Wobbly markets on inconclusive economic data

Dow wasn't sure where to go, but is up 29 presently, advancers ahead of decliners 3-2 & NAZ added 17.  Bank stocks reversed early losses & are back in the black


S&P 500 FINANCIALS INDEX

Value	208.45
Change	0.80  (0.4%)

The MLP index fell 2½ to 350, down 10 in just a couple of days.  But the REIT index rose 1+ to the 215s.  Junk bond funds also gained.  Treasuries fell, pushing the 10-year note yield to a 7-month high at 3.53%, evidence the US. economy is recovering so there is reduced demand for safety.

Treasury yields:

U.S. 3-month		0.14%
U.S. 2-year		0.67%
U.S. 10-year		3.53%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil wants to break thru 90 with all the bullish sentiment, but not today.  Gold fell to a 2-week low on investor sales following a 26% rally this year.

CLF11.NYM

...Crude Oil Jan 11...

88.02 ....

0.60

(0.7%)

GCZ10.CMX

...Gold Dec 10

....1,362.70

... 22.80

(1.7%)

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Photo:  Bloomberg

First-time claims for unemployment benefits unexpectedly declined last week, suggesting the labor market is on the mend. Applications for jobless claims decreased 3K to 420K, the lowest in 3 weeks, according to the Labor Dept. Expectations had for for an increased to 425K. There were no special factors in last week’s decrease.  The 4-week moving average decreased to 423K, the lowest since early Aug.  The number continuing to collect benefits rose 22K to 4.14M.  The continuing claims figure does not include the number of workers receiving extended benefits under federal programs. Those who’ve used up their traditional benefits & are now collecting emergency & extended payments increased by 324K to 4.83M as the House will shortly vote on extending those benefits.  The numbers are a little better, but not enough to reduce the unemployment rate.

Jobless Claims in U.S. Unexpectedly Fell to 420,000 Last Week

Weekly jobless claims - 1 year





4 week moving average - 1 year



# continuing to receive benefits - 1 year

Photo:   Bloomberg

Home construction nudged up in Nov after 2 months of declines as builders broke ground on 555K units (annualized), a 3.9% rise from Oct, according to, the Commerce Dept.  However, housing starts are just 16% above the 477K unit pace in Apr 2009, the lowest point on records dating back to 1959!  In addition, they are down 76% from their peak 4 years ago & 45% below the 1M annual rate consistent with a healthy market.  The activity last month came from building single-family homes. They increased to a pace of 465K units, a 6.9K rise from Oct. Apartment construction fell 9.1% to a unit pace of only 90K.  Housing permits, a barometer of future demand, fell 4% to an annualized rate of 530K, reflecting weakness in apartment construction. It marked the lowest level in permits since Apr 2009. More than a year after the recession ended, the housing market is struggling.

U.S. Housing Starts Rise for First Time Since August


Building permits - 1 year




I

Photo:  Yahoo

FedEx (FDX) reported fiscal Q2 earnings tumbled on higher costs & one-time charges, but raised its earnings prediction for the full-year on a better economic forecast & a brightened view for the holidays.  FDX said while shipments improved in all of its units, growth moderated in its intl priority unit, which had been booming (it includes exports of high-value items like computer parts & iPods.  FDX now expects EPS of $5.00-5.30 a share for the fiscal year ending in May, above previous guidance of $4.80-5.25. But the new prediction is still mostly under expectations of $5.21.  EPS was 89¢ in the Sep-Nov period, down from $1.10 last year.  EPS was $1.16 per share excluding one-time costs such as the integration of its trucking operations & higher maintenance expenses.  Revenue rose 12% to $9.6B.  Analysts expected $1.31 per share on revenue of $9.7B.  For its Q3, which includes the key holiday shipping season, it expects EPS of 95¢-$1.15 versus $1.10 per share by analysts & up from 76¢ last year.  The stock rose 1.59.

FedEx 2Q profit falls, but boosts view for year AP

FedEx   ---   2 years




Markets did not respond well to encouraging news on jobless claims & the outlook by FDX.  There are 2 whopper tax bills in DC, one to extend the lower tax rates & the other to fund the gov for the next year (already a few months late).  Both are loaded with plenty of pork, little was learned from the conservative bias in the recent elections.  Uncertainties about the Irish bailout are not helping bring out buyers.  The sell-off for MLPs is noticeable.  They could be weak for awhile as investors need time to adjust to the higher rates on Treasuries.


