Sideways markets ahead of Alcoa earnings

Stocks were little changed. Dow was down 10, advancers ahead of decliners 3-2 while NAZ dropped 14 off its high (reached before just prior to Lehman's collapse). Banks were higher, the Financial Index gained almost 1, on recognition of lagging performance by bank stocks (see below).


S&P 500 FINANCIALS INDEX

Value 205.96

Change 0.87

% Change 0.4%

On a quiet day, the MLP index is up pocket change in the 294s while the REIT rose 1+. Junk bond funds remain hot, finding plenty of buyers causing their yields to decline further. Treasuries are also doing little, the yield on the 10-year Treasury bond was up 1 basis point to 3.82%.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks









China oil imports rose 14% last year to a record high in Dec, part of a 56% surge in overall imports last month. Their cold winter is keeping demand high. As a result traders brushed off the disappointing US jobless report, taking oil to $83. Gold also rose helped by a weaker dollar. Gold has been climbing 50+ off the 1100 floor. As a reminder, 1200+ was it previous (record) high.

CLG10.NYM

...Crude Oil Feb 10

...82.99

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

GCF10.CMX

...Gold Jan 10

...1,153.60

... 15.40 .......(1.4%)

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

photo: Bloomberg



Analysts expect earnings for financial companies to rise 120% in Q4 & forecast income should triple in 2010. Based on these estimates, banks are selling at a 15% discount to the S&P 500 index. However after having been burned badly in the last 2 years, money managers hesitate about putting more money into bank stocks. Financial companies are the least-favored equity group.

•Bank Profits Tripling Leaves Stocks Cheapest With 15% Discount to S&P 500


S&P Financial Index - 1 year










Not much happening as traders await Alcoa's (AA), Dow stock, to kick off earnings season. AA earnings will give a glimpse into the strength of the economic recovery.


Dow Jones Industrials --- 2 weeks

Jobs report fails to move markets

Dow dropped on the opening after the release of the jobs report & was not able to recapture interest of buyers. However Dow ended up 11 thanks to buying at the close, advancers ahead of decliners 3-2 & NAZ shot up 17 to a new post Lehman collapse high. After making progress getting off the lows of its trading range, the Financial Index lost its momentum & headed back south.


S&P 500 FINANCIALS INDEX

Value 205.09

Change -1.12

% Change -0.5%

The MLP index was up 1 to the 293s, for the first week of 2010 much of its gains came out of the gate on Mon. The REIT index fell almost 2, drifting lower in the first week of 2010. Junk bond funds made solid advances today & in the first week. Treasuries with higher, the yield on the 10-year Treasury bond rose today lowering its yield 3 basis points to 3.79%.


Alerian MLP Index --- 1 week




Dow Jones REIT Index --- 1 week










Oil & gold don't know what to make of the jobs report.

CLG10.NYM

..Crude Oil Feb 10

..82.68

.. 0.02 ......(0.0%)

GCF10.CMX

..Gold Jan 10

..1,136.10

.. 3.00 ......(0.3%)

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



Consumer credit dropped a record $17½B in Nov. Unemployment near a 26- year high discouraged borrowing & banks are limiting access to loans. The slump was more than anticipated & followed a revised $4.2B drop in Oct. The series of 10 straight declines was the longest since record-keeping began in 1943. Revolving debt, such as credit cards, plunged by a record $13.7B in Nov. Non-revolving debt, including loans for autos and mobile homes, declined by $3.8B. Consumers are cautious about spending, limiting their ability to aid the economic recovery.

Consumer Credit in U.S. Declined in November by Most on Record


% Change in revolving debt - 1 year









The discouraging jobs report leaves markets uncertain about what to do next. Treasuries are betting it signals a postponement by the Federal Reserve to raise interest rates sending Treasuries higher. Markets traded pretty much sideways in the first week of 2010. But NAZ has an upward bias while Dow is continued its 2 month flat performance.


Dow Jones Industrials --- 1 week




Nasdaq --- 1 week

Stocks lower on weak employment data

Stocks dropped on the opening on more dreary jobless news. Losses were not severe, much of of the disappointment was already factored into the markets. Dow is off 17, decliners barely ahead of advancers & NAZ is up 8. Banks also are down although the Financial Index is still up 14 from its recent lows.


S&P 500 FINANCIALS INDEX

Value 204.06

Change -2.15

% Change -1.0%

The MLP index fell ½ while the REIT index dropped 2½. REITs have lagged behind other high yielders in recent months & are vulnerable to a setback. High yield funds are still on fire (by their standards). Treasuries found some buying. The yield on the 10-year Treasury bond fell 3 basis points to 3.79%, still high & looking to go higher.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks










Oil & gold were soft on the job report. Gold is holding above 1100, becoming a key support level.

