Nervous markets lower on earnings expectations

Markets were off after disappointing earnings from Alcoa (AA). This Dow stock is the first major company to report earnings & its announcement sets a bearish tone for earnings season in the next few weeks. Dow was down 36, decliners over advancers 5-2 & NAZ fell a very big 30. Banks suffered, also hurt by the talk of imposing $Bs in penalty taxes after their recovery from the financial crisis. The Financial Index is hanging in there above 200, but may not be able to remain above it very long. The index has seen little change since the end of Aug while other popular averages have been extending their gains, very disturbing.

S&P 500 FINANCIALS INDEX

Value 201.88

Change -3.27

% Change -1.6%

MLPs & REITs sold off today. The Alerian MLP Index fell 1.88 to the 292s but still has a terrific chart for the last 3 months. The Dow Jones REIT Index fell 3 with a less pretty chart. Junk bond funds saw a little selling after reaching post Lehman highs. With the uncertainty raised on AA earnings, Treasuries were in demand again today. The yield on the 10-year Treasury bond fell 9 basis points to 3.73%.


Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months










Oil & gold sold off, probably related to negative thoughts flowing from AA earnings. In addition, warmer winter weather kept buyers away from oil. Gold still has allure for the long term, but will be volatile in the short term.

CLG10.NYM

..Crude Oil Feb 10

..80.79

.. 1.73 ......(2.1%)

GCF10.CMX

..Gold Jan 10

..1,127.20

.. 23.50 ......(2.0%)

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Enterprise Products (EPD), now the largest MLP, & Duncan Energy Partners (DEP) each announced increased distributions (qtr over the prior qtr) for Q1. Each has a yield of about 7%, not far above the yield on the 10-year Treasury. A narrow spread signals there is less of a reward for the added risk for owning the MLP. But more increases from MLPs can be expected in the next 2 weeks. EPD was even while DEP dropped 51¢.


InPlay: Enterprise Products increases quarterly cash distribution rate to $0.56/unit from $0.53/unitBriefing.com
Duncan Energy Partners Increases Cash Distribution RateBusiness Wire


Enterprise Products --- 1 year




Duncan Energy Partners --- 1 year





Late day buying reduced losses for the Dow. The chart below shows the last 200 points have been very tough. Banks have been weak during this period & they represent an important part of the Dow. Banks will also have to contend with fears about even more bad news coming from real estate loans of which they own a lot & lower trading profits. Earning season began on an off note. If that continues, Dow may see its first correction in almost a year.

Dow Jones Industrials --- 3 months

Markets nervous ahead of jobs report

Stocks started lower but buying brought them back to even. Dow is up 3, advancers over decliners 4-3 & NAZ is down 6. Banks are rallying, the Financial Index is near its high for the last month but remains in the 190-210 trading range.

S&P 500 FINANCIALS INDEX

Value 203.88

Change 1.88

% Change 0.9%

The red hot Alerian MLP Index fell back 2½ to the 293s, hurt by Enterprise Products Partners (EPD) large unit offering causing its price to fall 82¢. The REIT index was up fractionally after selling off in the last 2 weeks. Junk bond funds were higher, still in demand. The yield on the 10-year Treasury rose 1 basis point to 3.82% remaining in high territory relative to the last 2 years.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks








Oil & gold were off in sympathy with lower stock prices. Cold weather is still a big plus for oil & gold hopes to make 1100 a floor.

CLG10.NYM

...Crude Oil Feb 10

...82.74

... 0.44 .......(0.5%)

GCF10.CMX

...Gold Jan 10

...1,131.20

... 4.70 .......(0.4%)

The number claiming unemployment benefits for the first time barely rose last week, after 2 weeks of sharp drops. The 4-week average of claims fell for the 18th straight week to 450K, approaching the roughly 425K that could be a sign the economy will start creating jobs. The Labor Dept said initial claims for jobless benefits rose only 1K to 434K last week, lower than the 447K figure expected. The number of continuing claims dropped 179K to 4.8M. However that figure doesn't include an additional 5.4M who are receiving unemployment under federal emergency programs. A total of 10.5M were receiving unemployment benefits, an increase of about 300K from the prior week, partly due to a a decision by Congress to extend benefits for a 4th time since the recession began. The many continuing to receive benefits indicates that even as layoffs are declining, hiring hasn't picked up, leaving people out of work for longer periods of time. Initial claims for jobless aid have dropped by 100K or 19%, since late Oct.

