3SOF

Top 5 Graphs of the Week: All Signs Point to an Interesting 2011

This week we take a look at the December quarter economic growth statistics coming out of three very different developed economies. First up is U.S., with strongest growth of the three, then France, and New Zealand. We also take a look at the rising UK inflation figures and think about what they mean for the Bank of England. Finally we review some emerging market monetary policy tightening moves over the past week, which point to growing opportunities and risks for emerging market equities.

1. U.S. GDP
The U.S. saw 4th quarter 2010 GDP revised up, with the final reading showing the U.S. economy rose 3.1% on a seasonally adjusted annualized rate in Q4. The reading compares with 2.8% in the previously released result, and is up from Q3's 2.6%. The upward revision reflected stronger inventories, non residential building investment, equipment and software investment, and even residential investment. The results reflect the theme of a manufacturing lead recovery, with business starting to become more confident in investing in their business, and gradually rising internal and external demand. The U.S. economy is likely to gain momentum through 2011, with corporate earnings likely to also gain momentum as analyst forecasts for S&P 500 earnings point to growth as great as 15% year on year in H2 2011. However there are due downside risks, such as the state of the global economy, and the U.S. fiscal situation.



2. France GDP
France reported GDP growth of 0.4% in Q4, revised up from 0.3% (with third quarter GDP being revised down to 0.2% from 0.3%), and placing GDP up 1.5% on an annual basis. The figure was boosted by a rise in household consumption expenditure, with final domestic demand making a positive contribution, and investment growth making a marginal contribution. Net exports also positively contributed as import demand slowed. Inventories had a net negative contribution. The Bank of France is forecasting economic growth to gain momentum this quarter, with growth expected to come in at around 0.8% in 1Q11. Also of interest was the French consumer confidence numbers, which showed consumers concern with inflation taking precedence over concerns with unemployment, confirming comments by the European Central Bank on the risks of second round inflation effects from rising commodity prices.



3. New Zealand GDP
The New Zealand economy grew 0.2% q/q in the December 2010 quarter (-0.2% 3Q10), placing it up 0.8% year on year (1.5% 3Q10). The strongest sectors on a quarterly basis were fishing, forestry and mining, manufacturing, construction, and personal and community services. While the worst performing sectors were wholesale trade, retail, accommodation and restaurants, and utilities. So it was basically the primary sectors doing well, with the consumer sector still struggling. Thus the results overall were hardly spectacular, but the outlook is more promising, with the earthquake rebuilding effort likely to start making positive contributions as early as H2 2011. In addition, the Rugby World Cup will also add tourism revenues and boost the consumer sector. High agricultural commodities will boost the primary exporting sector, particularly dairy. And loose monetary policy will also assist the economic recovery.



4. UK CPI
The United Kingdom fell prey to the global inflation trend, with its annual CPI inflation rate rise to 4.4% in February this year, beating expectations of 4.2%, and rising from 4.0% in January. The figure will no doubt irk the Bank of England, which is likely to come under increasing pressure to raise rates from excessively stimulatory levels (0.50%). Indeed, in its most recent meeting minutes the Bank of England noted it is likely that inflation will rise to as much as 5% or more, before normalizing, with the Bank expecting inflation to fall back to the official inflation target of 2% in 2012. Inflation in the UK is still being boosted by the one-off effect of sales tax rises, and the impact of strong commodity prices. While these are in theory one-off/temporary effects, there is still a risk that inflation expectations may rise. Provided the economic situation doesn't materially deteriorate it is likely the BoE will start normalizing monetary policy before long.



5. Monetary Policy
The week in monetary policy was characterized by further emerging market monetary policy tightening with the following central banks lifting policy rates: Nigeria +100bps to 7.50%, Kenya +25bps to 6.00%, Uruguay +100bps to 7.50%, and the Philippines +25bps to 4.25%. Meanwhile two Central Banks held their policy rates, but tightened reserve requirements; Turkey +300bps to 15%, and Russia +100bps to 5.5% (and +50bps to 4%). For emerging markets, monetary policy continues to be the wild card. If emerging markets are able to tackle the inflation challenge successfully without growth taking too much of a hit then emerging market equities are likely to bring in strong returns - especially coming off current modest/reasonable valuation levels. However the obvious flip side is the policy risk puzzle, with the possibility of hard landings coming from over-tightening.



Summary
So, we saw the U.S. revising its GDP growth numbers upward as the U.S. economy gained momentum, with all signs pointing to a strong 2011 - but with due downside risks. France likewise upgraded its GDP numbers in Q4 2010, but with momentum rising, also showed signs of rising inflationary pressures. Meanwhile, New Zealand reported a marginally positive but relatively weak Q4 GDP result, but with the conditions coming into place to support a strong 2011, particularly in the later half of the year. Over to the UK, British inflation rose further, adding increasing pressure on the Bank of England to start normalizing monetary policy. While emerging markets continued their monetary policy tightening campaign to rein in rising inflation on the back of commodity prices and strong economic growth.

