Tuesday, December 27, 2011

Sideways markets after better than expected consumer confidence data

Markets were essentially even.  Dow & NAZ were flat while decliners slightly beat advancers.  The Financial Index was down pennies in the 177s.

The MLP & REIT indices were little changed but junk bond funds edged higher & Treasuries slipped a tad.  Oil rose to a 2-week high, over $100, after confidence among US consumers beat expectations in Dec, bolstering the outlook for fuel demand.  Gold fell below $1600.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLG12.NYM...Crude Oil Feb 12...100.36 ...Up 0.68  (0.7%)

GCZ11.CMX...Gold Dec 11.......1,598.10 ....Down 6.60  (0.4%)

Get the latest market update below:

Consumer Confidence in U.S. Rose More Than Forecast

Photo:   Bloomberg

Confidence among US consumers rose in Dec to the highest level in 8 months.  The Conference Board’s index increased to 64.5, exceeding all estimates & the highest since Apr, from a revised 55.2 reading in Nov.  The measure averaged 53.7 during the recession that ended in 2009.  Unemployment that dropped last month to its lowest in more than 2 years & the lowest price for gasoline since Feb are prompting households to take advantage of discounts during the holiday shopping season.  The improvement in sentiment could help sustain household purchases, which account for about 70% of the economy, into the new year.

Consumer Confidence Rose More Than Forecast

Sears to Close as Many as 120 Stores

Photo:   Bloomberg

Sears plans to close 100-120 Kmart & Sears full-line stores & expects its adjusted Q4 EBITDA to drop more than halve from a year ago.  The company reported $933M in adjusted Q4 earnings before interest, taxes, depreciation, & amortization last year.  The retailer expects to earn $140-$170M by selling off inventory in affected stores & selling or subleasing store space.  The company also expects store closure & inventory reduction to lower peak inventory in 2012 by $500-$580M.  Sears also expects to record a non-cash charge of $1.6-$1.8B in Q4 related to a valuation allowance on certain deferred tax assets.  For the qtr-to-date, same-store sales at its Kmart unit dropped 4.4% & Sears Domestic comparable sales fell 6%.  The retailer is a victim of the economy, aggressive competition & its own reputation for run-down locations & poor customer service.  The stock sank $9.20 (20%) on the news.

Sears Plunges on Plans to Close as Many as 120 Stores

SHLD   Sears Holdings

stock chart

U.S. Stores Ramp Up Bargains as Sales Growth Lags 2010

Photo:   Bloomberg

Many consumers across the US took advantage of discounts on the day after Christmas, which this year was a holiday & a potential boon to retailers aiming for a strong finish to the shopping season.  Holiday sales will rise 3.8%, compared with a 5.2% advance last year, according to the National Retail Federation.  Sagging home prices & high unemployment continue to weigh on US.  Personal spending climbed only 0.1% last month, less than the median 0.3% gain projected.  Wages & salaries fell 0.1% from Oct.  Retailers continued to discount & keep stores open longer than ever.   While the discounts may help move the merchandise, they also could squeeze profit margins.

Bargains On Offer From Kohl’s to Target as Sales Growth Lags 2010: Retail

Many traders are away.  Today & the rest of the short week should feature little excitement in the markets.  The SHLD news was disappointing, although not unexpected.  Combined with the sluggish retail sales elsewhere does not send good signals for the markets.  Dow broke thru 12K, although not with conviction & now it's stuck again.  I view it as a flexible 12.2K ceiling that is holding & may continue to hold for the rest of the week.

Dow Jones Industrial Average

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