conference, the first after a monetary policy meeting, Ben Bernanke said there was "a bit less momentum in the economy" & he foresaw "a relatively weak number, maybe under 2 percent" for growth in output in Q1. But he added: "I would say that roughly that most of the slowdown in the first quarter is viewed by the committee as being transitory." The FED cut its growth estimate for 2011 to 3.1-3.3% from a Jan forecast of 3.4 -3.9%. It lowered its forecast for unemployment & said it would stay elevated over its 3-year forecast period. The FED said it would continue to reinvest proceeds from maturing securities it holds to keep its economic support in place, ensuring it would remain a big buyer in debt markets. Treasuries sold off (raising yields) after the FOMC meeting, not a vote of confidence.

Fed Signals No Rush to Tighten After Bond Buying- Reuters

Exxon Mobil, a Dow stock, raised its quarterly dividend 7% to 47¢ ($1.88 annualized). XOM is the world's largest publicly traded oil company & became a Dividend Aristocrat in recent years with a streak of 25 consecutive years of div increases. Q1 earnings will be released in a day or 2 & they will be great with oil trading substantially above where it was last year. The stock rose 36¢ & has had a nice run paralleling oil's rise in recent months.

Exxon Mobil raising quarterly dividend by 7 pct. AP

Exxon Mobil Corporation (XOM)

Photo: Bloomberg

ConocoPhillips, the 3rd-largest US oil company & the first to report earnings, had a rise of 43% in Q1 profits because of a jump in oil prices, but the results were short of expectations. Its production & refining businesses suffered from a variety of disruptions in Q1, including the uprising in Libya. EPS was $2.09, up from $1.40 last year & revenue increased 27% to $58.2B. Excluding gains from the sale of shares in Russian oil company Lukoil & other assets, EPS was $1.82, short of $1.93 expectated. Profit increased as prices for oil & natural gas liquids increased 27% in Q1 to $91.55 per barrel. Natural gas prices fell, however, 6% to $5.22 per 1,000 cubic feet. Oil production dropped in Q1 by 8% to 1.7M barrels per day as it dealt with a series of unexpected shutdowns. Altogether, the unplanned shutdowns cut profits by about $100M. The stock fell 1.38 after an excellent run in recent months.

ConocoPhillips Profit Misses on Libya, Refinery Maintenance

ConocoPhillips (COP)

The price at the pump averaged $3.88 yesterday, up over $1 YTD!!.

Markets responded well to what the FED had to say. In addition, earnings have been good on balance. The winds are all following, higher prices can be expected especially when troubles at home & around the world are being ignored. Meanwhile gold rises to new records indicating everything is not all that well.