Mixed markets on improved consumer sentiment

Dow was up 5, advancers & decliners were about equal & NAZ added all of 1.  The Financial Index was up pocket change to 301, good enough for a 3 month high.  The MLP index was up a fraction in the 395s & the REIT index fell a fraction to the 264s.  Junk bond funds were mixed but Treasuries rose after recent weakness.  Oil inched up (at 3 month highs) & gold slid a few $s.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.081%
U.S. 2-year	0.282%
U.S. 10-year	1.810%

CLU12.NYM

...Crude Oil Sep 12

...95.46

... 0.14

(0.15%)

GCQ12.CMX

...Gold Aug 12

.....1,615.00

... 1.10

(0.1%)

Get the latest daily market update below:

Photo:   Bloomberg

Angela Merkel is working while others are away on holiday.  She is considering easing Greece’s bailout terms, fanning tensions with members of her coalition who oppose giving the Greek gov any more concessions.  Merkel’s gov is torn between showing some leniency toward Greece as it struggles to meet the terms of its rescues & insisting that Prime Minister Samaras deliver on his promises.  “The sensitivities among many more than just the 27 coalition members who voted ‘no’ last time are well known” to Merkel, “so the official line is to stay tough” on Greece, said a member of Merkel’s Christian Democratic Union party.  “But at the same time, some are being sent forward to test the waters on how this tough line can be abandoned.”  Samaras, whose coalition favors extending its fiscal adjustment program by 2 years to the end of 2016, will visit Berlin next week for talks with Merkel, almost 3 years after the debt crisis emerged in Greece.  The country’s intl creditors are due to report on Greek progress in meeting bailout targets next month, an assessment that will determine whether Greece receives a next aid payment needed to stay in the eurozone.

Merkel Mulls Easing Greece Bailout Terms, Lawmakers Say

Photo:   Bloomberg

The index of US leading economic indicators climbed more than forecast in Jul, a sign of sustained expansion.  The Conference Board's gauge of the outlook for the next 3-6 months increased 0.4% after a revised 0.4% drop in Jun.  A rise by 0.2% was predicted.  Retail sales rose more than forecast, showing households are looking beyond the slowdown & increasing spending, which accounts for about 70% of the economy.  The housing market also has signaled improvement.  At the same time, unemployment remains above 8%, which is consistent with the Federal Reserve's view that economic growth will “remain moderate over coming quarters.”  7 of the 10 indicators in the index contributed to the increase, led by building permits & state jobless claims, while 2 decreased.  One, the average workweek, was unchanged in Jul.  The Conference Board’s index of coincident indicators, a gauge of current economic activity, increased 0.3% after rising 0.2% in Jun.  The coincident index tracks payrolls, incomes, sales & production.  The gauge of lagging indicators rose 0.4% after increasing a revised 0.1% the previous month.  Moderately good news.

Leading Indicators in U.S. Exceed Forecasts, Signaling Economic Expansion

Photo:   Bloomberg

Confidence among US consumers unexpectedly improved in Aug, boosting the prospect of stronger household spending in Q3.  The Thomson Reuters/University of Michigan preliminary Aug index of consumer sentiment increased to 73.6, the highest level since May, from 72.3 the prior month.  The gauge was projected to be little changed at 72.2.  After 2 months of sliding sentiment, the Aug advance indicates consumers may be feeling the benefits of growing payrolls & rising confidence raises the odds households can sustain the pickup in retail sales from Jul.  But this sentiment reading for Aug contrasts with the Bloomberg Consumer Comfort Index, which slumped last week to the lowest level since Jan.  The Michigan survey’s index of current conditions, which reflects Americans’ perceptions of their financial situation & whether they consider it a good time to buy big-ticket items like cars, improved to 87.6 from 82.7 the prior month.  It is the highest number since Jan 2008.  The index of consumer expectations 6 months from now, which more closely projects the direction of consumer spending, fell to 64.5, an 8 month low, from 65.6 in Jul.  More moderately good news.

