Markets inch higher

Dow didn't drift fat from break even & finished with a measly gain of 8, advancers ahead of decliners 3-2 & NAZ was up 10 helped by a 2+ rise for Apple (AAPL).  Banks stock were weak, taking the Financial Index 10+ below its interim high 2 weeks ago.

S&P 500 FINANCIALS INDEX

Value	220.37
Change	-1.46  (-0.7%)

The MLP index inched up pennies in the 379s (just 2 below its record high yesterday AM) & the REIT fell another 2½ taking it 10 below its interim high (also yesterday AM).  Junk bond funds were flattish & Treasuries fell on encouraging jobs data this AM.  The yield on the 10 year Treasury bond rose a basis point to just over 3.46%.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.67%
U.S. 10-year		3.46%

Alerian MLP Index   ---   YTD



Dow Jones REIT Index   ---   YTD



10-Year Treasury Yield Index   ---   YTD




Oil climbed to a 29-month high on concern that unrest curbing exports from Libya will spread in the region. Gold rose to a record for the 2nd straight day on mounting demand for an investment haven amid surging commodity prices & turmoil in Libya.  Oil & gold contracts have shot up sharply in the last 2 weeks (see below).

CLJ11.NYM

...Crude Oil Apr 11

..........101.95

.... 2.32 (2.3%)

$$$ Gold Super Cycle $$$  

Click Here

CLJ11  (oil contract)   ---   YTD



GCH11  (gold contract)   ---   YTD




Another chart, gas prices at the pump rose to $3.39 yesterday ($4.11 is the record).

Source AAA

Photo:   Bloomberg

The US economy expanded in Jan & early Feb in all parts of the country, but businesses are under pressure to raise their prices.  A Federal Reserve (FED) survey showed that all 12 of regions reported growth at a "modest to moderate pace," though growth in the Chicago region was slower than at the end of last year.  Retail sales picked up in all regions, except for Richmond & Atlanta. Factory activity rose in all districts except St. Louis.  The survey hints at some inflationary concerns, costs are rising for manufacturers & retailers in most areas. Manufacturers in many districts said they are increasingly able to pass on those costs to customers & retailers said they have or soon will raise prices.  The FED said that overall, the economy “ continued to expand at a modest to moderate pace.”

Fed: Labor Market Strengthened on Manufacturing, Retail

Steve Jobs
Photo:   Bloomberg

Steve Jobs made a surprise return to the spotlight, taking the stage to unveil Apple's (AAPL) new iPad.  The CEO has been out on medical leave since late Jan & his reappearance bolstered AAPL shares.  Jobs took swipes at rivals & mocked competing tablet computers. He spoke passionately about the iPad 2's main features as his #2 & heir apparent Tim Cook looked on.  "We've been working on this product for a while and I just didn't want to miss today," he told a packed auditorium in San Francisco. 

AAPL is launching the next generation tablet computer just as its main adversaries are releasing their first devices.  The $499 iPad 2 is thinner than the iPhone 4, twice as fast as the last tablet, camera-equipped, & ships Mar 11 in the US (Mar 25-26 to other countries). But the fast roll-out highlights the fierce competition in the tablet market.  15M iPads were sold in 9 months, double to triple what was predicted. The company is expected to sell 30M or more this year, which would generate close to $20B despite a growing number of competitors like Motorola (MOT), Research in Motion (RIMM) & Hewlett-Packard (HPQ).  But the iPad, is priced aggressively (i.e. low margins).  Jobs also bragged that iPad has a 90% market share.  However, its share will decline with growing competition. 

Apple's Steve Jobs Appears at Event to Unveil Latest IPad in San Francisco

Apple   ---   YTD




The federal budget was extended another 2 weeks, then congress will reexamine approving a final budget for this fiscal year (which has only 6+ months left).  Next they will work on the FY2012 budget starting in Oct.  Bernanke said he is not ruling out an extension of QE2 (starting in Jul) if it is needed.  Uh, Oh!  But the major stories remain unrest in the Mideast & labor unrest in Wisc which is spreading to other states.  Today's jobs data mentioned that layoffs at the state & local level are already being felt in the numbers, a situation which will get worse in coming months.  I keep thinking defensive thoughts as gold climbs to fresh record levels.  For those interested, more information on gold as an investment is available with the button above in the discussion about gold . 

