Markets advance despite lower consumer confidence readings

Dow rose 42, advancers ahead of decliners 3-2 & NAZ gained 15.  Bank stocks were weak.

S&P 500 FINANCIALS INDEX

Value	218.84
Change	-0.55  (-0.2%)

The Alerian MLP Index fell 1 to the 375s & the REIT index was little changed at 331 as were junk bond funds & Treasuries.  Oil fell to the lowest level in a week as Libyan rebels advanced against gov troops near the hometown of Qaddafi.  Gold continues in its 1415-1425 range. 

JPMorgan Chase Capital XVI (AMJ)

Treasury yield:

U.S. 3-month		0.09%
U.S. 2-year		0.79%
U.S. 10-year		3.44%

CLK11.NYM

...Crude Oil May 11

...103.87

... 0.11

(0.1%)

Photo:   Bloomberg

A monthly survey said soaring prices in gas & other household costs pulled down consumer confidence in Mar.  The Conference Board's Consumer Confidence Index fell more than expected to 63.4 from a revised 72.0 in Feb & below expectations of 65.4.  The decline reverses 5 straight months of improvement & raises concern about shoppers' ability & willingness to spend in coming months.  Consumers’ assessment of current conditions improved in Mar. Those claiming business conditions are “good” increased to 15.1% from 12.4%, while those claiming business conditions are “bad” decreased to 37.0% from 39.3%. But those saying jobs are “hard to get” edged up to 44.6% from 44.4%, while those stating jobs are “plentiful” dipped to 4.4% from 4.9%.  The proportion of consumers expecting business conditions to improve over the next 6 months declined to 20.6% from 25.2%, while those anticipating business conditions will worsen increased to 16.2% from 10.3%.  The proportion of consumers expecting an increase in their incomes declined to 15.3% from 17.4%.  The effects of higher priced gas is being felt by consumers.

U.S. Consumer Confidence Fell to a Three-Month Low in March


The Federal Reserve may be able to cut about $100B from its plan to buy Treasuries as the economy rebounds, said James Bullard, St. Louis Fed President. “We are still feeding the fire at this moment, so I think we have to start thinking about turning this around in the near future,” Bullard said  while attending a financial conference Europe. “If the economy is as strong as I think and hope it will be in 2011, I think it will be time for us to start to reverse our ultra-aggressive and ultra-easy monetary policy.”  This brings selling to Treasuries, raising their yields.

Fed’s Bullard Says QE Cuts Could Be About $100 Billion

Photo:   Bloomberg

The credit rating for Greece was cut 2 steps by Standard & Poor’s on concern the country may be required to restructure its debt & bondholders may lose out.  The rating was lowered to BB- from BB+ by S&P & the outlook remains negative.   In addition, S&P lowered sovereign credit ratings for Portugal to BBB-/A-3 (BBB- is the lowest investment grade). A meeting of EU leaders on Fri affirmed a decision earlier this month to ease the terms of 110B € ($155B) in emergency loans granted to Greece last year in return for a program of budget cuts. They also agreed that repayment of loans granted through the European Stability Mechanism, the region’s permanent debt crisis mechanism from 2013, would take a priority in the event of a debt restructuring. S&P said earlier in Mar that the agreement would be “detrimental” to existing bondholders.  There is good reason for more European sovereign debt worries.

Greece's Rating Cut Two Levels to BB- by S&P on Debt-Restructuring Concern

Portugal Credit Rating Is Lowered by S&P to BBB-, Lowest Investment Grade



Markets are quiet again going into the end of Q1 on Thurs.  But the health of European debts is being questioned which has the potential to drag down all stock markets if conditions get ugly (like they did last May).  The lower readings for consumer confidence is troubling for the US economy & they is likely to get worse with further increases in gas prices.  MLPs are doing well, the index is within striking distance of setting new record highs.  Enterprise Products (EPD), the largest MLP, just announced increases in its capital projects (an indication of why the index is doing so well).

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Markets fall on late day selling

Dow lost 22, decliners ahead of advancers 3-2 & NAZ dropped 12.  Japan's nuclear disaster & civil unrest in the Mideast & North Africa have increased market volatility in recent weeks.   Bank stocks were also slipping & sliding in late day trading. 

S&P 500 FINANCIALS INDEX

Value	219.39
Change	-0.67  (-0.3%)

Selling hit MLPs, taking the index down 1.80 to the 367s while the Dow Jones REIT index fell pocket change to 231 & junk bond funds were about even.  Treasury notes fell as the Treasury sold $35B of 2-year notes at the highest yields in almost a year.  The yield on the 10 year Treasury bond continues in its sideways range centered around 3.4%.  Oil was lower amid confusions of the goings on in the Mideast & disruptions of supllies from Japan.  Gold was volatile as investors weighed recent highs in precious metals & looked to lock in profits ahead of Q2.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.08%
U.S. 2-year		0.76%
U.S. 10-year		3.45%

CLK11.NYM

...Crude Oil May 11

...103.88

... 1.52  (1.4%)

