Friday, April 8, 2011

Oil and gold rise while stocks sink

Dow was under water in the PM (down 90 at the low), but late day buying limited the damage. Dow ended off 29, decliners over advancers almost 3-2 & NAZ fell 15. Bank stocks led the decline.

S&P 500 FINANCIALS INDEX

Value	221.70
Change	-1.93 (-0.9%)

The Alerian MLP backed off from its record reached yesterday. My article at SeekingAlpha published today discusses its stellar rise in the last 2½ years:

http://seekingalpha.com/article/262625-mlps-extend-gains-to-new-record-highs

The REIT index dropped 2 to the 232s & is down 5 in the last week. Junk bond funds were flattish & Treasuries were a little lower. The yield on the 10 year Treasury bond rose 1½ basis point to 3.57%. Oil topped 112, for a new 2½ year high. Gold is flying on fears, starting with risks of higher inflation for the US. Last year 1200 & 1300 were considered formidable ceilings. Now 1500 is just around the corner.

ALERIAN MLP INDEX

Value	381.49
Change	-1.42 (-0.4%)

Treasury yields:

U.S. 3-month		0.04%
U.S. 2-year		0.81%
U.S. 10-year		3.57%

CLK11.NYM

...Crude Oil May 11

...112.66

...

2.36

(2.1%)

Federal Reserve Bank of Dallas President Richard Fisher

Richard Fisher
Photo: Bloomberg

Richar Fisher, President of the Federal Reserve Bank (FED) of Dallas, said the central bank faces a “significant” risk of providing record stimulus for too long and should weigh curtailing its $600 billion bond-purchase plan. “We at the Fed are near a tipping point,” the said in a speech today. “Just as we pressed on in doing our duty through extraordinary, exigent measures, we must now discipline ourselves to just as persistently normalize our operations in a timely way.” Policy makers have disagreed over whether to begin removing record stimulus this year. Fisher is among the FED officials who have criticized the central bank’s current program of Treasury-securities purchases, scheduled to end in Jun. “Having done our job, I see many risks to the Fed overstaying its welcome,” Fisher continued. However, Dennis Lockhart, President of Federal Reserve Bank of Atlanta, said today the central bank should take its time in withdrawing stimulus. It looks like they want to give conflicting messages which will make it easier to take any course of action in the future.

Fisher Says Fed at ‘Tipping Point’ of Overstimulating U.S. Economic Growth

Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, agreed to pay $70M to settle charges that it paid bribes & kickbacks to win business overseas, the first big drug company to settle since the new administration began its scrutiny of the industry more than a year ago. JNJ is also expected to resolve a related investigation by the United Kingdom Serious Fraud Office. This is the same company which has lost maybe $1B in sales from numerous product recalls in recent months. The stock slipped 2¢.

J&J settles bribery and kickback charges- Reuters

Johnson & Johnson (JNJ)

Gas at the pump was up to $3.74 yesterday, the chart below is sobering. Rising gas prices spell trouble for the economic recovery.

After trading near break-even all week, Dow finished with a net gain of 4. The shutdown of the federal gov is getting a lot of attention. Politicos in DC will get paid unless they opt out. It should be interesting to see who wants to share payless days with the staff. Estimates are being thrown around about how much this could cost the economic. One thing.for sure, less spending means a smaller deficit. Next week earnings season begins & some of the biggest banks will report by week's end. This week the Financial Index was down fractionally.