Dow Jones Industrials   ---   YTD

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Higher markets after favorable jobs report

Dow rose 49, advancers ahead of decliners 2-1 & NAZ was up 24 (anticipating good news from Apples product announcement meeting).  Bank stocks were a little higher, after yesterday's down market.

S&P 500 FINANCIALS INDEX

Value	222.42
Change	0.59  (0.3%)

The MLP index gained a fraction to over 380 while the REIT slipped a fraction to the 233s.  Junk bond funds inched higher & Treasuries were slightly lower.  The yield on the 10 year Treasury bond went up 2 basis points to 3.44%, where it has been for 3 months.

Treasury yields:

U.S. 3-month		0.13%
U.S. 2-year		0.66%
U.S. 10-year		3.44%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil traded near a 29-month high, topping $100 again, & Persian Gulf stocks slid, while gold rose to a record for a 2nd day, amid concern unrest in the Mideast will escalate.

CLJ11.NYM

...Crude Oil Apr 11

...100.30

... 0.67 (0.7%)

Gold

.......1437.30

+6.10

+0.43%

Gold Super Cycle Link! Click Here

Photo:   Bloomberg

Private employers added 217K jobs in Feb, beating expectations, estimated by the ADP Employer Services report,,  Expectations were for a rise of 175K & the Jan figure was revised 2K higher to 189K.  The ADP report comes ahead of the gov much more comprehensive labor market report on Fri, which includes public & private sector employment.  That report is expected to show a rise in overall nonfarm payrolls of 185K last month & a rise of 190K in private payrolls.  Be careful about inferring too much from today's report, prior reports have overstated the gains in jobs.

Unemployment problems continue.  The number of planned layoffs rose in Feb to its highest level in 11 months as gov & non-profit employers let workers go.  Employers announced 50K planned job cuts last month, the highest level since last Mar & a jump of 32% from 38K in Jan, according to Challenger, Gray & Christmas. Layoffs were 20% higher than the 42K announced in Feb of last year, marking the first year-over-year increase since May 2009.  However, the report said the pace of job cutting remains relatively subdued. Job cuts for Jan & Feb stand at 89K, below the 113K job cuts that were announced in the first 2 months of 2010.

ADP Estimates U.S. Companies Added 217,000 Jobs in February

• Planned layoffs hit 11 month high: Challenger- Reuters

Photo:   Bloomberg

Bill Gross, in charge of the world’s biggest bond fund - Pacific Investment Management (PIMCO), said yields on Treasuries may be too low to sustain demand for US gov debt as the Federal Reserve (FED) approaches the end of QE2 in Jun. He figures Treasury yields are about 150 basis points too low when viewed on a historical context & when compared with expected nominal GDP growth of 5%. “A successful handoff from public to private credit creation has yet to be accomplished,” Gross said. “That handoff ultimately will determine the outlook for real growth and the potential reversal in our astronomical deficits and escalating debt levels.”  In Jan, the holdings of US gov & related debt in Pimco’s $239 billion Total Return Fund (PTTRX) were reduced to the smallest proportion in 2 years. The “25 basis-point policy rates for an ‘extended period of time’ may not be enough to entice arbitrage Treasury buyers, nor bond fund asset allocators to reenter a Treasury market at today’s artificially low yields,” Gross wrote. “Yields may have to go higher, maybe even much higher to attract buying interest.”  PTTRX has done well for investors with high levels of risk aversion, a relatively modest decline in the bear market followed by a steady but modest recovery.

Gross Says U.S. Yields Too Low as Fed Approaches End of QE2

Pimco Total Return Fund  ---  3 years




Barron's pointed out a technical signal.  When a stock breaks out to the upside from resistance, it is usually a bullish sign.  But a failure to hold on to that breakout is unusual, sending bearish signals.  One fifth of the Dow 30 just did that. I'm more concerned with overbought conditions which continue. Oil markets are very unsettled, sending oil over $100.  Stock markets don't behave well when oil shoots up.  Chaos in Libya shows no sign of ending soon & oil pumped out in Libya is not making it onto the world market.  Significantly higher prices have to cut economic growth which will not be appreciated in stock markets.

Dow Jones Industrials   ---   2 weeks

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Rising oil prices bring lower stock prices.