GCH11.CMX

...Gold Mar 11

........1,419.80

... 6.30

(0.4%)

EBay (EBAY) will pay $2.4B for GSI Commerce (GSIC), which operates websites for retailers like Toys R Us & Bath & Body Works.  GSIC runs websites, packs & ships products & offers interactive marketing services to a variety of retailers. It has long-term contracts with 180 retailers, including Radio Shack, Ace Hardware & American Eagle Outfitters.  EBAY hopes the acquisition will bolster its ability to connect buyers & sellers around the world. In addition, it could also help EBAY become more of a threat to Amazon (AMZN).  Lots of businesses need help doing things like generating demand for products, running their websites, delivering goods to customers & growing mobile sales. GSIC does this for large companies & EBAY & PayPal do this for small to medium-sized companies.  EBAY will pay $29.25 per share, a 51% premium over GSI's prior closing price. The $2.4B total is the 2nd-largest amount eBay has paid for another company (in 2005 EBAY paid $2.6B for Skype, which it has since sold).  The deal should close in Q3. EBAY said 2011 EPS will be 30-34¢ lower than its earlier outlook (in Jan, it had forecast EPS of $1.56-1.61) but adjusted EPS won't be affected (the company had forecasted $1.90-1.95).  EBAY expects the acquisition to add to EPS in 2012.  EBAY fell $1.36 to $30.34 & GSIC jumped $9.82 to just under the offering price.

EBay Agrees to Buy GSI Commerce for $2.4 Billion to Add Marketing Services

eBay Inc. (EBAY)

Acer, the world’s 2nd- largest maker of personal computers fell 6.9%, the most in 2 weeks in Taipei, after the company lowered its forecast for Q1 sales.  Q1 revenue from personal computers may fall about 10% from the previous qtr because of “relatively weaker” demand in Western Europe & the US. The company said Q2 sales are expected to be little changed from Q1, attributed to possible supply disruptions caused by the earthquake in Japan.  In Feb, Acer said Q1 shipments & sales would rise 3% from Q4 2010.  Asustek Computer (maker of this netbook) fell 5.7% & Compal Electronics dropped 5.2% on fears that they are among electronic companies that may cut their forecasts because of possible component shortages.These won't be the only companies to be affected.

Acer Falls in Taipei After Saying First-Quarter PC Sales to Miss Forecast


Gas prices at the pump are rising, up to $3.58+ yesterday.

Source:   AAA


There was another tech merger besides EBAY.  Merger Mon lived up to its reputation, but that didn't help stocks.  Q1 ends on Thurs, making it difficult to understand fluctations as fund managers adjust portfolios.  On the good side, nothing significant was decided in trading.  But we haven't heard the last about supply disruptions & other types of problems from Japanese companies.

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Markets rise on higher consumer spending

Dow was up 26, advancers ahead of decliners 3-2 & NAZ gained 5.  Bank stocks rose slightly.

S&P 500 FINANCIALS INDEX

Value	220.53
Change	0.47  (0.2%)

The MLP index rose 1+ to the 379s (384 is needed for another record) while the REIT index slipped a fraction to 230.  Junk bond funds were pretty much even, near multi year highs.  Treasuries fell, pushing 10-year note yields to the highest level in more than 2 weeks, as a gain in personal spending supported speculation the Federal Reserve may end its debt-purchase program early. Oil fell for a 3rd day on concerns that territorial gains by Libyan rebels may quicken a resolution to the country’s civil war.  Gold declined for a 3rd day from profit taking & signs the U.S. economy is improving.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.08%
U.S. 2-year		0.76%
U.S. 10-year		3.46%

CLK11.NYM

...Crude Oil May 11

...104.18

..... 1.22

(1.2%)

GCH11.CMX

...Gold Mar 11

........1,415.60

... 10.50  (0.7%)

Photo:   Bloomberg

Consumers spending rose in Feb at the fastest pace in 4 months, but a big part of the increase went to cover higher gas prices.  The Commerce Dept said that consumer spending jumped 0.7%. Personal incomes rose 0.3% after a 1.2% Jan increase (the biggest in nearly 2 years). Both gains reflected a Social Security tax cut, which boosted take-home pay.  Excluding inflation, the 0.7% spending rise was a more moderate 0.3%. Much of spending is being eaten up by higher priced goods (i.e. fuel).  Incomes after taking into account required tax payments rose 0.3%, the same as the overall increase in incomes. But after adjusting for inflation, after-tax incomes slipped 0.1%.  Because of higher gas prices, it is estimated that consumer spending will grow only 2-2.5% in Q1, down sharply from 4% in Q4 (fastest pace in 4 years). Higher oil prices are threatening to sap that momentum this year.  In Feb, spending on durable goods rose 1.7% (largely on new cars) while spending on nondurable goods rose 1.5%, reflecting higher prices for gasoline.  Over the past 12 months, core inflation, is up a modest 0.9%.  Higher gas prices are pinching & this will get worse.