Sources

1.http://www.bea.gov/      U.S. Bureau of Economic Analysis

2.http://stats.oecd.org/     OECD Statistics Database

3.http://www.stats.govt.nz/     Statistics NZ

4.http://www.tradingeconomics.com/     Trading Economics

5.http://www.centralbanknews.info/       CentralBankNews.info

Dow Jones Industrial Average...
The Dow broke out of its trend channel, signaling a loss of downward momentum. The slight increase in 21-day Twiggs Money Flow accompanying the rally indicates light volume. Expect retracement to test for support.

Monday, March 28, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +2.40 points. The US stock market last Friday moved higher after Q4 US economic growth was revised higher and technology bellwether Oracle reported strong earning: Dow Jones +0.41%, S&P 500 +0.32%, Nasdaq Composite +0.24%. The S&P 500 and Nasdaq posted 2-week highs while the Dow climbed to a 3-week high.

                Bullish factors for stocks included (1) the larger-than-expected upward revision to US Q4 GDP (+3.1% annualized versus expectations of +3.0% annualized, (3) strength in technology stocks after bellwether Oracle, the world's top supplier of database software, forecast profit that beat analysts' estimates, and (3) reduced inflation concerns after the unexpected downward revision to the Q4 PCE deflator which shows the smallest increase since data began in 1959 (+0.4% q/q versus the previously reported +0.5% q/q).

                Bearish factors included (1) the recent surge in fuel prices which prompted a larger-than-expected drop in Mar U.S. University of Michigan consumer confidence to its lowest level in 16 months (-0.7 to 67.5 versus expectations of -0.2 to 68.0), (2) concern that Japan's nuclear crisis may not be contained after Japan's Nuclear and Industrial Safety Agency said one reactor core at the quake-damaged Fukushima Dai-Ichi power plant might be cracked and leaking radiation, and (3) concern that the European debt crisis may worsen after S&P downgraded Portugal's debt.


•   Eastman Kodak (EK) soared 22% in pre-market trading after it won the latest round in a patent dispute against Apple and Research in Motion. Kodak's CEO said the victory may add more than $1 billion in revenue from royalty payments.

Tuesday, March 29, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +1.80 points. The US stock market yesterday traded higher until late in the session when it sank into the close and settled on its low: Dow Jones -0.19%, S&P 500 -0.27%, Nasdaq Composite -0.45%. The S&P 500 and Nasdaq posted 2-week highs while the Dow climbed to a 3-week high, but they all shed their gains and finished lower.

                Bearish factors included (1) concern that Japan is failing to contain its nuclear crisis after the Deputy Director General of the IAEA said the discovery of plutonium particles outside the crippled Fukushima Dai-Ichi power plant means there has been degradation of the nuclear fuel in at least one of its reactors, (2) weakness in hotel stocks after Marriott International, the largest US hotel chain, plunged after it said growth in revenue per available room in Q1 will be at the low end of its forecast because of weak North American demand, and (3) the rise in the 10-yer T-note yield to a 2-1/2 week high of 3.482%.

                Bullish factors for stocks included (1) the stronger-than-expected Feb personal spending which climbed for the eighth straight month and the unexpected upward revision to Jan (Feb +0.7% versus expectations of +0.6% and Dec revised up to +0.3% from the originally reported +0.2%), (2) the stronger-than-expected Feb pending home sales (+2.1% m/m versus expectations of +0.9% m/m), (3) a rally in solar stocks after Chancellor Merkel's party said that most of Germany's oldest atomic reactors will probably close following safety checks, which boosted alternative energy companies on a possible shift in Germany's energy policy after the anti-nuclear Green party gained widespread support in state elections on Sunday, and (4) strong M&A activity as takeovers have risen to $257 billion this quarter, the most since the collapse of Lehman Brothers in Q3 2008.


•   Halliburton (HAL) fell 1.3% in European trading after the oil services provider said that disruptions in North Africa and the Middle East will "severely" cut Q1 results by 3 cents to 4 cents a share.

Wednesday, March 30, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +6.50 points. The US stock market yesterday fluctuated on both sides of unchanged early and then trended higher into the close on a rally in energy producers and consumer companies: Dow Jones +0.67%, S&P 500 +0.71%, Nasdaq Composite +0.96%. The Dow posted a 1-1/4 month high.

                Bullish factors for stocks included (1) the smaller-than-expected decline in home prices in the Jan S&P/CaseShiller composite-20 home price index (-0.2% m/m and -3.1% y/y versus expectations of -0.5% m/m and -3.2% y/y), (2) strength in consumer companies led by gains in Home Depot which rallied after it sold $2 billion in bonds to help finance stock buybacks, and (3) a rally in energy producers on speculation crude production will increase in the Middle East after the CEO of Baker Hughes, the third-largest oilfield services provider, said Saudi Arabia will deploy more drilling rigs and boost its count by 28% to 118.