Dow Jones Industrials   ---   2 weeks

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Down day after a very successful year

Markets were lower on the final day of one of the best years for stock markets. Volume was extremely low (only .4B on NYSE floor) giving extra strength to the few traders operating. Dow fell 120 with selling at the close, decliners over advancers 3-2 & NAZ dropped 22. Once again, these changes on probably the lightest trading of the year mean little. Bank stocks also had selling at the close taking the Financial Index lower.


S&P 500 FINANCIALS INDEX

Value 193.78

Change 0.72

% Change 0.4

The MLP dropped ½, still in the 285s & the REIT index dropped 3½. The Alerian MLP Index had an unforgettable year, difficult to imagine it ever duplicating that performance with a gain of 109. Junk bond funds were mixed, but many have doubled from their lows when yields were 20-25% & even higher. Markets learned to accept & reward risk. The flip side is the large sell-off in Treasuries. The yield on the 10-year Treasury bond soared after plunging early in the year. Rising yields bring lower bond prices


Alerian MLP Index --- 1 year




Dow Jones REIT Index --- 1 year




10-Year Treasury Yld Index - 1 year










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Oil & gold ended the year up an "up" tick. Oil had a good year after the first 2 months & gold is flying. Fundamentals are in place for gold to climb again, as usual timing is uncertain.

CLG10.NYM

..Crude Oil Feb 10

..79.52

.. 0.24 ......(0.3%)

GCF10.CMX

..Gold Jan 10

..1,095.70

.. 4.20 ......(0.4%)

OIL (ETF) --- 1 year




GLD (ETF) --- 1 year





This was a year for the record books, many didn't call that successfully at the start of 2009. Dow is up 4K (65%) from it lows. But NAZ gained 1K (75%) from its low. Many of the high yields beat even the NAZ. MLPs, REITs & junk bond funds had many which more than doubled from their lows. Buyers in the gloomy days were able to lock up amazing yields!


Dow Jones Industrials --- 1 year




Nasdaq --- 1 year

Happy New Year to all!!

Markets tread water on weak home sales

Dow is down 7, advancers over decliners 3-2 & NAZ is up 8. Banks stocks are seeing profit taking after recent gains, the Financial Index can't get away from its 4 month lows.


S&P 500 FINANCIALS INDEX

Value 193.89

Change -0.90

% Change -0.5%

MLPs just keep soaring at a time when markets are only doing so-so. The Alerian MLP Index is up 1+ into the 283s, another 18 month high! The Dow Jones REIT Index is up a fraction in the 183s, barely good enough for another 2009 high. Junk bonds keep flying onward & upward. The VIX, volatility index, is flattish in the high 19s (it's yearly low). Treasuries were higher on the slowdown in home sales, the yield on the 10-year Treasury bond fell 4 basis points to 3.70%.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks





Oil cracked thru 75 as crude supplies fell. Bulls want this to become its floor once again. Meanwhile gold is floundering around. The stronger dollar has been behind its plunge in Dec & for the immediate future it will remain on defense.

CLG10.NYM

...Crude Oil Feb 10

...75.75

... 1.35 .......(1.8%)

GCZ09.CMX

...Gold Dec 09

...1,086.20

... 0.60 .......(0.1%)

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Sales of new homes plunged 11% unexpectedly in Nov to the lowest level since Apr, housing continues rocky reflecting a slump in demand following the extension of a deadline for first-time buyers to qualify for a tax credit. The incentive deadline was pushed back to Apr 30 & expanded to include current homeowners who relocate. The Commerce Dept said that Nov sales fell to an annual rate of 355K from a downwardly revised 400K in Oct & below the forecast rate of 440K. The median sales price of $217K was down 2% from $221K a year earlier but up 4% from Oct. The National Association of Home Builders said its index of industry confidence fell to the lowest level since Jun, reflecting concern that job losses & a slow economic recovery will continue to stifle demand. The recovery for home builders continues to be shaky. The recent increase in the yield on the 10-year Treasury bond is another negative home builders don't want.

•Sales of New U.S. Homes Unexpectedly Fell in November to Seven-Month Low


Personal incomes rose 0.4% last month, helped by a $16.1B increase in wages & salaries. The rise in incomes helped bolster spending, which rose 0.5% in Nov, but both were slightly less than expected. Income growth will not be sufficient to a significant recovery while debt is being paid off.

Consumer Spending in U.S. Climbs Less Than Forecast

Exxon Mobil (XOM), Dividend Aristocrat, is the weakest Dow performer this year. The stock is down 21¢ to 68.36 with a 2½% yield for the value investors.

