Dow reaches a 2½ year high on March jobs report

Stocks started the new month higher but lost steam in the PM.  Dow gained 56 to near a 2011 high, advancers 2-1 ahead of decliners & NAZ gained 8. 

S&P 500 FINANCIALS INDEX

Value	222.48
Change	1.77  (0.8%)

The MLP index rose 1½ to the 381s while the REIT index was up a fraction in the 237s.  Junk bond funds were higher at their lofty levels.  I just wrote an article on junk bond funds for SeekingAlpha: 

http://seekingalpha.com/article/261385-high-yields-on-junk-bond-funds-still-attractive-in-low-yield-environment

Treasuries gained, pushing 2-year note yields down from the highest level in 10 months, after Bill Dudley, New York Federal Reserve Bank President said the economic recovery is “still tenuous,” easing speculation policy makers are poised to unwind stimulus measures.The yield on the 10 year Treasury eased, but more importantly the yield on the 2 year Treasury note is 0.79% (annualized), up from under 0.40% at its low last year.  This is a leading indicator for rising interest rates & needs to be watched.  Oil is up to $108 & on the move (upward) again.  Gold is rising as shown by the green line in the chart below.  Tensions from the Mideast (Libya, Syria, etc.) are high & higher oil prices are bringing more uncertainties to the global economic recover. 

ALERIAN MLP INDEX

Value	381.01
Change	1.19   (0.3%)

Treasury yields:

U.S. 3-month		0.06%
U.S. 2-year		0.80%
U.S. 10-year		3.44%

CLK11.NYM

...Crude Oil May 11

...107.93

... 1.21  (1.1%)

Ford SUVs
Photo:  Bloomberg

Last month, Ford (F) sold more new vehicles than General Motors (GM) in the US.  This was only the 2nd month Ford has outsold GM since 1998.  Ford sales rose 16% over last year. Among the strongest sellers was the new Explorer, which saw sales double over last Mar.  Buyers gravitated to smaller, more fuel-efficient cars & SUVs because of rising gas prices. The new Fiesta subcompact saw sales jump 56% from Feb.  Fusion sedan & Escape small SUV also saw big increases for the month.  Ford sold 212K cars & trucks 6K more than GM.

Toyota (TM) said deliveries of Toyota, Lexus & Scion models fell 5.7% to 176K vehicles.  Nissan, the 2nd-largest Japanese automaker, increased deliveries 27%. Honda, the 3rd-largest, said its sales in the US rose 23% last month to 133K Honda & Acura brand cars & light trucks.  Hyuandi, South Korea's largest automaker, said deliveries rose 32% to 61,K vehicles, a record for its US sales in Mar. Industrywide light-vehicle sales ran at a seasonally adjusted annual rate of 12.9M in Mar,.a decline from the 13.4M rate in Feb & would be the first sequential drop in 7 months.

Ford Outsells GM for First Time in a Year


Gas at the pump is at highs not seen since the ugly days in 2008.  Early news about auto sales in Mar are saying that high prices are being felt by consumers.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.619	$3.754	$3.885	$3.966	$3.059	$4.026
Yesterday Avg.	$3.606	$3.740	$3.872	$3.963	$3.049	$4.013
Week Ago Avg.	$3.561	$3.698	$3.829	$3.946	$3.021	$3.975
Month Ago Avg.	$3.387	$3.495	$3.633	$3.744	$2.859	$3.762
Year Ago Avg.	$2.803	$2.976	$3.083	$2.947	$2.329	$3.065

Source:   AAA


Big companies increased divs by a record amount in Q1.  117 companies in the S&P 500 index said they would raise or start paying divs. The value of the new & raised annual divs announced amounted to a record $16.6B. Just 78 companies raised their divs in the same period last year. Now that the economy is recovering, profits are rising & investors are demanding something for their patience.  JPMorgan (JPM), a Dow stock, is quintupling its annual div to $1, amounting to an increase of $3.1B. The value of the payout is a record for an S&P 500 company.  Cisco (CSCO), another Dow stock, will begin paying $1.3B in divs annually, a record amount for a first-time div payer in the S&P 500.

• Dividends come roaring back in 2011- Breakout

The good jobs news should have brought more buying in the markets.  Dow went over 12,391, the previous high in 2011, but ended 15 below.  The offer by NAZ to buy NYSE hit winds from the start.  Congress wants to get involved & it will need approval from gov agencies.  Then there's the whisper about higher interest rates in the wind, the QE2 program has less than 3 months to run.  Higher gas prices at the pump are being felt at retail with more increases ahead.  Next week is the last week before earnings season.

Dow Industrials (INDU)

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Early gains vanish after a favorable jobs report

After a very strong start, markets sold off. Dow is down 25, advancers head of decliners 5-2 & NAZ was even. Banks participated in the brief rally & are now selling off.

