HIgher oil prices push stock prices lower

Dow fell 88 (90 above its lows), decliners ahead of advancers 2-1 & NAZ dropped 14.  Bank stocks led the market lower & the Financial Index is 9 below its high 2 weeks ago.

S&P 500 FINANCIALS INDEX

Value	222.13
Change	-2.97  (-1.3%)

The Alerian MLP Index fell 1+ to the 379s while the REIT index dropped 2 to 233. The chart below is for AMJ, a fund that tracks the Alerian MLP Index.   Junk bond funds sold off but Treasuries rose for the first time in 3 days after a gov report showed the economy added fewer jobs than expected & wage growth was flat in Feb.  The yield on the 10 year Treasury bond fell 8 basis points to 3.49%.

Treasury yields:

U.S. 3-month		0.11%
U.S. 2-year		0.67%
U.S. 10-year		3.49%

JPMorgan Chase Capital XVI (AMJ)  --  3 months





Oil prices hit a 29-month high after the gov reported the unemployment rate fell to 8.9% in Feb. Gold rose on mounting tensions in Libya that boosted the appeal of the precious metal as an investment haven.  Gold is just below its record highs reached this week & it will march higher.

CLJ11.NYM

....Crude Oil Apr 11

...104.40 ...

... 2.49 (2.4%)

GCH11.CMX

...Gold Mar 11

.......1,426.60

... 10.60

(0.8%)

$$$Gold Super Cycle$$$  

Click Here

Yesterday the average price for gas at the pump was $3.47, up about 40¢ YTD.  At $4,12, it will establish a new record.  There are all kinds of estimates about how big an increase in the price of gas is needed to reduce the GDP growth rate by 1%.  The price rise is becoming a huge problem for the economy!

Souce:  AAA

Gasoline prices are setting records across Europe & exceeding $4 a gallon in California as crude oil prices keep climbing.  Households are cutting back on travel, cinema visits & groceries in the UK., where prices jumped to 130.68 pence per liter ($8.06 a gallon) yesterday. Prices set records in the Netherlands & Italy today. Brent oil’s rise as high as $119 has pushed fuel costs up & put the economic recovery at risk. The impact on consumer prices may push the European Central Bank to raise interest rates as soon as next month to discourage higher wages & head off the threat of an inflationary spiral.

Record Gasoline Grips Europe, California Faces $4 a Gallon


Buyers returned in the last hour of trading to limit the damage.  Or maybe sellers gave up to take an early weekend holiday.  The jobs report was pretty good although some were disappointed that good was not "good enough."  There is a fair amount of turmoil going on in the world, not good for stock markets which value predictability.  Dow is back to where it was one month ago.  Next week could be a tough week for stock markets.  But gold continues to glitter!!

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Markets fall on $104 oil

Stocks fell at the start following mixed news of encouraging economic data & higher oil prices.  Go figga, although higher oil prices would be a drag on any stock market advance.  Dow is down 71, decliners over advancers 2-1 & NAZ fell 12.  Bank stocks are leading the decline.

S&P 500 FINANCIALS INDEX

Value	222.25
Change	-2.85   (-1.3%)

The weaker stock market took the MLP index down 1½ to the 379s & the REIT index fell the same to the 233s.  Junk bond funds werre mixed at their lofty levels with only moderate yields & Treasuries were flattish.  The yield on the 10 year Treasury bond slipped a fraction of a basis point to 3.52%.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.70%
U.S. 10-year		3.52%

Oil advanced, heading for its 6th weekly gain, as civil unrest in Libya fueled concern that supply disruptions will be prolonged while employment data from the US showed signs of growing demand. Gold also was strong on continued civil unrest in the Mideast.

CLJ11.NYM

....Crude Oil Apr 11

...103.80

..... 1.89

(1.9%)

GCH11.CMX

...Gold Mar 11

.......1,426.20

... 10.20

(0.7%)

Gold Super Cycle Link! Click Here

Private employers added 222K jobs last month, the most since Apr, showing that companies are feeling more confident in the economy & about their own financial prospects. It also bolstered hopes that businesses will shift into a more aggressive hiring mode to boost the economic recovery.  The unemployment rate is now at the lowest point since Apr 2009 after falling for 3 months, down from 9.8% in Nov (the sharpest 3-month decline since 1983).  The number unemployed dipped to 13.7M (almost double since before the recession).  After factoring in the number of part-time workers who would rather be working full time and those who have given up looking for work, the percentage of "underemployed" people dropped to 15.9%, the lowest in nearly 2 years.  The number of "long-term" unemployed, out of work 6 months or more, sank to 5.99M, a decline of 217K from Jan.  That's what you call good news on the jobs front.