Markets sank at the opening & kept falling during the day.  Dow sank 168, decliners over advancers 3-1 & NAZ was down 44 ahead of Apple's (AAPL) big event tomorrow when it will announce new products.  AAPL fell 4 to the 349s ahead of the meeting.  Bank stocks suffered, giving the Financial Index one bad day (a move of 5 is major).  The 230 ceiling for the index is proving to be formidable after turning bulls back twice in the last year.

S&P 500 FINANCIALS INDEX

Value	221.83
Change	-4.95  (-2.2%)

The Alerian MLP Index fell 2½, from its record yesterday, to the 379s, after doing quite well during the market run up in the last 3 months.  The REIT index had a even bigger fall, down 7 to the 234s.  Junk bond funds were generally lower while Treasuries did little.  The yield on the 10 year Treasury was flat at 3.41%.  After an initial rise in the last 3 months it has been flat while stocks were charging ahead..

Treasury yields:

U.S. 3-month		0.13%
U.S. 2-year		0.66%
U.S. 10-year		3.40%

Alerian MLP Index   ---   3 months



Dow Jones REIT Index   ---   3 months



10-Year Treasury Yield Index   ---   3 months




Oil surged to the highest level since Sep 2008 as Mideast turmoil threatened to spread from Libya to top OPEC producers such as Saudi Arabia & Iran.  Gold went over $1433, setting a new record before profit taking.  Charts for both contracts are shown below.  Investors long oil & gold have done well.

CLJ11.NYM

...Crude Oil Apr 11...

99.67...

2.70  (2.8%)

GCH11.CMX

...Gold Mar 11

....1,429.50

... 21.00 (1.5%)

*** Gold Super Cycle ***  

Click Here

CLJ11  (oil contract)   --  YTD



GCH11  (gold contract)  --  YTD

Photo:   Bloomberg

US auto sales rose more than 20% in Feb when the lure of discounts from automakers led by General Motors (GM) outweighed concerns about higher oil prices. This data puts the industry on track for its highest sales rate since Aug 2009 when the "cash for clunkers" credits spurred a short-lived boom.  GM led the industry with a 46% sales gain, stoked by incentives that also led the industry at an estimated $3,700 per vehicle on average in Feb.  But shares of Ford (F) & GM were lower amid mounting concerns about rising costs & after both carmakers posted disappointing quarterly earnings recently.  GM fell 62¢, taking it below its offering price of $33, & Ford fell 37¢.  Toyota (TM) had a 42% sales gain (off depressed results last year) & Nissan had a 32% increase after stepping up its incentive spending.  Ford & Chrysler lagged, with sales gains of 14% & 13%&, respectively.  The boom for GM & Nissan came on the back of stepped-up incentives for car buyers & dealers in a traditionally slow month for vehicle purchases & at a time when rising oil prices have emerged as a new threat to the industry.  Trucks remained popular. Sales for Nissan's Pathfinder SUV & GM's Chevrolet Silverado pickup truck both rose 60%.

GM, Toyota February Sales Top Estimates in Recovery

General Motors  --  YTD



Ford  --  YTD




Prices at the pump are shooting up.  The record was $4.11 set in Jul 2008 & we could see a new record in 2011.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.375	$3.477	$3.624	$3.729	$2.848	$3.747
Yesterday Avg.	$3.368	$3.468	$3.613	$3.713	$2.840	$3.737
Week Ago Avg.	$3.171	$3.304	$3.436	$3.564	$2.750	$3.620
Month Ago Avg.	$3.099	$3.292	$3.409	$3.432	$2.664	$3.506
Year Ago Avg.	$2.705	$2.873	$2.976	$2.875	$2.330	$3.066

Source:  AAA


Bulls have finally run into headwinds in the last 3 weeks, 12K is a tough ceiling to break thru.  The sharp rise in oil prices is unsettling for stocks.  A good rule of thumb is when oil shoots up, stocks head south & this may be the first wave of repeating that relationship.  Dow ran up 11% from 11K in 10 weeks, after upward revisions on growth rates for the US economic recovery in 2011.  But oil prices could force those revisions to be revised again, this time downward. Markets have had spectacular runs over the last 2 years & are greatly overbought. 

