Markets rattled by another Japanese earthquake

Japan's northeastern coast was hit by another strong earthquake. A tsunami warning for a wave of up to one meter for a coastal area has been issued to the area already ravaged by last month's tsunami.  Stocks sold off.  Dow fell 48, decliners ahead of advancers 3-2 & NAZ dropped 3.  Bank stocks had been in the black but pulled back into the red.

S&P 500 FINANCIALS INDEX

Value	224.56
Change	-0.06   (-0.0%)

The MLP Index fell a fraction in the 381s, remaining near 383+ needed for a new record, & the REIT index fell 2+ to the 234s.  Jujnk bond funds continued mixed at their high levels & Treasuries were weaker.  The yield on the 10 year Treasury bond went up 1 basis point to 3.56%, still near a 2 month high.  Crude rose to a 30-month high after a report that fewer Americans filed for jobless benefits, signaling fuel demand will grow. For the 3rd day in a row gold hit a new record high, rising to $1,466 & expectations are for it to climb over $1,550 in the near term.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.05%
U.S. 2-year		0.81%
U.S. 10-year		3.55%

CLK11.NYM

...Crude Oil May 11...

108.98

... 0.15

(0.1%)

GCJ11.CMX

....Gold Apr 11

.........1,460.30

.... 2.60  (0.2%)

Photo:   Bloomberg

New claims for unemployment benefits fell slightly more than expected last week.  They slipped 10K to 382K according to the Labor Dept (below the forecast of 385K).  Claims have now held below the 400K level that is generally associated with steady job growth for 4 weeks in a row, with the 4 week average below that mark for the 6th straight week.  The number still receiving benefits under regular state programs fell 9K to 3.72M, the lowest level since Oct 2008 (just after the Lehman collapse). The number on emergency unemployment benefits dropped 25K to 3.56M & 8.52M in total were claiming unemployment benefits.

Initial Jobless Claims in U.S. Fell 10,000 Last Week to 382,000


RPM (RPM), a Dividend Aristocrat but not a member of the S&P 500, reported a profit for its fiscal Q3 versus a loss in the prior year, beating expectations & raised guidance for the year.  CEO Frank Sullivan said RPM was pleased with its performance during the typically weak Q3 even as it faced higher raw materials costs.  "Nearly all of our business units generated strong sales increases and substantially stronger growth in earnings," Sullivan said.  EPS was a penny per share compared with a net loss of 7¢ in 2010.  Revenue rose to $679M from $667M a year earlier.  Analysts expected a loss of 5¢ on revenue of $627M. Sullivan said that the commercial construction segment is seeing improvement in the US & Europe after 2 years of depressed demand.  RPM raised guidance for the fiscal year based on the strong Q3 performance, expecting revenue growth of 7-8% to $3.35B & EPS of $1.40-1.45.  Previously the company predicted sales growth of 4-5% to $3.25B.  Analysts expect EPS of $1.38 on revenue of $3.27B.  The stock gained 1.10.

RPM International reverses loss in fiscal 3Q AP

RPM International Inc. (RPM)

The European Central Bank (ECB) raised its benchmark interest rate by 25 basis points to 1.25%. This is a rare move for the conservative bank.  The bank said it always does what is necessary to deliver price stability over the medium term.  2 more increases to 1.75% are expected by the end of the year as inflation accelerates & Germany's economy booms. But the risk is that higher borrowing costs will boost the € & exacerbate the sovereign debt crisis, which last night forced Portugal to follow Greece & Ireland in seeking a European Union bailout. The € fell half a penny to $1.42½.  Inflation breached the ECB’s 2% limit in Dec & accelerated to 2.6% last month, the fastest pace in more than 2 years.  The ECB acknowledged that surging energy & food prices are largely to blame & is worried that workers will demand higher wages in compensation, entrenching faster inflation.

Trichet Leaves Door Open to Further Rate Moves


Trading this week continued to lumber along but news from Japan is unsettling. The jobless data is encouraging although the slow steady pace of improvement is not making a big impact on the unemployment picture, especially while housing remains in its 5 year depression.  Today news from Japan will by the prime driver for stocks.

Dow Industrials (INDU)

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Higher markets on hopes in gov budget talks

Dow rose 32, advancers ahead of decliners less than 3-2 & NAZ was up 8.  Bank stocks also joined in the rally after lagging for much of the last month.  The recent rise for the Financial Index brought it back to where it was at the start of Mar. 

