Tuesday, April 5, 2011

Stocks waver while gold reaches a new record high

Stocks hardly budged after staying close to break even all day. Dow fell 6, advancers ahead of decliners 5-4 & NAZ was up 2. Bank stocks were also flattish.

S&P 500 FINANCIALS INDEX

Value	222.09
Change	-0.23 (-0.1%)

On profit taking, the MLP index fell a fraction in the 381s while the REIT index was flat in the 237s. Junk bond funds actually declined, about ½%. Treasuries were weaker, the yield on the 10 year Treasury bond rose 5 basis points to 3.49%. Oil slipped from the highest level in more than 30 months on signs demand may drop in the US. & China, the largest consuming countries. Gold futures surged to a record of $1,456 an ounce (green line on the chart below) as sovereign-debt concerns boosted demand for the precious metal as an alternative asset.

ALERIAN MLP INDEX

Value	381.64
Change	-0.42 (-0.1%)

Treasury yields:

U.S. 3-month		0.07%
U.S. 2-year		0.82%
U.S. 10-year		3.49%

CLK11.NYM

...Crude Oil May 11

...108.03

...

0.44

(0.4%)

Photo: Bllomberg

Federal Reserve (FED) officials raised concerns last month that a big jump in energy prices could weaken the economy & unleash inflation, prompting a few to suggest the possibility of tightening credit this year. Such a move usually involves boosting interest rates, although the minutes from the FED closed-door meeting on Mar 15 did not specify that. It simply noted that a "few members" (probably a minority) raised that possibility. Another group said the FED might need to keep holding interest rates at record low levels beyond this year. The differing viewpoints about potential future policy actions highlight a growing number of challenges facing the economy, which all the members agreed was improving. The differing viewpoints about potential future policy actions highlight a growing number of challenges facing the economy, which all the members agreed was improving. At last month's meeting, the FED offered its most optimistic assessment of the economy since the recession. FED policymakers said the recovery was finally on "firmer footing." Companies had stepped up hiring & both consumers & businesses were spending more. Still, the minutes noted that FED members discussed possible pitfalls, both at home & abroad. Higher prices for oil, food & other commodities are a major concern. So is unrest in the MidEast & uncertainties stemming from the nuclear & economic crisis in Japan, the world's 3rd-largest economy. More of the same from the FED, QE2 only has about 80 days to run.
.
Fed Officials Divided Over Tighter Policy in 2011, Minutes Show

Mar sales at US retail chains probably dropped modestly, held back by the combination of a later Easter & higher gas prices. Department stores are expected to post the biggest declines after tallying huge gains a year earlier, when consumer demand picked up steam & shoppers bought spring clothing. Mar sales at stores open at least a year are likely to show a 0.7% fall across 25 chains tracked by Thomson Reuters. Mar same-store sales jumped 9% last year, when Easter was on Apr 4. This year the holiday lands on April 24. Low consumer confidence & higher food & gasoline prices appear to be tempering any major recovery, even though shoppers have started to see improving economic data. The Intl Council of Shopping Centers (ICSC) & Goldman Sachs just reported that sales rose 2.8% last week. The ICSC said it expected same-store sales to be flat to up 2% for Mar. The Standard & Poor's retail index was up 1.5% on Tues & has risen 2.7% since Feb sales were reported on Mar 3.

U.S. Service Industries Grew Less Than Forecast in March

John Chambers
Photo: Bloomberg

John Chambers, CEO of Cisco (CSCO), a Dow stock, in a remarkably candid memo to employees, admitted the one-time technology bellwether & Wall Street darling has lost its way & will need to change to restore its credibility. Chambers, confessed in an internal email that CSCO had been slow to make decisions, fallen down on execution & lacked discipline in an aggressive expansion. "We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders," Chambers wrote. "That is unacceptable. And it is exactly what we will attack." The last 2 quarterly results disappointed the market. "Bottom line, we have lost some of the credibility that is foundational to Cisco's success - and we must earn it back," he wrote. "Our market is in transition, and our company is in transition. And the time is right to define this transition for ourselves and our industry." The stock sort of liked the news, up 16¢.

Cisco CEO Will Make Targeted Moves to Fix ’Lost Credibility’

Cisco Systems, Inc. (CSCO)

Price at the pump was almost $3.69 yesterday.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.685	$3.821	$3.950	$3.993	$3.086	$4.062
Yesterday Avg.	$3.662	$3.800	$3.927	$3.985	$3.089	$4.065
Week Ago Avg.	$3.587	$3.726	$3.857	$3.960	$3.037	$3.997
Month Ago Avg.	$3.503	$3.634	$3.763	$3.863	$2.929	$3.854
Year Ago Avg.	$2.828	$3.003	$3.111	$2.986	$2.331	$3.068

Source: AAA

Dow has had a steady climb of 800 off its lows 3 weeks ago. Maybe it needs a breather. There could be a shutdown of the federal gov on Fri if there is no agreement on this year's budget & related budget cuts. Who knows? Markets might take that as a plus & rally. The rest of the week may see more sideways trading as markets prepare for earnings season starting next week.