Thursday, February 14, 2013

Sluggish markets are helped by favorable jobless data

Dow inched up 1, decliners just ahead of advancers & NAZ slid 2.  The Financial Index picked up a fraction in the 239s, its multi year high.  The MLP index was up 2+ to the 435s for another new record & the REIT index fell a fraction to 280.  Junk bond funds were mixed & Treasuries lost ground again.  Oil continues its climb to $100 while gold lost favor in a generally rising stock market.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLH13.NYM...Crude Oil Mar 13...97.33 .....Up 0.32 (0.3%)

GCG13.CMX...Gold Feb 13......1,637.20 ...Down 7.00  (0.4%)

A job seeker (R) meets with a prospective employer at a career fair in New York City, October 24, 2012. REUTERS/Mike Segar

Photo:   Yahoo

The number filing new claims for unemployment benefits fell more than expected last week.  Claims for state unemployment benefits dropped 27K to 341K according to the Labor Dept.  The prior week's claims figure was revised to show 2K more applications received than previously reported.  Expectations were for claims to fall to 360K.  While companies are no longer aggressively laying off workers, they still appear to be in no hurry to step-up hiring against the backdrop of still lackluster demand.  The economy has struggled to grow much more than 2% annually since the 2007-09 recession ended.  The 4-week moving average for new claims rose 1½K to 352K.  The average hit a near 5-year low in the prior week, but a drop in first-time claims early this year likely was exaggerated by difficulties smoothing out the data for seasonal fluctuations.  The number still receiving benefits under regular state programs dropped 130K to 3.11M, the lowest level since Jul 2008 & could reflect people exhausting benefits.  Continuing claims have hovered around 3.2M since late Nov.

Jobless Claims in U.S. Fell More Than Forecast Last Week

Senate Majority Leader Harry Reid

Photo:   Bloomberg

Senate Dems later today will unveil a $120B plan for a 10-month delay in automatic spending cuts for defense & domestic programs set to begin Mar 1.  Half of the cost of putting off the across-the-board cuts would be covered by revenue increases & the other half by spending cuts, according to Majority Leader Harrry Reid.  The plan would set a minimum 30% effective tax rate for the highest earners, a provision known as the “Buffett Rule.” & also would deny companies the ability to deduct the costs of moving jobs & investments out of the US.  Unless Congress acts, $1.2T in across-the- board spending cuts, known as sequestration, will take effect.  The Senate plan includes more specific defense reductions & cuts to agricultural subsidies.  The revenue proposals Dems are pursuing have been rejected before by the Senate, which Dems control & congressional Reps say they will oppose any sequester-replacement deal that includes revenue.

Senate Democrats Said to Offer Plan to Delay Spending Cut

Cases of Pepsi are displayed for sale in Carlsbad, California February 7, 2012. REUTERS/Mike Blake

Photo:   Yahoo

PepsiCo, a Dividend Aristocrat, reported a higher-than-expected Q4 profit, helped by increases in sales volume & prices, & gave a 2013 forecast consistent with its ongoing turnaround plan.  PEP forecast 2013 EPS, excluding any impact from currency, to grow 7% from the $4.10 per share it earned in 2012, a "transition year" in which profit fell 5%.  In the just-ended Q4, EPS was $1.06, up from 89¢ a year earlier.  Excluding special items, EPS was $1.09, above the forecast of $1.05.  Net revenue fell 1% to $19.95B.  Excluding the effect of items including selling some businesses, an extra selling week in 2011 & currency exchange rates, revenue increased 5%.  The stock rose 1.43.

PepsiCo Fourth-Quarter Profit Gains 17% on Higher Prices

Pepsico (PEP)

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Stocks continue to meander, looking for direction.  Earnings are good enough to keep the bulls happy but the background of macro economic issues is not encouraging.  MLPs remain HOT as the index goes to new record highs.  But MLPs are yield securities & the yield on the index is below 6%.  That has been a troubling sign in the past.  Large federal budget cuts are coming in 2 weeks & congress is just starting to take notice.  The wishy-washy solution will probably come after Mar 1.

Dow Jones Industrials

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