Thursday, May 26, 2011

Markets head lower after weak jobless clalims data

Dow fell 61 & is down almost 500 in May, decliners over advancers 4-3 but NAZ was off just a fraction. Bank stocks keeps slipping & sliding, bringing the Financial Index back to where it was in Dec.

S&P 500 FINANCIALS INDEX

Value	207.81
Change	-0.53 (-0.3%)

The Alerian MLP Index is up 1 to 366 & the REIT index is up a fraction in the 242s. Junk bond funds hardly budged but Treasuries rose. The yield on the 10 year Treasury bond fell below 3.1%, an important floor. If it remains there, lower rates are in sight even though the Federal Reserve is scheduled to end is bond buying program in a month. Oil fell, but remains above $100 & gold was little changed.

JPMorgan Chase Capital XVI

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.496%
U.S. 10-year	3.092%

CLN11.NYM

...Crude Oil Jul 11

...100.42

...

0.90

(0.9%)

GCK11.CMX...

Gold May 11

....1,527.20

....

0.60

(0.0%)

U.S. Jobless Claims Unexpectedly Climbed Last Week

Photo: Bloomberg

More people applied for unemployment benefits last week, the first increase in 3 weeks adding evidence that the job market is still sluggish. The number of applications for benefits rose 10K to 424K according to the Labor Dept. No states cited extreme weather as a factor in the increase even though tornadoes & floods have devastated several states in the Midwest & South. But the 4 week average declined for the first time in 7 weeks to 438K. The total number receiving benefits is also falling as the benefit rolls declined 46K to 3.7M. Roughly 4M additional people are receiving benefits under emergency programs enacted during the recession. All told, 7.7M received unemployment benefits, a drop of almost 200K from the prior week. This news continues mushy, not what is expected during a strong economic recovery.

Jobless Claims Unexpectedly Climbed Last Week

The US economy grew at a modest 1.8% annual rate in Q1, less than forecast, reflecting a smaller gain in consumer spending than previously calculated. The revised rise in GDP was the same as estimated last month & compares with a 3.1% gain in Q4 2010 according to the Commerce Dept. Consumer purchases fell short of forecasts, reflecting a smaller rise in spending on autos & utilities, & revisions cut the Q4 gain in wages by $25B, almost half, indicating a bleaker outlook for the biggest part of the economy.

Economy Grew 1.8% in First Quarter, Less Than Forecast

Freescale Semiconductor (FSL) raised $783M, pricing 43.5M shares at $18 each. But the expected price range had been $22-$24. The IPO gave the company a market value of $4.3B. FSL is up $1 to $19, better than feared yesterday.

Freescale Rises After IPO Prices at Bottom

Spirit Airlines (SAVE) priced its IPO of 15.6M shares at $12 each, the low end of its expected range. Formerly, the company had planned a price of $12-$13. Earlier this month, it had expected to sell 20M shares at $14-$16. The company should receive proceeds of about $171M after underwriting expenses. Underwriters also have a 30-day option to buy up to an additional 2.3M shares to cover over-allotments. The stock has not begun trading yet.

Spirit Airlines IPO price at $12, low end of range AP

Stocks are wandering on low volume, looking for direction. But the bias is on selling. Jobless claims data & revisions to GDP are reminders that the economy is sputtering. Of course the long holiday weekend is looming, many traders have started their holidays early. The politics of electing a new leader for the IMF are important because Europe needs a lot of help to free itself from the financial mess. The balance of the week should see stocks moving lower on very light volume.