Consumer Sentiment in U.S. Unexpectedly Rises After Two Months of Declines

Once again there is very little going on in the markets.  Too many are away on summer holiday, enjoying their profits.  Dow is up about 40 this week, good enough to keep the bulls happy.  Until Labor Day, sluggish market performance is expected although the bulls are still trying to take the Dow to new highs for this year.

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Markets edge higher on improved consumer sentiment

Dow was up 15, advancers ahead of decliners 4-3 & NAZ gained 7.  The Financial Index slipped a fraction to below 198.

The MLP index was up fractionally in the 408s & the REIT index fell a fraction in the 245s.  Junk bond funds continue their winning ways, bringing even lower yields, while Treasuries were flattish.  Oil saw little movement as it pushed towards $110 & gold was hit with profit raking after recent gains.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.092%
U.S. 2-year	0.297%
U.S. 10-year	1.981%

CLJ12.NYM

.....Crude Oil Apr 12

...108.11

.... 0.28

(0.3%)

GCG12.CMX

...Gold Feb 12

.......1,773.60

... 11.30

(0.6%)

Consumer sentiment improved a tad in Feb to a yearly high as Americans became more confident about the economy's resilience.  The Thomson Reuters/University of Michigan's final reading of the index on consumer sentiment came in at 75.3, edging up from 75.0 in Jan, the highest level since Feb 2011.  The expectations was for a reading of 73.0.  "It is not that surging oil prices, instability in the Mideast, the European crisis or uncertainties about future tax and spending policies could not ultimately derail the recovery, but that consumers expect the pace of overall economic growth to continue to slowly restore lost jobs despite these potential problems," survey director Richard Curtin said.  The survey's barometer of current economic conditions eased to 83.0 from 84.2 but its gauge of consumer expectations rose to its highest in a year, at 70.3 from 69.1.  Curtin said the divergent components suggested "the overall gain was anchored by the expectation that the recovery has legs, even if the pace edges up to a brisk walk, at best."  A third of consumers spontaneously reported hearing about more job opportunities, the highest proportion ever recorded by the survey.  Encouraging news.

U.S. Michigan Consumer Sentiment Rises

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Photo:   Yahoo

Sales of new homes dipped in Jan but Q4 of 2011 was stronger than first estimated.  The Commerce Dept said that new-home sales fell 0.9% to an annual rate of 321K homes, following 4 straight months of gains in which home sales rose 10%.  The gains came after the upwardly revised Q4 & Dec figures.  The annual sales pace in Dec was 324K, the highest in a year.  Even with more sales, just 304K new homes were sold in 2011, the fewest on records dating back to 1963, & new homes are selling well below the 700K rate in a healthy market.  Builders are growing more optimistic after seeing more people express interest in buying this year, they've also sought more permits to build single-family homes.  Sales prices for new homes are rising.  The median sales price of a new home rose 0.3% to $217K.  Relatively good news in a depressed industry.

Sales of New Homes Probably Rose to Nine-Month High

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Photo:   Yahoo

JC Penney reported a loss of $87M in Q4 from restructuring & management transition charges as well as the financial impact of preparing for its new pricing strategy.  "While 2011 was a year of transition at J.C. Penney, 2012 will be a year of transformation," CEO Ron Johnson said.  With a new pricing plan that debuted shortly after the end of Q4, the company is embracing a 3-tier strategy: everyday prices that are about 40% less than initial prices of a year ago, deeper promotions that last a month and clearance events the first and third Friday of each month.  The loss per share amounted to 41¢, below EPS of $1.13 in the year-ago period.  The results include restructuring & management charges that totaled 56¢.  The impact of its pricing strategy, debuted Feb 1, lowered results by an additional 59¢.  Excluding those charges, the company earned 74¢, which beat estimates of 68¢.  Revenue slipped 5% to $5.42B, reflecting the company's exit from its catalog business & revenue at stores open at least a year fell 1.8%.  The stock fell 41¢.

J.C. Penney Posts Fourth-Quarter Loss

J.C. Penney Company, Inc. Holding Company (JCP)

Markets continue to muddle along as they have all week.  Dow just pushed over 13K, but who knows if that will hold?  The economic data in the US is favorable although short of earning a grade of A.  Gas prices keep climbing & the price off crude suggests more price hikes are ahead.  High price gas is a solid negative for the economy.  The Greek debt mess lumbers on.  Progress there is measured in inches.  Dow may top 13K at a close, but that will probably not be a convincing fashion. 