Exxon Mobil --- YTD





Dow keeps meandering just under 10½K while NAZ has managed new yearly highs. Weakness in the Dow is disturbing. Maybe it's reflecting gloomy data on unemployment & sales for housing, autos & retail. Without major news, the rest of today & tomorrow should be a quiet time for the markets, many of the successful are enjoying the rewards they already earned.


Dow Jones Industrials --- 2 weeks

Markets tread water after unemployment report

Sellers were never able to take command & a few buyers returned later in the day, bringing the averages back nearer break even. Dow was off 21, decliners over advancers almost 2-1 & NAZ slipped 9. After a big decline yesterday, banks had a difficult time deciding whether to go up or down today.

S&P 500 FINANCIALS INDEX

Value 192.07

Change -0.31

% Change -0.2%

The Alerian MLP Index rallied in the PM, bringing it back to essentially even, still in the 245s. REITs continued weak, down another 1½ to the 159s (just 2 points above the 10% decline level from the 2009 high on Sep 23). Junk bond funds continued mixed, within a shout of their recent highs. Treasuries saw selling late in the day. The yield on the 10-year Treasury bond rose 3 basis points to 3.22%, still very low based on recent values.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil continued lower closing under 70 while gold inched up climbing over 1K again.

CLX09.NYM

..Crude Oil Nov 09

..69.78

.. 1.04 ......(1.5%)

GCV09.CMX

..Gold Oct 09

..1,003.20

.. 3.70 ......(0.4%)

The latest speculation on CIT Group (CIT) is they may have to file for Chapter 11. This company has unusual importance to the national economy since it finances about 1M small businesses. Today the stock was up 11¢ to 1.17. The chart below shows they've been living on death's door for a few months.

CIT --- 6 months





Brazil is very excited that Rio was chosen to host the 2016 Olympics. Back to the stock markets, sellers didn't come on too strong today despite the negative economic data. One important piece of the unemployment report is that gov employment fell 53K in Sep after dropping 19K in Aug. Don't worry, federal jobs keep climbing, nothing will stop that as long as $T (that's T as in trillion) deficits continue. But state & local jobs are being lost, they were supposed to benefit from the stimulus package passed in Feb. That bill was rushed thru over the weekend because it was considered sooo important, especially to hold the unemployment rate under 8%. So much for that gov planning!

The concept of a slow recovery is being talked about more, not good for the markets.


Dow Jones Industrials --- YTD

Markets advance to new 2009 highs

Stocks started strong & remained higher all day. Dow is shooting for 10K first reached almost 11 years ago. Today Dow rose 51 to 9829 closing near the highs. However it has been flat near 9800 for 4 days. Advancers were over decliners 5-2 & NAZ was up 8. Banks soared again, the Financial Index made another yearly high. The index is up more than 150% from its low earlier this year. When troubled financial giant Citigroup (C) doubles in 2 months, all financials are "golden." Speaking of risky financials being rewarded, AIG (AIG) has had an even better run over the 2 months.

S&P 500 FINANCIALS INDEX

Value 206.62

Change 4.54

% Change 2.2%

Citigroup --- 2 months




AIG --- 2 months





MLPs were little changed, the index was virtually even & hurt by a large offering of new units. Enterprises Products Partners (EPD) was down 73¢. The Dow Jones REIT Index was up 5+ to a new closing high for 2009. Junk bond funds were sideways at their high levels for 2009. The yield on the 10-year Treasury bond fell 3 basis points to 3.46%.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





The dollar continues very weak thanks to the heavy gov borrowing. The € is at $1.48 & it only takes 91+ Japanese ¥ to buy a dollar. With the dollar weak, money flows into commodities & stocks. Oil has been kicking around 70+ since its run up in late May. In roughly the same time frame gold has taken off, from the mid 800s to 1K+ & it wants to go higher.

CLV09.NYM

..Crude Oil Oct 09

..71.55

.. 1.84 ......(2.6%)

GCU09.CMX

..Gold Sep 09

..1,014.00

.. 10.30 ......(1.0%)

The Treasury sold a record $43B in 2-year notes at an annualized yield of just over 1%, in line with expectations. Demand was good including from foreign interests (indirect bidders). Buyers were motivated by the outlook for low inflation & a low growth rate for the US economy.

Treasuries Gain on Growth Outlook Before $43 Billion Note Sale


The Federal Reserve is not expected to change interest rates at their meeting & should continue with accommodating language for the markets. We all know the economy is mending, not a lot for them to say.

Dow Jones Industrials --- YTD