CLG10.NYM

...Crude Oil Feb 10

...82.28

... 0.38 .......(0.5%)

GCF10.CMX

...Gold Jan 10

...1,128.20

... 4.90 .......(0.4%)

GLD (ETF --- 2 weeks

Photo: Bloomberg



U.S. employers unexpectedly cut 85K jobs in Dec. The Labor Dept reported Nov payrolls were revised to show the economy actually added 4K jobs rather than losing 11K as initially reported, breaking a streak of 22 consecutive monthly losses. However, with revisions to Oct the economy lost 1K more jobs than previously estimated over the 2 months. The unemployment rate remained unchanged at 10% in Dec reflecting a surprisingly large number of people leaving the labor force. These numbers reinforce the outlook that job recovery will be very, very slow while the economy is mending. Factory payrolls keep declining, at least the rate has not been getting worse in recent months. Adding to global economic woes, Euro-zone unemployment jumped to an 11-year high in Nov & is likely to rise more in the coming year.

•U.S. Lost 85,000 Jobs in December; November Payrolls Revision Shows a Gain


Jobless Rate (%) - 1 year




Change in factory payrolls - year

Photo: Bloomberg



UPS (UPS) will cut 1,800 jobs (less than 1% of its global work force) to reposition itself for a gradual economic recovery. About 1,100 will be offered a voluntary separation package as part of the work force reduction meant to streamline its US small package segment. UPS also raised its profit forecast for Q4, citing improving operations & cost cuts, expecting EPS of 73-75¢ cents per share for Q4. UPS had previously predicted earnings of 58-65¢ per share. UPS rose $2.51 to $59.92

UPS Profit Exceeds Company Forecast, Plans to Cut 1,800 Jobs


UPS --- 1 year











Even a dismal jobs report did not rattle the markets, bulls will take this as a good sign. I don't know.


Dow Jones Industrials --- 2 weeks

Markets edge higher without conviction

Stocks were treading water but late day buying brought the Dow to a new 2009-10 closing high, above 10,600. Dow gained 33, advancers ahead of decliners 4-3 but NAZ was off 1. Banks had another good taking, the Financial Index was up 15 from is recent lows of 190. 6 month charts for 2 eminent banks are shown below. That time has been good for many stocks, but not banks.


S&P 500 FINANCIALS INDEX

Value 206.21

Change 4.21

% Change 2.1%

JPMorgan --- 6 months




Wells Fargo --- 6 months





The Alerian MLP Index cooled off, retreating 3 to the 292s. Enterprises Products Partners (EPD) is responsible for some off the decline after their large unit offering, the units fell 83¢. The 6 month chart for AMZ is still outstanding, up about 1/3! The Dow Jones REIT Index rose 2, taking it above the previous high in Sep & needing just 8 more to reach a new yearly high. But there are clouds (high vacancy rates) in the sky. Junk bond funds continue hot, many yields have fallen to only 10%. Treasuries were mixed, the yield on the 10-year Treasury bond was up 1 basis point to 3.82%.


Alerian MLP index --- 6 months




Dow Jones REIT Index --- 6 months








Oil & gold had mild pullbacks. But cold weather is working in favor of gold & long term fundamentals are good for gold.

CLG10.NYM

..Crude Oil Feb 10..

82.62

.. 0.56 ......(0.7%)

GCF10.CMX

..Gold Jan 10

..1,133.10

.. 2.80 ......(0.2%)

Gas pump prices have surged past 2009 highs as winter storms & speculative money are sending oil prices higher. The average gallon of gas was $2.71 yesterday, up 90+¢ per gallon from a year ago. In less than a month, crude prices have jumped 20% & yesterday peaked above last year's high dragging pump prices to new 15-month highs.

• Gasoline prices surpass 2009 highs- AP

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$2.709	$2.876	$2.979	$2.869	$2.332	$3.069
Yesterday Avg.	$2.685	$2.851	$2.953	$2.847	$2.328	$3.063
Week Ago Avg.	$2.639	$2.802	$2.902	$2.805	$2.294	$3.018
Month Ago Avg.	$2.634	$2.797	$2.897	$2.815	$2.268	$2.985
Year Ago Avg.	$1.727	$1.834	$1.899	$2.418	$1.551	$2.041

Highest Recorded Average Price:
Regular Unl.	$4.114	7/17/2008
DSL.	$4.845	7/17/2008

Source: AAA


Sears Holding (SHLD) was the best performing S&P 500 stock gaining 10.31 (12%) to a 15 month high on a favorable holiday sales report & upward guidance for earnings.

•Sears Holdings expects 4Q gains on Kmart strength
AP


Sears Holding --- 6 months




The Federal Reserve issued a warning to banks to prepare for rises in short term interest rates. “In the current environment of historically low short-term interest rates, it is important for institutions to have robust processes for measuring and, where necessary, mitigating their exposure to potential increases in interest rates,” was the official announcement. That means The FED will sell short term Treasury debt, of which it has a lot, driving interest rates up. Markets will shudder when this takes place.

The jobs report tomorrow morning will direct the markets.


Dow Jones Industrials --- 6 months




Nasdaq --- 6 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