•Initial Unemployment Claims in U.S. Climb Less Than Estimated to 434,000


Initial jobless claims - 1 year




Number receiving unemploy - 1 year

Photo: Bloomberg

Holiday shoppers brought relief to the nation's retailers, giving them modest sales gains for the season which prompted a number of chains to raise Q4 profit outlooks. But retailers may be facing chilly months ahead as consumer spending is expected to remain muted amid high unemployment & tight credit. The holiday season was considered decent but nothing to get excited about.

According to the Intl Council of Shopping Centers sales index, Dec sales rose 2.8% compared to a year ago, ending a year that averaged a 2.0% drop. For the overall holiday season, Nov & Dec, the index was up 1.8%, better than its estimate for a 1% gain. That figure, however compares with a 5.8% drop a year ago, the weakest holiday season in at least 4 decades. Costco (COST), Target (TGT & a Dividend Aristocrat), Macy's (M) & TJX (TJX) all reported increases but only TJX had a sharp gain (up 2½). Sears Holdings Corp (SHLD) eked out a small gain & offered Q4 guidance sharply above estimates, stock up 11.69 to 100.56. Other retailers were mixed to lower.

•Retailers in U.S. Boost Profit Outlooks as Kohl's, TJX December Sales Jump



Markets continue to muddle along after the big pop up on the first day of 2010. Jobless claims & retail sales were favorable, but expected. Despite strength in some sectors, Dow just can't break away from 10½K.


Dow Jones Industrials --- 2 weeks

Stocks & oil fall on rising dollar

Good but not great earnings reports along with a fall in commodities resulting from a higher dollar sank stock markets. Dow was off 104 (near the lows for the day), decliners over advancers 3-1 & NAS dropped 12. Banks were weak all day, the Financial Index closed below 200 for the first time in 4 weeks.

S&P 500 FINANCIALS INDEX

Value 197.95

Change -5.10

% Change -2.5%

MLPs fell, related to the drop in oil prices. The Alerian MLP Index fell a big 4+ to the 261s but the Dow Jones REIT index was down only pennies in its 2 month trading zone. Even hot junk bond funds saw selling. Treasuries fell sharply, ahead of a record $123B in Treasury notes to be sold this week (for funding the stimulus programs which have not been helping the economy so far & record deficits). The yield on 10-year Treasury bond reached its highest yield in 2 months, 3.55%.

Alerian MLP Index --- 1 year




Dow Jones REIT Index --- 1 year




Yield on 10-Year Treasury bond - 1 year





Enterprise Products Partners (EPD) & TEPPCO Partners completed the merger of the 2 partnerships. With a value of $30 billion, 48K miles of pipelines & a market capitalization of $18B, Enterprise becomes the largest MLP in the US.

Enterprise and TEPPCO Complete Merger; Announce Results of Exchange Offer for TEPPCO NotesBusiness Wire


Enterprise Products --- 1 year




Oil fell back below the important 80 level. Gold's decline took it back to its lowest level in 3 weeks.

CLZ09.NYM

..Crude Oil Dec 09

..78.72

.. 1.78 .......(2.2%)

GCV09.CMX

..Gold Oct 09

..1,039.90

.. 15.70 ......(1.5%)

Caterpillar (CAT), a Dow stock, had to lay off another 2500 workers but will be able to rehire 550 others because of increased orders. The stock fell 53¢ along with the markets but has doubled from its lows earlier this year.

Caterpillar --- 1 year




Stock markets are not giving earnings reports a warm reception. This week Kellogg (K), Procter & Gamble (PG & a Dow stock), Met Life (MET) & the big oils will be reporting. Dow is back to its lowest level in 2 weeks (i.e. the start of earnings season).

Dow Jones Industrials --- 1 year