S&P 500 FINANCIALS INDEX<

Value	224.62
Change	2.53   (1.1%)

The MLP index was up a fraction to 382 (383+ is a new record) & the REIT was down pennies to 237.  Junk bond funds were mixed & Treasuries fell.  The yield on the 10 year Treasury bond rose 6 basis points to 3.55%, near a 2 month high   There is growing nervousness about higher interest rates on Treasuries.  Oil is pushing $109 & the chart for gold shows it setting new records (green line) for a 2nd day.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.05%
U.S. 2-year		0.83%
U.S. 10-year		3.55%

CLK11.NYM

...Crude Oil May 11

...108.70

... 0.36   (0.3%)

Gas prices have risen for 15 days straight days & are getting closer to the all-time high of $4.11, reached in 2008.  In the past 3 weeks alone, prices have jumped 4%. YTD, gas prices are up a whopping 20% & it's not even summer driving season yet, when prices tend to peak. The increase is largely being fueled by higher oil prices which have risen as oil producing nations in North Africa & the MidEast wrestle with chaos which has sparked a 24% spike in oil prices over the last 12 months. 

• Gas prices rise along with oil- CNNMoney

Source:    AAA

Dennis Lockhart, President of the Federal Reserve (FED) Bank of Atlanta said he doesn’t expect the central bank to tighten US monetary policy by the end of the year with inflation still low & the economic recovery fragile.  “I wouldn’t rule it out entirely, but at this stage I personally am not leaning in the direction of thinking that is absolutely required,” Lockhart said at an Atlanta conference.  FED policy makers at a meeting last month differed over whether to begin removing record stimulus in 2011, according to minutes of the Mar 15 meeting. “A few participants indicated that economic conditions might warrant a move toward less-accommodative monetary policy this year; a few others noted that exceptional policy accommodation could be appropriate beyond 2011,” according to the minutes.  “The rest of this year in the scheme of things is a fairly long time,” Lockhart said. “You have to remain somewhat flexible, and the recent history of macro events has reinforced that view with Japan and with the Middle East developments.”

Lockhart Not ‘Leaning’ to Fed Policy Tightening By Year-End


Sprint Nextel (S) & Verizon Wireless (VZ) cut the price of the Galaxy Tab tablet computer for the 2nd time this year, signaling more competition for the iPad from Apple (AAPL). The Tab, made by Samsung, now costs just $199.99 with a 2-year wireless-service contract. In Jan, Sprint cut the price to $299.99, while VZ reduced the price to $499.99.  The cheapest iPad 2, which has Wi-Fi only, is priced at $499.  AT&T, #2 carrier, has held the price for the Tab at $549.99 after slashing it $100 earlier this year.  It's hoped the lower initial price & carrier promotion will help boost demand for the devices.  Wi-Fi tablets connect to the Web using so-called hotspots available in bars, hotels & users’ homes.  The 95% market share of this market that AAPL was proud of will fall (but in a rapidly growing market).

Samsung Tablet Price Cut to $200 by Carriers in Rising Challenge to IPad


In the last 3 weeks, Dow has only had 4 minor setbacks.  Overall, it's up an incredible 850!  The Alerian MLP Index has a similar story, but with a more modest rise of 13.  Problems around the world do not bother the bulls.  Today there is a lot of apprehension about a shutdown of the federal gov by week's end.  Those who like less gov wouldn't mind but it will cause a lot of grief beyond gov workers losing pay.  Now there's talk of hope regarding budget cuts in DC.  Not sure what that means let alone if it will much to  reduce massive deficits.  This has been a sideways week for the markets, but they've been inching up to new multi year highs.  The rest of the week should see more of the same.

Dow Industrials (INDU)

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Stocks extend gains as gold reaches new record levels

Stocks keep climbing.  Dow was up 30 to a new 2½ year high, advancers ahead of decliners 3-2 & NAZ was up 6.  Bank stocks were also strong but the Financial Index has been flat over the last month.