Dow Industrials

Markets advance despite lower consumer confidence readings

Dow rose 42, advancers ahead of decliners 3-2 & NAZ gained 15.  Bank stocks were weak.

S&P 500 FINANCIALS INDEX

Value	218.84
Change	-0.55  (-0.2%)

The Alerian MLP Index fell 1 to the 375s & the REIT index was little changed at 331 as were junk bond funds & Treasuries.  Oil fell to the lowest level in a week as Libyan rebels advanced against gov troops near the hometown of Qaddafi.  Gold continues in its 1415-1425 range. 

JPMorgan Chase Capital XVI (AMJ)

Treasury yield:

U.S. 3-month		0.09%
U.S. 2-year		0.79%
U.S. 10-year		3.44%

CLK11.NYM

...Crude Oil May 11

...103.87

... 0.11

(0.1%)

Photo:   Bloomberg

A monthly survey said soaring prices in gas & other household costs pulled down consumer confidence in Mar.  The Conference Board's Consumer Confidence Index fell more than expected to 63.4 from a revised 72.0 in Feb & below expectations of 65.4.  The decline reverses 5 straight months of improvement & raises concern about shoppers' ability & willingness to spend in coming months.  Consumers’ assessment of current conditions improved in Mar. Those claiming business conditions are “good” increased to 15.1% from 12.4%, while those claiming business conditions are “bad” decreased to 37.0% from 39.3%. But those saying jobs are “hard to get” edged up to 44.6% from 44.4%, while those stating jobs are “plentiful” dipped to 4.4% from 4.9%.  The proportion of consumers expecting business conditions to improve over the next 6 months declined to 20.6% from 25.2%, while those anticipating business conditions will worsen increased to 16.2% from 10.3%.  The proportion of consumers expecting an increase in their incomes declined to 15.3% from 17.4%.  The effects of higher priced gas is being felt by consumers.

U.S. Consumer Confidence Fell to a Three-Month Low in March


The Federal Reserve may be able to cut about $100B from its plan to buy Treasuries as the economy rebounds, said James Bullard, St. Louis Fed President. “We are still feeding the fire at this moment, so I think we have to start thinking about turning this around in the near future,” Bullard said  while attending a financial conference Europe. “If the economy is as strong as I think and hope it will be in 2011, I think it will be time for us to start to reverse our ultra-aggressive and ultra-easy monetary policy.”  This brings selling to Treasuries, raising their yields.

Fed’s Bullard Says QE Cuts Could Be About $100 Billion

Photo:   Bloomberg

The credit rating for Greece was cut 2 steps by Standard & Poor’s on concern the country may be required to restructure its debt & bondholders may lose out.  The rating was lowered to BB- from BB+ by S&P & the outlook remains negative.   In addition, S&P lowered sovereign credit ratings for Portugal to BBB-/A-3 (BBB- is the lowest investment grade). A meeting of EU leaders on Fri affirmed a decision earlier this month to ease the terms of 110B € ($155B) in emergency loans granted to Greece last year in return for a program of budget cuts. They also agreed that repayment of loans granted through the European Stability Mechanism, the region’s permanent debt crisis mechanism from 2013, would take a priority in the event of a debt restructuring. S&P said earlier in Mar that the agreement would be “detrimental” to existing bondholders.  There is good reason for more European sovereign debt worries.

Greece's Rating Cut Two Levels to BB- by S&P on Debt-Restructuring Concern

Portugal Credit Rating Is Lowered by S&P to BBB-, Lowest Investment Grade



Markets are quiet again going into the end of Q1 on Thurs.  But the health of European debts is being questioned which has the potential to drag down all stock markets if conditions get ugly (like they did last May).  The lower readings for consumer confidence is troubling for the US economy & they is likely to get worse with further increases in gas prices.  MLPs are doing well, the index is within striking distance of setting new record highs.  Enterprise Products (EPD), the largest MLP, just announced increases in its capital projects (an indication of why the index is doing so well).

