Monday, May 9, 2011

Commodity rebound takes stock markets higher

Stocks were up on rebound Mon. Dow gained 45, advancers over decliners 5-2 & NAZ was up 15. But bank stocks slipped & have not been able to find traction this year.

S&P 500 FINANCIALS INDEX

Value	216.29
Change	-0.40 (-0.1%)

The Alerian MLP Index had a modest rise after last week's big sell-off while the REIT index rose 1½ to almost 244. Junk bond funds were mixed & Treasuries inched higher. The yield on the 10 year Treasury bond fell 2 basis points to its lowest level in months. Crude oil rose above $103, rebounding from the biggest weekly decline since 2008, on signals that the global economic recovery remains intact. Silver futures rebounded from the biggest weekly slump ever & gold gained on renewed demand for precious metals as alternative assets.

ALERIAN MLP INDEX

Value	372.00
Change	0.97 (0.3%)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.54%
U.S. 10-year		3.14%

CLM11.NYM

...Crude Oil Jun 11

...103.02

...

5.84

(6.0%)

Live 24 hours silver chart [ Kitco Inc. ]

US households expanded debt in Q1 for the first time in more than 2 years. Mortgage balances rose according to the Federal Reserve Bank of New York. Consumer indebtedness rose 0.3% to $11.5T on Mar 31. Households have slashed debt by $1.03T (8.2%), since it peaked in Q3 of 2008 when the financial crisis was unfolding. “We are beginning to see signs of credit markets healing gradually and evidence of greater willingness of consumers to borrow and banks to lend,” Andrew Haughwout, VP at the New York Fed said. Throughout Q1, banks eased lending terms as they forecast improvement in the economy & firms sought more loans, according to a Fed survey of senior loan officers released last week. Delinquency rates declined for the 5h straight qtr, with 10.5% of outstanding debt in “some stage of delinquency,” down from 10.8% 3 months earlier. That’s also down from 11.9% a year earlier. New bankruptcies fell 13.3% to 434K, 6.4% below a year earlier. About 368K consumers showed new foreclosures on their credit reports in Q1, 17.7% less than in Q4 2010. Credit-card limits rose by $30B (1%), the first increase since Q3 of 2008. Credit card balances declined by 4.6%. This is the type of data expected from an improving economy.

Household Debt in U.S. Climbed 0.3% in First Quarter on Mortgage Balances

Coca-Cola (KO), a Dow stock & Dividend Aristocrat, plans to invest more than $25B over the next 5 years to help reach its $200B sales target in 2020. Turkey is among the “tigers” of growth markets for the company, which also includes Brazil, Russia, India & China. Yesterday, KO celebrated its 125 anniversary. The stock was up a nickel & has done very well in the last year.

Coca-Cola Plans $25 Billion Investment in 5 Years, Hurriyet Says

Coca-Cola Company (The) (KO)

The price of gas at the pump eased back a couple of pennies, but remains close to $4, up substantially YTD & over last year.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.960	$4.104	$4.231	$4.155	$3.338	$4.393
Yesterday Avg.	$3.966	$4.110	$4.236	$4.159	$3.339	$4.395
Week Ago Avg.	$3.952	$4.092	$4.218	$4.155	$3.331	$4.384
Month Ago Avg.	$3.750	$3.885	$4.012	$4.038	$3.149	$4.144
Year Ago Avg.	$2.914	$3.094	$3.206	$3.128	$2.296	$3.021

This was really not a good day for those expecting a rebound . Volume was very low, only ¾B shares on the NYSE floor. There is plenty of turmoil out there & these markets are worried. Greek debt is getting most attention & it's difficult to see how that can be solved quickly when last year's bailout is not working. The lack of participation by bank stocks is bad sign for any bullish argument. MLPs should have had a bigger recovery since the reason for last week's decline (changing the tax advantage for distributions) has been pretty much ruled out. Dow has had to struggle harder for gains during the last 3 months. Bulls will need to bring something to the table to get markets going again.