S&P 500 FINANCIALS INDEX

Value	223.44
Change	1.35    (0.6%)

The Alerian MLP Index rose a fraction to the 382, just 1 under its record reached a month ago, while the REIT index continued flat at 237.  Junk bond funds inched higher & Treasuries were weak.  The yeld on the 10 year Treasury bond rose 3 basis points to 3.52% (its highest level in a month).  Oil prices held near a 2-1/2 year peak, supported by unrest in the Middle East & North Africa & dollar weakness ahead of an expected European Central Bank interest rate increase.  Gold gained to a record for a 2nd day as rising inflation spurred demand for an investment haven & the dollar slumped against the €.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.06%
U.S. 2-year		0.82%
U.S. 10-year		3.50%

CLK11.NYM

Crude Oil May 11

108.70

0.36 (0.3%)

Photo:  Yahoo

Rising oil prices are threatening to halt US economy's gains.  Partly because of flat wages, households have been struggling to pay higher gas prices.  The average for gas was $3.71 yesterday, according to AAA (up 88¢ from a year ago).  Airlines, shipping companies & other US businesses are being squeezed. The rising prices are further straining an economy struggling with high unemployment & a depressed housing market. Unlike other kinds of consumer spending, gas purchases provide less benefit for the economy as about half the revenue flows to oil exporting countries like Saudi Arabia & Canada.  For consumers, more expensive energy siphons away money that would otherwise be used for household purchases, from cars & furniture to clothing & vacations. Two-thirds of Americans say they expect rising gas prices to cause hardship for them or their families in the next 6 months, according to a new Associated Press-GfK Poll. 71% say they're cutting back on other expenses to make up for higher pump prices & 64% say they're driving less. 53% say they're changing vacation plans to stay closer to home.  Rising fuel prices are pinching businesses too.  It has been estimated that higher oil prices shaved 0.5% from growth rate in Q1 & will likely have a larger negative impact in Q2.

Rising oil prices beginning to hurt US economy AP

Photo:   Yahoo

Rising corn seed sales helped boost Monsanto (MON) fiscal Q2 profits, climbing 15% above last year as corn seed revenue jumped 7%. The company is rolling out more expensive brands of genetically altered corn seeds & is competing fiercely for market share against other seed developers.  Earnings beat estimates but its forecast for the year was below expectations.  EPS rose to $1.88 for the qtr ended Feb 28 compared with $1.60 a share, a year ago.  Revenue increased 6.2% to $4.13B (including $2.4B in corn seed revenue).  Analysts expected earnings of $1.84 on revenue of $4.15B.   The company affirmed full-year earnings forecast of $2.72-2.82 on an ongoing basis & $2.66-$2.79 on an as-reported basis. But analysts expect EPS of $2.85.  The stock fell 3.23 to 70.

Monsanto posts 2Q profit but forecast disappoints AP

Monsanto Company (MON)

The Toyota Prius hybrid has become a mainstream vehicle in the US.  Toyota (TM) announced that it had passed the million sales milestone, helped by brisk sales recently as US gas prices continued to rise toward $4 per gallon.  The Prius, powered by both a gas engine & an electric motor, gets an estimated 51 MPG in the city & 48 on the highway. Aside from electric vehicles, it is the most fuel-efficient car in the US, according to the Environmental Protection Agency. TM began selling the Prius 11 years ago when gas prices were low. In Q1, TM sold nearly 43K, 52% more than last year, according to Autodata. In 2010, the company sold more than 140K.  Worldwide sales topped 2M last year & TM said its total global hybrid vehicle sales passed the 3M mark last month.  TM fell 13¢.

Toyota sells 1 millionth Prius hybrid in US AP

Toyota Motor Corp Ltd Ord (TM)

This is another quiet day but there is little selling.  MLPs are red hot again & just a whiff of wind will bring the index to a new record high (although the yield has been reduced to 5.9%).  Gold, however, is the hottest investment & its strength during these times of trouble around the world does not send positive signals for further advances in stocks even though both have been advancing for months.  They're not supposed to advance at the same time..

Dow Industrials (INDU)

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Stocks waver while gold reaches a new record high

Stocks hardly budged after staying close to break even all day.  Dow fell 6, advancers ahead of decliners 5-4 &  NAZ was up 2.  Bank stocks were also flattish. 

S&P 500 FINANCIALS INDEX

Value	222.09
Change	-0.23    (-0.1%)

On profit taking, the MLP index fell a fraction in the 381s while the REIT index was flat in the 237s.  Junk bond funds actually declined, about ½%.  Treasuries were weaker, the yield on the 10 year Treasury bond rose 5 basis points to 3.49%. Oil slipped from the highest level in more than 30 months on signs demand may drop in the US. & China, the largest consuming countries.  Gold futures surged to a record of $1,456 an ounce (green line on the chart below) as sovereign-debt concerns boosted demand for the precious metal as an alternative asset.

