Thursday, January 19, 2012

Higher markets on lower jobless claims

Dow was up 27, advancers over decliners 2-1 & NAZ rose 19.  Bank stocks are leading the way higher again, taking the Financial Index to it highs back in late Oct.

S&P 500 Financials Sector Index

Value 189.43 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    1.64   (0.9%)

The MLP index was pretty much even while the REIT index rose 1 to 239.  Junk bond funds edged higher but Treasuries sold off on less risk averse in the markets.  Oil climbed over 101 & gold had modest profit taking in what has been an excellent yea.

Alerian MLP Index

Value 392.62 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change    -0.26     (-0.1%)

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CLG12.NYM...Crude Oil Feb 12...101.23 ...Up 0.64  (0.6%)

GCF12.CMX...Gold Jan 12.........1,653.50 ...Down 6.00  (0.4%)

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First-Time Jobless Claims in U.S. Reach Lowest Level in Almo

Photo:  Bloomberg

Claims for unemployment benefits plummeted last week to 352K, the fewest since Apr 2008.  Applications fell 50K, the biggest drop in more than 6 years according to the Labor Dept.  The 4-week average dropped to 379K. the 2nd-lowest in more than 3 years.  However, volatility at this time of year is common.  Even with this lower level of layoffs, the job market has a long way to go before it fully recovers from the damage of the recession, which wiped out almost 9M jobs.  More than 13M remain unemployed & millions more have given up looking for work & are no longer counted as unemployed.  The overall number receiving benefits rose to more than 7.8M which includes about 3.6M people covered by extended-benefit programs begun during the recession.  These benefits will expire next month unless extended by Congress.

Housing Starts Fell 4.1% in December in Worst Year for U.S.

Photo:   Bloomberg

Home. builders ended 2011 with a 3rd straight year of dismal home building & the worst on record for single-family home construction.  A decline in housing starts last month contributed to the depressed number of homes started last year, offering a stark reminder that a housing recovery is a long way off.  Builders started just 607K homes last year, only slightly better than the previous 2 years & it's roughly half the 1.2M in a  healthy housing market.  In Dec, builders broke ground on 657K homes (annualized), down 4% from the previous month.  Last year was also the worst for single-family home construction on records dating back a half-century as builders started just 429K.  In a good economy, builders break ground on about 840K.  It will be years before the industry is fully recovered.  Even a steady rise in apartment construction last year offered only a sliver of hope that 2012 will be a little better.  While the layoff picture brightens, the economic recovery still has problems.

U.S. Housing Starts Drop 4.1%, Worse Than Forecast

  • A Bank of America sign is seen outside of a branch in Greenville, South Carolina January 18, 2012. REUTERS/Chris Keane
Photo:   Yahoo

Bank of America, a Dow stock, posted a quarterly profit, but the #2 US bank still needs more capital.  It's considering issuing $1B in common stock to certain employees in lieu of a portion of year-end cash bonuses next month.  CEO Moynihan is working to show BAC has enough capital to absorb mortgage-related losses from Countrywide & meet new intl capital standards.  CFO Bruce Thompson said the bank should start to see the benefits of job cuts in Q1 expenses.  "We enter 2012 stronger and more efficient after two years of simplifying and streamlining our company," Moynihan said. "We built our capital ratios to record levels during 2011 on the strength of our core businesses and by shedding those that are not core to serving customers and clients."  Q4 EPS was 15¢ compared with a loss of 16¢ last year.  The bank benefited from pretax gains of $5.3B from the sale of China Construction Bank shares & gains from the exchange of trust preferred securities & the sale of debt securities.  But various accounting charges & litigation expenses reduced earnings by $3.7B.  The bank set aside $2.9B for loan losses, down from $5.1B a year ago. The stock gained 34¢ (5%).

Bank of America Corporation (BAC)

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The bulls are still in command of the markets although the favorable report on new jobless claims should have brought out more buyers.  The signs are that the US economy is improving, even if housing is being left behind.  But exports to Europe should be sluggish.  European markets are doing better this week on fewer ugly stories about sovereign debts.  However, the discussions in Greece about getting bondholders to accept at least a 50% haircut on their investments are still stuck in neutral.  The House is playing hardball approving another increase in the limit on federal debt.  For the time being it's not a major issue, but is likely to flare up before the Nov elections.  But Dow is up almost 400 in Jan as investors are not worried.

Dow Industrials

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