Thursday, November 10, 2011

Oversold markets spring back

Dow rose 59, advancers over decliners 3-2 & NAZ was up only 1.  Bank stocks were higher, but just barely.

S&P 500 Financials Sector Index

Value 173.39 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change     0.45    (0.3%)

The MLP index was even at 360 & the REIT index went up 1 to 223 (hardly a robust recovery in an oversold market).  Junk bond funds inched up & Treasuries retreated on easing tensions from Europe.  Oil rose to the highest level in more than 3 months as a gov report showed US jobless claims unexpectedly decreased.  Gold tumbled on less confusion coming from Europe.



Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ11.NYM....Crude Oil Dec 11...96.89 .....Up 1.15  (1.2%)

GCX11.CMX...Gold Nov 11.....1,754.90 ...Down 36.00  (2.0%)

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Jobless Claims in U.S. Decreased to Lowest Level

Photo:   Bloomberg

Claims for unemployment benefits fell last week to the lowest in 7 months.  The Labor Dept said initial claims fell for the 2nd straight week, down 10K to 390K.  But the labor market is still a long way from recovering from the deep 2007-2009 recession.  Weekly jobless claims still remain well above pre-recession levels & have dipped below 400K, a threshold believed to signify improving labor market conditions, only 10 times over the past year.  The 4-week moving average fell to 400K, the lowest since Apr, from 405K in the previous week.  The number continuing to receive benefits fell 92K to 3.62M.  Those who’ve used up their traditional benefits & are now collecting emergency & extended payments increased 43K to 3.53M in the latest week.  Slightly better news does not bring rejoicing.

Jobless Claims Fall to Lowest in Seven Months

More US homes entered foreclosure in Oct than in the previous month, with Florida, Pennsylvania & Indiana registering among the largest monthly increases. 77K properties received an initial default notice last month, up 10% from Sep.  The number of homes scheduled to be auctioned or repossessed by lenders also posted monthly increases.  All told, notices of default, scheduled auctions & bank repossessions, warnings that can eventually lead to a home being lost to foreclosure, hit a 7-month high in Oct.  Activity slowed a year ago after problems surfaced with the way many lenders were handling documentation, namely shoddy mortgage paperwork comprising several shortcuts.  Many of the largest banks reacted by temporarily ceasing all foreclosures, re-filing previously filed foreclosure cases & revisiting pending cases to prevent errors.  Banks appear to be moving past those problems now & starting to tackle a swelling backlog of homes with mortgages that have gone unpaid   The rate that homeowners were 60 or more days late on their mortgage payment rose in the Jun-Sep period for the first time since the last 3 months of 2009, 5.88% of homeowners missed 2 or more payments (an early sign of possible foreclosure), up from 5.82% in Q2.  In addition, 22.5% of homes had a mortgage that was under water (10.9M properties) & another 2.4M borrowers had less than 5% equity in their home.  More bad news for an industry that is already in a depression.

Foreclosure Filings in U.S. Rise 7%

Merck, a Dow stock, is starting a new 4-pronged srategy to grow & reward shareholders. Along with expanding medicine sales in emerging markets & other areas, it plans to expand its consumer & animal health businesses, launch new drugs & boost sales of existing ones, as well as well as manage spending tightly.  The quarterly div was boosted 4¢ to 42¢.  CEO Kenneth Frazier said the company hopes to keep 2012 revenue about the same as this year's, even though its top selling drug Singulair gets generic competition next Aug.  The company plans to file for approval of 8 drugs with the FDA in 2012 & 2013. The stock gained 87¢ (2½%).

Merck Gains on Boosting Dividend for First Time Since 2004

Merck & Company, Inc. (MRK)

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There is a little sense of calm coming from Europe, but not sure how low that will last. Greece got a new prime minister, but the gov is having trouble finding people to run the country with more austerity measures coming.  Italy has a fuzzy economic outlook.  Because of all the arguments it's generating, the super committee is getting more attention.  Economic data in the US remains soggy.  A Bloomberg measure of confidence holds at record lows.  The housing market continues dreary & that has a very big impact on high unemployment.  Today's rally is not impressive & the 10.6K floor for the Dow may not hold for long.

Dow Industrials (INDU)

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