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HIgher markets on stronger GDP growth in Q4

Dow rose 72, advancers ahead of decliners almost 3-1 & NAZ was up 21 on encouraging news about the economic recovery in the US..  Banks stocks were also higher.

S&P 500 FINANCIALS INDEX

Value	220.79
Change	1.20  (0.5%)

The MLP index rose 1+ to the 378s, closing in on its record high of 383, while the REIT index gained 2 to the 231s.  Junk bond funds hardly budged & Treasuries were little changed.  Oil fell for a 2nd day as crude failed to breach technical resistance at its 30- month high.  Gold fluctuated after rising to a record yesterday on continued turmoil in Libya.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.07%
U.S. 2-year		0.68%
U.S. 10-year		3.41%

CLK11.NYM

...Crude Oil May 11

...105.14

... 0.46

(0.4%)

Photo:   Bloomberg

Consumer sentiment in Mar fell to its lowest level in more than a year as gasoline & food prices rose.  The index was slightly lower than the preliminary reading for Mar, while inflation expectations remained elevated. Even so, the latest consumer survey from Thomson Reuters & the University of Michigan said there was no decline in buying plans.  "While the data clearly indicates that the rate of real consumer spending will diminish, the data does not indicate a renewed downturn is now on the horizon," the report said.  The final Mar reading on consumer sentiment came in at 67.5, down from 77.5 in Feb, the lowest level since Nov 2009 & below the median forecast of 68.0.  The preliminary March figure was 68.2.  The survey's gauge of consumer expectations saw its 5th largest monthly decline, tumbling to 57.9 from 71.6, its lowest level in 2 years. The barometer of current economic conditions fell to 82.5 from 86.9 & was below a forecast of 83.2.  Inflation concerns remained high with the one-year inflation expectation at 4.6%, the same as the preliminary figure & up from 3.4% in Feb. The survey's 5-10-year inflation outlook was up to 3.2% from 2.9%.

U.S. Consumer Sentiment Falls More Than Forecast Amid Rising Fuel Prices

Photo:  Bloomberg

The economy grew more quickly than previously estimated in Q4 as businesses restocked shelves to meet rising demand & maintained fairly solid spending.  GDP growth in Q4 2010 was revised up to an annualized rate of 3.1%, according to the Commerce Dept, & was close to its initial estimate of 3.2% published 2 months ago.  For all of 2010, the economy grew 2.9%, while corp profits grew 20.4%, from a depressed level in the prior year & the most since 2004.  Data so far this year suggests the economy is maintaining this growth pace in Q1, but there are concerns that rising oil prices could crimp consumer spending & slow the recovery. The growth pace is still not strong enough to reduce high unemployment significantly.

Q4 growth estimates were raised to reflect stronger business spending & inventory accumulation than previously forecast.  Business investment rose at a 7.7% rate instead of 5.3%, lifted by spending on equipment & software, as well as on structures.  Business spending on software & equipment increased at a 7.7% rate instead of 5.5%.  Business inventories increased $16.2 billion instead of the $7.1 billion estimated last month.  The rise in inventories still marked a sharp slowdown from $121.4B in Q3.  Excluding inventories, the economy expanded at an unrevised 6.7% pace, the fastest increase since 1998.

 U.S. Economy Grew 3.1% in Fourth Quarter, Revised From 2.8%

Photo:   Bloomberg

Apple (AAPL) began selling the iPad 2 to queues of consumers in a 25 country release including: the UK, France, Switzerland & Germany, as the company tries to defend its dominance in tablet computers amid mounting competition.  Lines of hundreds of consumers were waiting to buy the new tablets. The proportion of AAPL sales outside of the Americas rose to 62% in the last fiscal year, the highest in at least 7 years, amid the growing popularity of iPhones in China & Asia. The stock has been flattish for more than a month, but is up nicely YTD.  Today it gained 6 to 351.