ALERIAN MLP INDEX

Value	381.64
Change	-0.42   (-0.1%)

Treasury yields:

U.S. 3-month		0.07%
U.S. 2-year		0.82%
U.S. 10-year		3.49%

CLK11.NYM

...Crude Oil May 11

...108.03

... 0.44

(0.4%)

Photo:   Bllomberg

Federal Reserve (FED) officials raised concerns last month that a big jump in energy prices could weaken the economy & unleash inflation, prompting a few to suggest the possibility of tightening credit this year.  Such a move usually involves boosting interest rates, although the minutes from the FED closed-door meeting on Mar 15 did not specify that.  It simply noted that a "few members" (probably a minority) raised that possibility.  Another group said the FED might need to keep holding interest rates at record low levels beyond this year.  The differing viewpoints about potential future policy actions highlight a growing number of challenges facing the economy, which all the members agreed was improving.  The differing viewpoints about potential future policy actions highlight a growing number of challenges facing the economy, which all the members agreed was improving.   At last month's meeting, the FED offered its most optimistic assessment of the economy since the recession. FED policymakers said the recovery was finally on "firmer footing." Companies had stepped up hiring & both consumers & businesses were spending more.  Still, the minutes noted that FED members discussed possible pitfalls, both at home & abroad.  Higher prices for oil, food & other commodities are a major concern. So is unrest in the MidEast & uncertainties stemming from the nuclear & economic crisis in Japan, the world's 3rd-largest economy.  More of the same from the FED, QE2 only has about 80 days to run.
.
Fed Officials Divided Over Tighter Policy in 2011, Minutes Show


Mar sales at US retail chains probably dropped modestly, held back by the combination of a later Easter & higher gas prices.  Department stores are expected to post the biggest declines after tallying huge gains a year earlier, when consumer demand picked up steam & shoppers bought spring clothing.  Mar sales at stores open at least a year are likely to show a 0.7% fall across 25 chains tracked by Thomson Reuters. Mar same-store sales jumped 9% last year, when Easter was on Apr 4. This year the holiday lands on April 24. Low consumer confidence & higher food & gasoline prices appear to be tempering any major recovery, even though shoppers have started to see improving economic data.  The Intl Council of Shopping Centers (ICSC) & Goldman Sachs just reported that sales rose 2.8% last week. The ICSC said it expected same-store sales to be flat to up 2% for Mar.  The Standard & Poor's retail index was up 1.5% on Tues & has risen 2.7% since Feb sales were reported on Mar 3.

U.S. Service Industries Grew Less Than Forecast in March

John Chambers
Photo:   Bloomberg

John Chambers, CEO of Cisco (CSCO), a Dow stock, in a remarkably candid memo to employees, admitted the one-time technology bellwether & Wall Street darling has lost its way & will need to change to restore its credibility.  Chambers, confessed in an internal email that CSCO had been slow to make decisions, fallen down on execution & lacked discipline in an aggressive expansion.  "We have been slow to make decisions, we have had surprises where we should not, and we have lost the accountability that has been a hallmark of our ability to execute consistently for our customers and our shareholders," Chambers wrote. "That is unacceptable. And it is exactly what we will attack."  The last 2 quarterly results disappointed the market.  "Bottom line, we have lost some of the credibility that is foundational to Cisco's success - and we must earn it back," he wrote. "Our market is in transition, and our company is in transition. And the time is right to define this transition for ourselves and our industry."  The stock sort of liked the news, up 16¢.

Cisco CEO Will Make Targeted Moves to Fix ’Lost Credibility’

Cisco Systems, Inc. (CSCO)

Price at the pump was almost $3.69 yesterday.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.685	$3.821	$3.950	$3.993	$3.086	$4.062
Yesterday Avg.	$3.662	$3.800	$3.927	$3.985	$3.089	$4.065
Week Ago Avg.	$3.587	$3.726	$3.857	$3.960	$3.037	$3.997
Month Ago Avg.	$3.503	$3.634	$3.763	$3.863	$2.929	$3.854
Year Ago Avg.	$2.828	$3.003	$3.111	$2.986	$2.331	$3.068

Source:   AAA


Dow has had a steady climb of 800 off its lows 3 weeks ago.  Maybe it needs a breather.  There could be a shutdown of the federal gov on Fri if there is no agreement on this year's budget & related budget cuts.  Who knows?  Markets might take that as a plus & rally.  The rest of the week may see more sideways trading as markets prepare for earnings season starting next week.

Dow Industrials (INDU)

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