S&P 500 FINANCIALS INDEX

Value 193.60

Change 0.68

% Change 0.4%

MLPs are lumbering along, today down .68 to the 268s. The graph points out that the 270 ceiling may be tough to crack, at least for awhile. This is where the index was prior to its plunge last Sep. However REITs are having a good day, the index is up 4 taking it within 4 points of its yearly high. Junk bond funds are doing well. Risk is being rewarded as Treasuries sold off big. The yield on the 10-year Treasury bond rose 10 basis points to 3.48%.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil rebounded off the 75 floor which has held for several weeks. Gold is having its worst day in some time. Bargainer hunters may start nibbling.

CLF10.NYM

...Crude Oil Jan 10

...77.17

... 0.71 .......(0.9%)

GCZ09.CMX

...Gold Dec 09

...1,184.20

... 33.20 .......(2.7%)

The unemployment rate unexpectedly fell to "only" 10% in Nov, employers cut the smallest number of jobs since the recession began. However the respite may be temporary. Many expect the unemployment rate to climb into next year as the economy struggles to generate enough jobs for the 15.4M out of work. The economy shed 11K jobs last month, an improvement from the revised total of 111K in Oct (& much better than the 130K expected). If part-time workers who want full time jobs & laid off workers who have given up looking for work are included, the so-called underemployment rate also fell, to 17.2% from 17.5% in Oct. Also the average work week rose to 33.2 hours, from a record low of 33 hours. The increase in hours worked means employees are earning more income which could help increase consumer spending. Temporary help services added 52K jobs, the 4th straight increase. The news from the job report was about as good as could be hoped for but there is still a long way to go before we see significant reductions in the unemployment rate.

•Jobless Rate in U.S. Unexpectedly Drops to 10% as Payrolls Fall by 11,000

Unemployment rate (%) - 1 year




Underemployment rate (%) - 1 year





Orders to factories rose 0.6% in Oct, the 6th gain in the past 7 months, much better than the flat reading that had been expected. A jump in demand for commercial aircraft & petroleum products led the gain. Orders for durable goods, items expected to last three years, rose 0.6%, unchanged from a preliminary estimate last week. Orders for nondurable goods rose 1.6%, aided by gains in demand for petroleum, chemicals, plastics & food.

Orders to U.S. Factories Climb for Sixth Time in Seven Months

Factory orders (% change) - 1 year

The global rebound should produce div increases. It is estimated that 1 in 6 companies in the S&P 500 will increase their divs. An added benefit for those paying qualified divs is they are taxed at a lower rate that ordinary income. AT&T (T), Wal-Mart (WMT) & Progress Energy (PGN) are forecasted to lead those increasing divs. Dividend Aristocrats, such as WMT, may be getting more attention going forward, many have been left behind in in the year's rally.

Dividend Payments May Rise as Recovery Frees Cash

The very favorable jobs report was just what the markets needed. But the reversal by the markets is discouraging. PM trading should be unusually interesting.

Dow Jones Industrials --- 2 weeks

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Markets held most of early gains

Dow gained 132, advancers over decliners better than 3-1 & NAZ rose 30 (but not good enough for a 2009 high). Banks had a good day & the Financial Index continues to waffle around 200 as it has done for 3 months.


S&P 500 FINANCIALS INDEX

Value 199.08

Change 2.88

% Change 1.5%

MLPs & REIT lost some of their AM gains, the indices were up only 1½ & 2 respectively. Junk bond funds were slightly higher as the VIX, volatility index, slipped back to 21, nearing its 2009 low of 20. Fears are easing bringing back more speculation. The yield on the 10-year Treasury bond was up 1 basis point to 3.37%. Below is a table from Yahoo describing the yield spreads among Treasury issues, highlighting the difference between the short maturities (which do not have any or only a little inflation risk) & the long ones which have to deal with more inflation risk over a longer period of time.

Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months

US Treasury Bonds Rates

Maturity	Yield	Yesterday	Last Week	Last Month
3 Month	0.01%	0.01%	0.03%	0.03%
6 Month	0.12	0.11	0.15	0.15
2 Year	0.73	0.72	0.76	0.94
3 Year	1.25	1.24	1.27	1.56
5 Year	2.17	2.18	2.18	2.44
10 Year	3.36	3.36	3.34	3.49
30 Year	4.29	4.29	4.28	4.29

Oil lost most of the AM gains, slipping into the middle of its 75-80 trading range. But gold continues being on fire, reaching new record levels again. The old adage about keeping 5-10% of assets in gold is getting more attention these days.

