Wednesday, January 25, 2012

Higher markets after Federal Reserve announcement

Dow rose 83, advancers ahead of decliners almost 4-1 & NAZ was up 31 (helped by a $27 rise for Apple).  The Financial Index was up only a fraction to the 191s (a 6 month high).

MLPs are flying again, taking the Alerian MLP Index up 3+ to the 401s, a new record high!!!  The REIT index also had a good day, up 3 to the 245s, a 6 month high & only 5 below its post 2008 recession high.  Junk bond funds were mixed but Treasuries gained after the FED announcement.  Oil rose after Federal Reserve pledged to keep interest rates low into 2014, boosting fuel demand.  Gold climbed with a $20 pop shown in the chart below.

JPMorgan Chase Capital XVI (AMJ)

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CLH12.NYMCrude Oil Mar 1299.73 Up 0.78 (0.8%)

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Pedestrians walk past a "Now Hiring" sign in the window of a GNC shop in Boston

Photo:   Yahoo

The Federal Reserve (FED) downgraded its outlook for US economic growth this year but is slightly more optimistic about the unemployment rate.  The FED expects the economy to grow 2.2%-2.7% in 2012, down from the Nov forecast of 2.5%-2.9%.  Earlier it noted the weak but growing economy when it said it doesn't plan to raise its benchmark interest rate until late 2014.  Some members even wanted to push that back further.  Still, the FED expects unemployment to fall as low as 8.2%, improvement from bottom rate of 8.5% in the Nov forecast.  Inflation has been relatively tame & the FED doesn't see that changing over the next 3 years.  For the first time, the FED offered an official target for inflation, 2%.  The Fed did not specify a target for unemployment but said that unemployment of 5.2%- 6% would be consistent with its goal for a healthy economy.

  • <p>               German Chancellor Angela Merkel, delivers the opening address at the World Economic Forum in Davos, Switzerland, Wednesday, Jan. 25, 2012. The overarching theme of the Meeting, which will take place from Jan. 25 to 29, is "The Great Transformation: Shaping New Models". (AP Photo/Michel Euler)
Photo:   Yahoo

German Chancellor Merkel insisted that Europe will remain an economic power only if it deepens the integration that has caused it so many problems.  The tone of Merkel's keynote address was not dramatically different from her measured norm, but it was positive enough to feed an emerging feeling among European power brokers that Germany (i.e. Europe) is finally becoming convinced that it needs to do whatever it takes to save the € from collapse.  "The message is that we are ready for more commitment. We are no longer making excuses," Merkel said.  If Europe doesn't integrate further, she said, "we will remain an interesting holiday destination for a long time, but we won't be able to produce prosperity for the people in Europe anymore."  Merkel pledged to do what is necessary to protect the € from collapse, & said greater European unity is needed to spark job creation & growth.  But she poured cold water on calls for Europe to ratchet up the financial firepower of its safety net for failing economies.  Germany is at the center of any rescue plan because it has the deepest pockets in Europe.  Let's see if the others are paying attention.

Merkel Makes Appeal for Time to Solve Crisis

Abbott, a Dividend Aristocrat, reported a 12 % increase in Q4 profit with double-digit sales growth.  These results highlighted the rationale for splitting the company into 2, announced late last year, with top-selling drug Humira dominating the results, contributing $2.18B (20%) to sales.  EPS was $1.02, up from 92¢ last year.  Excluding one-time items, the company earned $1.45, up from $1.30 in 2010.  Total sales grew 4.1% to $10.4B.  Analysts were expecting EPS of $1.44 on revenue of $10.59B.  For 2012, ABT expects to earn $4.95-$5.05, compared with the average estimate of $5.02.   The branded drug business posted sales of $4.78B inQ4, an increase of 6.7%.  The stock slipped 75¢.

Abbott profit rises 12 percent in fourth quarterAP

Abbott Laboratories (ABT)

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The FED gave a boost to the markets after it pledged to keep interest rates low for well into 2014.  The  Dow rose steadily, over 100, after hearing the news.  Breadth in the markets was good.  But the rally in Treasuries, taking the yield on the 10 year Treasury back below 2%, & the sharp rally for gold shows other investors were more interested in "risk averse."  Asian markets will follow this rally, but tomorrow may not bring a continuation after coooler heads have had a chance to think thru implications.  Among other things, the Greek debt mess drags on with no end in sight!

Dow Industrials

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