U.S. Consumer Spending Rose More Than Forecast in February


More Americans signed contracts to buy homes in Feb, but sales were uneven across the country & not enough to signal a rebound in the housing market.  The National Association of Realtors said its index of sales agreements for previously occupied homes rose 2.1% last month to a reading of 90.8. Sales rose in every region but the Northeast.  Signings were 19.6% above the Jun reading, the low point since the housing bust. Still, the index is below 100, which is considered a healthy level. The last time it reached that point was in Apr, the final month to qualify for a home-buying tax credit.   Sales of previously owned homes fell last year to the lowest level in 13 years. Housing plods along in the dumps. 

Pending Sales of U.S. Existing Homes Rose 2.1% in February

Wal-Mart (WMT), a Dow stock & Dividend Aristocrat, is resuming normal operations at half the stores hampered by the earthquake in Japan as residents struggle to find water, food and other necessities.A dozen of its Seiyu stores in the quake-hit Sendai area are restarting full operations after being limited mostly to relief efforts for 2 weeks.  Of the remaining 12 stores, 10 will be opened as soon as possible & 2 may take a “long time” because they’re covered in mud.  Retailers are racing to open stores & replenish shelves after as hundreds of thousands in the Tohoku region are scrambling for shelter, food & water. The earthquake & tsunami knocked out more than 1,000 stores in the Tohoku &Kanto regions.

Wal-Mart to Open Half of Japanese Stores Hampered by Earthquake, Tsunami

Wal-Mart Stores, Inc. (WMT)

Some think of this as Merger Mon, not today.  News is uninspiring but stocks are edging higher.  MLPs are back in a rally mode & the index may want to take out its previous high made 4 weeks ago.  Gold backed off, an indication not a lot is going.  All markets are awaiting developments.

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Markets rise on revised GDP data

Dow gained 50 (AM gains were trimmed by late day selling), advancers ahead of decliners 2-1 & NAZ added 6.  Bank stocks were marginally higher.

S&P 500 FINANCIALS INDEX

Value	220.06
Change	0.47  (0.2%)

The Alerian MLP Index shot up 1½ to the 378s, just 5 below its record reached earlier in Mar, & the REIT index rose 1½ to the 231s.  Junk bond funds were a tad higher.  Treasuries eased back taking the yield on the 10 year Treasury bond to its highest level in 2 weeks.  Oil edged lower as crude failed to breach technical resistance at its 30-month high & on concerns that the European debt situation & the crisis in Japan will curb fuel demand.  Gold futures fell on bets that the rally yesterday to a record was overdone.  Bloomberg TV had an gold "expert" on who predicted gold will average $1495 this year which implies it will top $1500 in the coming months. 

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.08%
U.S. 2-year		0.75%
U.S. 10-year		3.44%

CLK11.NYM

...Crude Oil May 11

...105.58

... 0.02

(0.0%)

GCH11.CMX

...Gold Mar 11

........1,426.10

... 8.70  (0.6%)

Dennis Lockhart
Photo:  Bloomberg

The US economic recovery is on solid ground, making it unlikely the Federal Reserve (FED) will extend its bond-buying stimulus program according to Dennis Lockhart, Atlanta Federal Reserve Bank President.  "I remain satisfied that the current stance of monetary policy is appropriately calibrated to the current and projected state of the economy," Lockhart told a conference.  The remarks suggested the FED plans to continue its program of $600B in gov bond purchases to the Jun deadline, but has no plans to extend the program beyond that. When asked about the chances of an extension (i.e. QE3), Lockhart said: "It's a high bar."  Lockhart fought back against the notion that Fed officials exclude inconveniently high costs such as food and energy from their policy calculus.  "Contrary to popular opinion, Federal Reserve officials do actually eat and fill up their gas tanks," Lockhart said.

Lockhart Supports Fed's Monetary Policy, Would Tighten to Curb Inflation




RIMM's Blackberry tablet - PlayBook
Photo:   Yahoo

Research In Motion (RIMM) is facing skeptical investors unsure it can pull off a difficult transition as it promises strong growth based on a tablet & operating system few have seen.  RIMM has spent heavily developing & marketing the device, designed to snatch some glory away from the iPad, which virtually invented the now-crowded tablet market.  To cushion the blow, RIMM took the unusual step of providing a forecast for full-year earnings that topped the expectations of all but the most optimistic pundit. The number supported RIM's contention that the pain surrounding the PlayBook launch would set the stage for long-term gain.  But investors & analysts were largely not buying the argument.  The stock plunged $7+ to the 56s. 

RIM shares dive as outlook signals tough road ahead

Research in Motion Limited (RIMM)

Markets had an excellent week after a 3 day drubbing last week.  Dow gained 362.  The MLP index rose 12, one of its biggest gains in history.  Problems around the world are of little bother to market bulls.  Meanwhile, gold touched record highs above $1440, yesterday.  Both markets should not rise at the same time.  MLPs are yield securities & their yields are below 6% again.  The average price for gas at the pump is still $3.55 & that is haunting all stock markets.

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