CLF10.NYM

..Crude Oil Jan 10

..77.66

.. 0.19 ......(0.3%)

GCX09.CMX

Gold Nov 09

..1,164.30

.. 17.90 ......(1.6%)

Gold video that redirects to the Course landing url! Click Here



The Wall Street Journal has an article about shopping for divs, many of these fine companies have been left behind in this year's bull market. S&P 500 Dividend Aristocrats include:

Clorox (CLX)
Sysco (SYY)
Johnson & Johnson (JNJ & a Dow stock)
Merck (MRK & a Dow stock)
Procter & Gamble (PG & a Dow stock)
McDonalds (MCD & a Dow stock)

Shop for dividends in this aging bull market- WSJ


Stocks gave up a little ground in the PM, but still started the week with excellent gains & Dow is at new 2009 highs. This may holiday week may be good to stocks.

Dow Jones Industrials --- 3 months

Stocks are mixed, absorbing 2 days of gains

Dow was up 4, decliners ahead of advancers 4-3 & NAZ rose 5. Banks are having a good day, the Financial Index is up almost 1%.


S&P 500 FINANCIALS INDEX

Value 202.62

Change 1.60

% Change 0.8%

The Alerian MLP index is down 0.35, but at its yearly high in the 252s. The Dow Jones REIT Index fell 1. Junk bond funds were flattish, not disturbed by Moody's prediction that bond defaults will rise in the next few months.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Commodities were strong again, but inching their way up today. For gold, each gain represents a new record price.

CLX09.NYM

...Crude Oil Nov 09

...71.20

... 0.32 .......(0.4%)

GCV09.CMX

...Gold Oct 09

...1,040.70

... 2.10 .......(0.2%)

The yield curve for Treasuries is presented below. The 3 month bill yields essentially zero, a measly 0.06% annualized yield. The 2 year note has a 0.87% annualized yield while the 10 year Treasury bond yields 3.21%. The spread between the 2 year & 10-years is 244 basis points, a very large premium indicating worries about inflation going forward.

Treasury securities

5 Dividend Aristocrats
needing more friends

Below is a list a few of the S&P 500 Dividend Aristocrats (minimum 25 year streak of higher annual divs) which have underperformed the markets this year. They have excellent histories of raising divs, the yields along with future capital gains should be of interest for "value investors."


Exxon Mobil --- 1 year




JNJ --- 1 year




Wal-Mart --- 1 year




McDonald's --- 1 year




Abbott Labs --- 1 year





The markets are absorbing 2 days of big gains. Alcoa (AA) will be the first Dow stock to report earnings (later today). The stock has been rising in anticipation of their smallest loss in a year. That will be viewed as "good earnings" by stock market bulls, but not by those buying gold & Treasury securities.


Alcoa --- 2 weeks




Dow Jones Industrials --- 2 weeks

Stocks rise on a mixed unemployment report

Buyers bid up markets after losses were less bad than feared. Dow gained 95, advancers 3-1 ahead of decliners & NAZ was up 32. Banks rebounded, bringing the Financial Index to within 8 for their 2009 high set last week.

S&P 500 FINANCIALS INDEX

Value 190.30

Change 0.90

% Change 0.5%

S5FINL:IND





The high yields sectors joined in the rally. The Alerian MLP index was up 2½ to the 237s (although it has been in the mid 230s for a couple of weeks) & the Dow Jones REIT Index gained 1. Junk bond funds rose. But Treasuries sold off badly, the yield on the 10-year Treasury bond shot up 11 basis points to 3.44%. Oil was flat, just under 68 & oil was off 1 to an elevated 995.


Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months





Ford (F) had the credit rating on its debt increased to Caa1 from Caa3 by Moody's. The 7.8% bonds of Ford Motor Credit rose $10 to $948 for a $1000 bond, the highest it's been in 2 years. This yield is only about 200 basis points above the yields on investment grade debt. Ford had been managing its business better than GM & benefited from GM's bankruptcy. The stock lost 8¢.

•Ford Motor Credit Notes Rise to 23-Month High After Parent's Ratings Boost


Ford --- 1 year




There has been very little good news on the dividend front, but here is one. Verizon (VZ), Dow stock, raised the div 3% to 1.90. Their yield is over 6%, an attractive yield for a quality stock. VZ gained 35¢.

•Verizon hikes dividend 3 percent to 47.5 cents
AP

Verizon --- 1 year





Stocks ended the week with a bang. Unemployment rose to its highest level in 26 years, but that did not deter buyers. After a bad day for Dow on Mon, losses for the week were reduced to only 60. The S&P 500 is back over 1K & NAZ is above 2K, each has been straddling their respective resistance levels for the last month.
9496 close on Aug 28


Dow Jones Industrials --- 6 months




S&P 500 --- 1 month




NASDAQ --- 1 month

Happy Labor Day!!