U.S. Payrolls Rose 192,000; Jobless Rate at 8.9% in February



Businesses ordered more manufactured goods from US factories in Jan, but excluding a big surge in demand for airplanes, the rise in demand was the smallest in 3 months.  Excluding the volatile transportation category, orders rose 0.7%, the weakest showing since Oct, according to the Commerce Dept.  Helped by the surge in demand for commercial aircraft, total business orders rose 3.1%, the biggest gain in more than 4 years. That pushed total orders up to $445.6B, a level viewed as healthy & 26.3% above the recession low hit in Mar 2009.  Demand for durable goods rose 3.2%, an upward revision from a preliminary estimate last week of 2.7%. Demand for nondurable goods such as chemicals, paper & food rose 3.1%, the same as the Dec increase.  But orders for nondefense capital goods excluding aircraft fell 6.2%, the biggest drop in 2 years. This category is closely watched because it is viewed as a good indicator of business plans to invest to expand & modernize their operations.

Orders to U.S. Factories Climb by Most in More Than Four Years on Recovery

Photo:   Bloomberg

The Federal Reserve (FED) is signaling its favors an abrupt end to $600B in Treasury purchases in Jun, jettisoning a prior strategy of gradually pulling back on intervention in bond markets.  “I don’t see a lot of gain to reverting to a tapering approach,” said Dennis Lockhart, Atlanta FED President said. “I don’t think that is necessary,” Charles Plosser, Philadelphia FED President, said last month.  Central bankers, who next meet Mar 15, are about half way through the 2nd round of bond purchases.  It's believed the New York FED is buying around $80B a month in Treasuries.  When these purchases end, it will be felt in all markets.

Fed Policy Makers Signal Abrupt End to Bond Purchases in June


I mentioned yesterday that the good news from the jobs report could have been already baked into the markets.  It seems that's what happened.  Oil is pushing on $104, higher oil prices are not friendly to rising stock markets.  The continued chaos in Libya & nervousness about what's next in the Mideast is dominant today in traders' thinking.  Dow is back to where it was a month ago despite a the flow of news stories about the economic recovery in the US.  Sorry there are no charts, but I'm having problems fitting them into the space allocated.  Hope to have that fixed soon.

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Strong market advance on favorable economic data

Dow cllimbed 191 on increased optimism about the US recovery, advancers over decliners almost 4-1 & NAZ was up 50 (propelled by a 7+ advance for Apple after showing off its new iPad yesterday).  Bank stocks had an excellent day, giving the Financial Index a major gain.

S&P 500 FINANCIALS INDEX

Value	225.10
Change	4.73  (2.1%)

The Alerian MLP Index gained 1+ to 381, just short of setting another record high.  The REIT index was up 3½ to the 235s.  Junk bond funds were higher while Treasuries had a huge selloff.  The yield on the 10 year Treasury bond shot up 11 basis points to 3.57%, clearly above the 3.40% plateau it had been on for a few months.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.78%
U.S. 10-year		3.57%

Alerian MLP Index   ---   3 months



Dow Jones REIT Index   ---   3 months



10-Year Treasury Yield Index   ---   3 months




While oil slipped, it still has a very bullish chart suggesting higher prices are ahead.  Gold fell the most in 6 weeks after Venezuela offered to mediate a resolution to the crisis in Libya.  I find it difficult to bet on anything from Venezuela.

CLJ11.NYM

...Crude Oil Apr 11

...101.91

...... 0.32

(0.3%)

GCH11.CMX

...Gold Mar 11

...,,,1,416.00

... 21.20 (1.58%)

+++ Gold Super Cycle +++ 

Click Here

CLJ11  (oil contract)  --  YTD





Shoppers gave retailers surprisingly strong sales gains in Feb, extending the momentum from a strong holiday season.  Worries are growing, however, that rising gas prices could sap shoppers' spending in the spring.  Among major retailers reporting, Limited Brands (LTD), JC Penney (JCP). & Macy's (M). had gains that beat expectations. Luxury retailers including Saks (SKS) saw sales surge as the affluent kept spending but Target (TGT) announced an increase slightly below projections & Gap (GPS) reported a bigger-than-expected drop.  The ICSC said that its index of 28 retailers rose 4.2% for Feb compared with the same month last year, well above projections for a 2½-3% increase. The gain follows a revised 4.7% increase for Jan, after the best holiday season since 2006.  The figures are based on revenue at stores open at least a year, considered a key indicator of a retailer's health.  The stocks were mixed, SKS led the pack rising 4%.