Apple Begins Global Sales of New IPad 2 Tablet as Competition Intensifies

Apple Inc. (AAPL)

Markets continue strong after last week's tumble.  Dow is up 375 this week & nearly 700 YTD.  Strong stock markets are good for MLPS,  The index has its eyes on setting new records with yields below 6%.  The GDP news was what the bulls like to hear, but that's backward looking.  High oil prices & resulting higher prices at the pumps are today & the future which have the potential to slow the recovery.

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Markets little changed on weak economic data

Dow is down all of 1, decliners ahead of advancers 5-4  NAZ fell 6.  Bank stocks are also meandering with the Financial Index hardly budging.

S&P 500 FINANCIALS INDEX

Value	215.59
Change	-0.07  (-0.0%)

The MLP index is up a fraction to 358, stuck in a sideways rut while the REIT is also up a fraction but in the 223s.   Junk bond funds are inching higher.  The yield on the 10 year Treasury bond went up 3 basis points to 3.38%.   Very little should happen in these markets for the rest of the week.

Treasury yields:

U.S. 3-month		0.15%
U.S. 2-year		0.70%
U.S. 10-year		3.38%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil perked up from the storm & cold temps in the east.  Gold is charging forward & will complete its 10th consecutive year of gains (during a troubled time for many financials).  A link is provide to learn more about gold.

CLG11.NYM

...Crude Oil Feb 11

...91.31

...... 0.31  (0.3%)

GCZ10.CMX

...Gold Dec 10

......1,405.40

... 23.00

(1.7%)

Gold Super Cycle Link! Click Here

Photo:  Bloomberg


Consumer confidence slipped this month as more people worried that the job market is worsening.  The latest survey from Conference Board showed a decline even after people increased their holiday spending at the biggest rate in 4 years.  The Consumer Confidence Index fell to 52.5 in Dec, down from a revised 54.3 in Nov & below expectations of 55.8. The decline reverses 2 consecutive months of increases. It takes a reading of 90 to indicate a healthy economy, not approached since the recession began in 2007.  The declines come even though economic indicators suggest layoffs are slowing, businesses are buying more goods & consumers are spending more money. Economists are raising growth forecasts for Q4 & 2011.  One measure of the Confidence Index, which assesses how shoppers feel now about the economy, declined to 23.5 from 25.4 in Nov. The other barometer, measuring how shoppers feel about the economy over the next 6 months, fell to 71.9 from 73.6 in Nov  However consumer confidence is no worse off today than it was a year ago with the outlook remaining cautious.  This contrasts to preliminary figures from Thomson Reuters/University of Michigan which showed a climb to a 6 month high in Dec. Nothing like a little confusion to sort thru.  The latest storm related problems are not going to help.

Consumer Confidence Unexpectedly Falls on Jobs Outlook

Consumer confidence - 1 year



Consumer sentiment - 1 year





Holiday sales jumped 5.5%, the best performance in 5 years.  Retail sales, excluding autos, rose to $584B from Nov 5-Dec 24, said MasterCard Advisors.  Spending Pulsewhich, measures retail sales by all payment forms, said sales had a 4.1% gain from a year earlier (including sales made over the Web).  Last-minute Christmas shoppers pushed sales at stores open at least a year up 4.8% in the week ended Dec 25, the strongest year-over-year gain since Apr according to the International Council of Shopping Centers.  It said sales for the Nov-Dec period will rise 4% or more which compares with a previous forecast of 3.5-4.0%.  Apparel sales grew the fastest in the 50 days before Christmas, with an 11% gain, more than 10 times the pace of last year (helped by cold weather in Dec).  Luxury sales rose 6.7%, compared with only 0.9% a year ago. Consumer electronics sales increased 1.2% after falling 4.6% a year earlier.  Results look to be good enough, but are short of sensational.  This week could be poor with weak performance by stores in the eastern US.

U.S. Retailers' Holiday Sales Increase 5.5%, Most Since 2005


Usually little happens during this holiday week.  Many traders & investors are waiting for the new year before making commitments.  The move by China yesterday to tighten monetary policy will affect countries all over the world as China has become a major player in the global economy.  It could have brought out more buyers for gold which is just a few dollars from setting another record.  The storm in the east along with this being a slow week could cause distortions one way or the other in the jobless data on Thurs.

Dow Jones Industrials   ---   2 weeks

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