Dow Jones Industrials   ---   3 months

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Markets fall on worries about higher oil prices

Dow started lower but losses were reduced to only down 11, decliners ahead of advancers 4-3 & NAZ fell 5.  The Financial Index fell & is off 6 from its recent highs.

S&P 500 FINANCIALS INDEX

Value	225.04
Change	-1.74  (-0.8%)

The Alerian MLP Index fell a fraction to under 382, yesterday's new record high.  It has been reaching new highs because it's emotionally attached to the price of oil.  The REIT index fell 2½, to the 238s, from yesterdays' interim highs.  Junk bond funds inched higher while Treasuries fell after comments by Bernanke.  The yield on the 10 year Treasury bond rose 4½ basis points to 3.46%, its first rise in more than a week.

Treasury yields:

U.S. 3-month		0.14%
U.S. 2-year		0.69%
U.S. 10-year		3.46%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil rose from the lowest in a week as Libyan crude exports were curbed by fighting in the country while demonstrations planned in Iran raised concern of wider disruptions.  Gold climbed close to a record as Mideast unrest spurred demand for the metal as an investment haven.

CLJ11.NYM

....Crude Oil Apr 11

...98.40

.... 1.43

(1.5%)

GCH11.CMX

...Gold Mar 11

.....1,420.50

... 11.20

(0.8%)

Gold Super Cycle Link! Click Here

CLJ   (oil contract)   ---   2 weeks

Photo:   Bloomberg

Federal Reserve Chairman Bernanke told Congress that a prolonged rise in oil prices would pose a danger to the economy, but a more likely outcome is a temporary & modest increase in consumer prices -- not runaway inflation.  He expressed confidence that economic growth would increase this year. But it won't be strong enough to quickly lower unemployment (at 9%).  In addition, he cited other risks to the economy, including rising prices for oil, gasoline, food & other commodities, & further weakness in home prices. Most importantly, he said the economy still needs the support of its $600B bond-purchase program, downplaying runaway inflation risks that others have raised. The bond-purchase program is scheduled to end in Jun.  Bernanke says the sharp drops in the nation's unemployment rates over the last 2 months were encouraging but it will still take "several years" for unemployment to drop back to normal - around 6%.  No surprises although a reminder about the negative effects of higher gas prices sent a sobering message to the markets.

Bernanke Sees Temporary Inflation Gain From Commodities

Photo:  Bloomberg

US manufacturers expanded at the fastest pace in nearly 7 years last month, as factories continue to boost economic growth.  The Institute for Supply Management said its index of manufacturing activity rose to 61.4 in Feb, up from 60.8 in Jan. That's the highest reading since 61.4 in 2004. The ISM's index bottomed out at 33.3 in Dec 2008, its lowest point in nearly 30 years.  A reading above 50 indicates expansion & the manufacturing sector has now expanded for 19 months.  Another gauge measuring orders rose & an employment index topped 60 for only the 3rd time in a decade. But prices paid for raw materials rose for the 3rd straight month, a sign that inflation could be a problem.

Manufacturing in U.S. Expanded at Faster Pace Last Month

Photo:   Bloomberg

Google (GOOG), which powers my blog, is opening new offices in Latin America & boosting staffing levels by 50% to capitalize on its fastest-growing region.  Revenue from Latin America surged 80% last year, outpacing other markets. GOOG, with 500 people in the region, has opened branches in Santiago, Lima & Bogota to take advantage of the growth.  Dennis Woodside, Vice President, said,  “What we are seeing is the Internet coming into its own in all the Latin American markets.” He continued, “There are 650 million people in the region, and a lot of them are really coming online for the first time. Our business in Latin America is just booming.”  GOOG is seeking new growth areas to offset a maturing US market & a diminished presence in China. The US & the UK accounted for about 60% of the $29.3B revenue last year, most of which was generated by ads.  GOOG was off 5 to 608.

Google Boosts Its Presence in Latin America as Region's Sales Increase 80%

Google   ---   1 year




Markets are taking another breather following the first major pause in the otherwise straight up 3 month advance.  Dow is less than 200 away from resuming its march upward.  Stocks & the high yield sectors (stocks with higher yields) continue in demand along with gold.  That unusual connection has lasted for months, but I still feel there will be a day of reckoning.  That could be spurred by events in the Mideast, especially if the Libya situation drags on for some time.. 

Dow Jones Industrials   ---   2 weeks

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