February Retail Sales Beat Estimates, Led by Macy’s, Penney

Limited Brands   ---   1 year



JC Penney   ---   1 year



Macy's   ---   1 year



Saks   ---   1 year



Target   ---   1 year



The Gap   ---   1 year




The average price at the pump was $3.43 yesterday, climbing toward the record $4.11 set in 2008

Source:   AAA


The advance was so strong today, it asks the question, "What is left to do tomorrow after a good employment report?"  The spike up in Treasury yields & plunge for gold prices coordinate with the rise in the stock markets.  But higher rates bring higher mortgage rates (along with other business borrowings).  International tensions remain quite high while the military is evaluating options reagrding Libya (along with other countries in the area).  Higher inflation from increased gasoline & food prices are major threats to the economy.  But currently, stock markets are not concerned so stock prices should continue to rise.

Dow Jones Industrials   ---   3 weeks

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Markets rally on lower unemplyment claims

Dow gained 167, advancers ahead of decliners 7-2 & NAZ was up 40 (helped by a strong gain in Apple stock).  Bank stocks were also in a recovery mode. 

S&P 500 FINANCIALS INDEX

Value	224.06
Change	3.698  (1.7%)

The MLP index gained 1¾ to the 381s & the REIT index was up 3 to the 234s, recovering after a steep 2 day slide.  Junk bond funds inched higher while Treasuries sold off on the good news about the economy. The yield on the 10 year Treasury bond rose 7½ basis points to 3.53%, its highest level in almost 4 weeks. 

Treasury Yields:

U.S. 3-month		0.12%
U.S. 2-year		0.75%
U.S. 10-year		3.54%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil saw profit taking on the possibility of calm coming to Libya & gold fell from a record level after Venezuela (hard to believe) offered to mediate a resolution to the crisis in Libya.

CLJ11.NYM

...Crude Oil Apr 11

...101.95

..... 0.28

(0.3%)

GCH11.CMX

...Gold Mar 11

......1,422.70

... 14.50

(1.0%)

Gold Super Cycle Link! Click Here

Photo:  Bloomberg

The number of people requesting unemployment benefits last week plunged to a nearly 3-year low, bolstering the likelihood that companies will increase the pace of hiring this year.  Applications for unemployment benefits fell 20K to 368K according to the Labor Dept, the 3rd decline in the past 4 weeks. Applications are at their lowest level since May 2008.  The 4-week average fell to 388K, the lowest level since Jul 2008 (the last time the average was below 400).  It is expected that the Feb employment report tomorrow will show strong job gains - 175K jobs.  The number receiving unemployment benefits dropped to 3.77M, the lowest level since Oct 2008. That doesn't include millions enrolled in emergency unemployment benefit programs funded by the federal gov.  An additional 4.5M unemployed received benefits under the extended programs & 9.2M were on the benefit rolls.  The faviorable jobs report was no great surprise, but hearing the news warms the hearts of the bulls.

U.S. Initial Jobless Claims Fall to 368,000, Lowest Since 2008


Last week, consumer confidence held close to the highest level in almost 3 years as more Americans said their finances were in good shape. The Bloomberg Consumer Comfort Index (formerly the ABC News U.S. Weekly Consumer Comfort Index) was minus 39.3 in the period to Feb 27, compared with minus 39.2 the prior week. Respondents’ view of their financial situation climbed to an almost 2-year high.  A 2-percentage-point cut in payroll taxes this year is trickling into bank accounts. Extra money & an improving job market are helping cushion the pinch from the biggest one-week jump in gas prices in 5 years.  The comfort index of personal finances rose to 2.4 last week, the highest since May 2009, from minus 2.3. 51% of those polled held positive views on their financial situation, up from 49% in the previous week & the first time in almost 2 years that the reading topped 50%.  Another indication about an economic recovery although higher gas prices will start pinching these numbers soon.

Income Optimism Keeps U.S. Comfort Index Near High


AT&T (T) and Verzon (VZ), both Dow stocks, will provide service for the Apple (AAPL) iPad 2.  This  follows announcement by AAPL that it sold 15M iPads between Apr-Dec last year.  AAPL is hot again, shooting up 7 to 359 (5 below its recent record).   The other 2 stocks hardly budged. 

AT&T, Verizon to provide iPad 2 serviceat bizjournals.com

Apple   ---   YTD



AT&T   ---   YTD




Verizon   ---   YTD




Buyers are coming out of the woods today, taking the Dow within 150 of its recent recovery high.  This is one of those days when all that is needed to pick a winner is to throw darts.  Tomorrow the Feb jobs report will be released & expectations are very high.  The problem is to figure out how much of the good news is already baked into the markets.

Dow Jones Industrials   ---   2 weeks

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