Friday, May 27, 2011

Markets higher as commodities rise

Dow gained 78, advancers ahead of decliners better than 3-1 & NAZ was up 17. Bank stocks are up, giving the Financial Index one of its best days this year.

S&P 500 FINANCIALS INDEX

Value	211.45
Change	2.10 (1.0%)

The MLP index rose 1+ to the 367s & also up 1+ for the week. The REIT index was up a fraction in the 245s, also little changed this week. Junk bond funds were flat as were Treasuries with yields at or near their lowest levels of 2011. Oil rose, heading for a weekly gain after leaders of the Group of 8 said the global economy is gaining strength. Gold rose to a 3-week high as the dollar’s slump spurred demand for commodities.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.046%
U.S. 2-year	0.484%
U.S. 10-year	3.064%

CLN11.NYM

....Crude Oil Jul 11

...100.49

.....

0.26 (0.3%)

GCM11.CMX

...Gold Jun 11

.......1,533.10

...

10.30

(0.7%)

Pending sales of existing US homes dropped far more than expected in Apr to touch a 7-month low, dealing a blow to hopes of a recovery in the housing market. The index of pending home resales declined 12% after a revised 3.5% increase in the prior month, according to the National Association of Realtors, & much worse than the median forecast of a 1% decline. The prospect that foreclosures will continue to drive down property values may keep buyers on the sidelines awaiting further price declines.

Pending Sales of U.S. Existing Homes Drop 12% as Foreclosures Hurt Values

Photo: Yahoo

Consumers spent more in Apr but much of the increase was eaten up by higher food & energy prices. After discounting for the jump in prices, spending barely budged & after-tax incomes were flat for a 2nd straight month. Consumer spending rose 0.4%, reflecting a surge in the category that covers food & gasoline, with the biggest price gains last month according to the Commerce Dept. Excluding price changes, spending rose only 0.1%. Incomes rose 0.4% but after-tax incomes adjusted for inflation were flat. The savings rate was unchanged at 4.9% of after-tax incomes, the same as Mar. Both months represented the smallest savings rate since Oct 2008 when the US plunged into a deep financial crisis. During the recession, savings were built up on concerns about massive job layoffs. A key inflation gauge preferred by the Federal Reserve (FED) showed prices rose 0.3% in Apr, the 5th straight month of gains of 0.3% or higher. However, excluding food & energy, inflation was up just 1%, well below the FED's target levels. More evidence of a recovery that is just muddling along.

U.S. Consumer Spending Rose Less Than Forecast

France's Finance Minister Christine Lagarde

Photo: Bloomberg

Christine Lagarde, French Finance Minister, said Europe's debt crisis & the aftermath of the Arab Spring will be priorities for the next chief of the IMF. “Europe will be a clear focus for the next couple of years,” Lagarde said. “I also think that what is happening in northern Africa, in the Middle East, and the major economic developments that will be needed to accompany what is happening, will probably attract the IMF’s attention and possibly financing.” The IMF said in a report that oil-importing nations in the Middle East & North Africa will require more than $160B in external funding through 2013. Lagarde, vying to become the 5th IMF chief from France, also said she would “remedy the situation” if she found developing countries underrepresented at the fund. “I don’t think it should be a European or an emerging economies candidate” for the top job, Lagarde said. “It should be a good candidate. My sense is that it should be an open, transparent and merit-based process.” While developing nations have called for an end to Europe’s 65-year hold on the post, they've failed to unite behind one nominee. More muddle for intl finance when there are major problems that need to be solved.

Lagarde Sees Europe Debt Crisis, Middle East as Focuses for Next IMF Chief

Markets are having a good day & as on prior days this week, volume is low. This could be lowest this week. As a result small amounts of buying (or selling) will have a big influence on the outcome for the day. European finances remain a mess with Greece, the most vulnerable, in a rebellious mood. The US recovery is sputtering & that should not improve with high gas prices hurting demand for "real" goods. Foreign markets will be open on Mon but will probably do little until US markets reopen on Tues.