Wednesday, March 14, 2012

Markets slide after recent gains

Dow eked out a gain of 16, decliners over advancer 3-1 & NAZ was up 1 in spite of another binge by Apple. Bank stocks held up, with the Financial Index flat at 207.

The MLP index fell 5½ to the 397s (14 below its recent record high) & the REIT index was down 1 to 250. Junk bond funds were off a tad while Treasury prices plunged on improved economic outlook from the Federal Reserve. Oil was flattish & gold plunged, like Treasuries, as risk averse thoughts have evaporated. It's at a key technical point, further damage could bring more selling. However, the long term outlook for gold is for much higher prices.

JPMorgan Chase Capital XVI (AMJ)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.081%
U.S. 2-year	0.386%
U.S. 10-year	2.272%

CLJ12.NYM

...Crude Oil Apr 12

....105.45

...

1.26

(1.2%)

Photo: Bloomberg

Ben Bernanke said the weak economy impedes efforts by banks to make profitable loans. “Despite some recent signs of improvement, the recovery has been frustratingly slow, constraining opportunities for profitable lending,” Bernanke said. The FOMC said yesterday that economic conditions would still warrant holding the benchmark interest rates near zero at least through late 2014. But community banks are “facing difficult challenges,” Bernanke said. “Their close ties to local economies are, on balance, a source of strength, but a drawback of those ties is that the fortunes of communities and their banks tend to rise and fall together.” The best 6-month streak of job growth since 2006 caused him to acknowledge an improved path for the economy, even as policy makers repeated that unemployment is “elevated” & that strains in global markets “continue to pose significant downside risks to the economic outlook.” Bernanke said that “together with economic conditions, regulation and supervision are among the top concerns for community banks.” Banks face higher costs under tougher supervision including the Dodd-Frank Act. The gap has shrink between interest earned & interest paid as the Fed pushed down long-term interest rates by purchasing $2.3T in bonds & lengthened the average duration of the securities in its portfolio.

Bernanke Says U.S. Growth Impedes Lending

Gasoline is now over $4 per gallon in 4 states & DC, as a 3-month surge in pump prices continues & prices in several other states are almost there. Nationwide, gasoline has soared 54¢ in 2012 to an average of $3.81 per gallon. Prices are rising as service stations pass along the higher cost of crude. Pump prices also tend to jump this time of year as gasoline suppliers sell off their remaining stocks of winter gasoline to make room for a different grade of gasoline required in the summer. The seasonal switch causes a temporary supply dip that pushes prices even higher. The gov indicated that the switch was under way & gasoline supplies fell 1.4M barrels last week. The report also noted that energy demand remains weak in the US. Oil demand dropped 5.4% while wholesale gasoline demand fell 7.2% below last year. Earlier, the International Energy Agency said global oil supplies fell 200K barrels per day in Feb, even as members of OPEC increased production & global supplies are predicted to fall later this year. Tighter supplies could push oil & gasoline prices higher.

Gasoline tops $4 a gallon in more states AP

Source: AAA

Photo: Bloomberg

Apple stock is getting a boost from anticipation of the new iPad3 & some analysts predict it could climb to $700. At least 4 have increased price targets to $700 or higher in the past 2 weeks, 23% above yesterday’s closing price of $568 (after the stock had previously gained 40%). The new iPad3, set to go on sale Mar 16, has been upgraded with a sharper screen & faster chip as CEO Cook seeks to widen the company’s lead in tablets. AAPL is also cutting the price of the older iPad by $100 to help gain market share. The stock shot up $21 to $589, giving it a market cap of $550B.

Apple May Climb Above $700 on New IPad: Analysts

Apple Inc. (AAPL)

Dow just manged to make it 6 up days in a row. It's difficult to avoid the obvious thought that the markets are overbought with that kind of run. Excitement over European debts has quieted down, but the recession lumbers on. The US economy is doing reasonable well even though dark clouds of higher gas prices are moving in. MLP fans have found out in the last month that securities don't keep going up forever. Today the index had a major drop (over 5). The sharp rise in Treasury yields may have prompted MLP holders to demand higher yields. A 5 year chart for the Dow shows its fall & spectacular recovery.