   Bearish factors included (1) the larger-than-expected decline in Mar US consumer confidence which fell to a 3-month low (-8.6 to 63.4 versus expectations of -5.4 to 65.0), and (2) concern the European sovereign-debt crisis may worsen and hamper the global economy after Standard & Poor's cut Portugal's and Greece's sovereign-debt ratings.


•   International Business Machines (IBM) and Apple (AAPL) are up nearly 1% in pre-market trading after IT researcher Gartner raised its forecast for global IT spending in 2011 to an annual pace of 5.6% from its previous prediction of 5.1%, citing the growth solely to increased sales of tablet computers, which it included in its forecast for the first time.

Thursday, March 31, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +0.10 of a point. The US stock market yesterday finished higher after a report that showed growth in jobs bolstered optimism about the economy: Dow Jones +0.58%, S&P 500 +0.67%, Nasdaq Composite +0.72%. The Dow posted a 1-1/4 month high, the S&P 500 rose to a 2-1/2 week high and the Nasdaq climbed to a 3-week high.

                Bullish factors for stocks included (1) the +201,000 increase in the Mar ADP employment change, which while slightly weaker than expectations of +208,000, was the third time in the last 4 months that hirings have exceeded 200,000 jobs, (2) strength in technology stocks after IT researcher Gartner raised its forecast for global IT spending in 2011 to an annual pace of 5.6% from its previous prediction of 5.1%, and (3) end of quarter window dressing as the S&P 500 Index is up nearly 6% this quarter, its biggest Q1 gain in 13 years, which prompts money managers to add stocks to their portfolios to show they were long stocks during the current upmove.
   
                Bearish factors included (1) weakness in energy producers after crude oil tumbled, (2) comments from Kansas City Fed President Hoenig who said current central bank policies risk undermining world growth and that the Fed should raise the funds rate toward 1.00% in a "fairly short period," and (3) concern the European sovereign-debt crisis may worsen after credit-default swaps insuring Portuguese government debt rose to a record 557 bp and people with knowledge of the matter said 3 of Ireland's biggest banks may have to raise a combined 9 billion euros ($12.7 billion) in capital after bank stress tests are published on Thu.


•   Mosaic (MOS) slipped 1.1% in pre-market trading after the company late yesterday said Q1 sales increased 28% to $2.21 billion, below analysts' estimates of $2.34 billion.

Wall Street flat as Friday payrolls data eyed...

On Thursday March 31, 2011, 2:14 pm
By Chuck Mikolajczak

NEW YORK (Reuters) - U.S. stocks edged higher on Thursday as a modest reading on jobless claims failed to topple upbeat expectations about Friday's U.S. payrolls report for March as the quarter quietly draws to a close.

Initial claims for unemployment benefits last week showed the trend of labor market improvement remains intact, but at a slow pace. The data precedes Friday's closely watched monthly employment report from the U.S. Labor Department -- a large deviation in either direction from the estimate of 190,000 jobs added to March non-farm payrolls is likely to have a strong effect on markets.

"Non-farm payrolls tomorrow is big -- 200,000 to 205,000 is probably the level that is being priced in right now," said

Max Bublitz, chief investment strategist at SCM Advisors in San Francisco.

"We all freak out over the first number and kind of ignore the revisions but the fact is it is a very noisy number, and it's a little bit of a crapshoot."

Volume was light again on Thursday, continuing a pattern for the week, as traders opt to ride the quarter's gainers, pushing the S&P 500 up 5.7 percent in the quarter. Only 4 billion shares had traded on the New York Stock Exchange, NYSE Amex and Nasdaq heading into the session's final hours.

But the benchmark S&P has been unable to hold gains around 1,330, a level that the index has been unable to break through despite several attempts in the past month.

"We are bouncing off that 1,332 level, which was kind of a double off the (March 2009) lows. We've struggled with it at times and it's been kind of a grind here," Bublitz said.

The Dow Jones industrial average (DJI:^DJI - News) rose 4.20 points, or 0.03 percent, to 12,354.81. The Standard & Poor's 500 Index (^SPX - News) added just 0.87 of a point, or 0.07 percent, to 1,329.13. The Nasdaq Composite Index (Nasdaq:^IXIC - News) gained 2.98 points, or 0.11 percent, to 2,779.77.

Berkshire Hathaway's Class B shares (NYSE:BRK-B - News) fell 2.3 percent to $83.53 a day after the resignation of David Sokol, the man widely seen as the leading successor to Warren Buffett to run Berkshire. Sokol resigned after Buffett revealed that Sokol had bought shares in chemical company Lubrizol Corp (NYSE:LZ - News) before pushing Buffett to acquire it.

In an interview on CNBC, Sokol said he did nothing wrong in buying the shares.

Retailers ranked among the worst performers, dragged lower by Carmax Inc (NYSE:KMX - News), which lost 6 percent to $32.52 after posting fourth-quarter earnings. The S&P Retail index (Chicago Options:^RLX - News) lost 0.7 percent, while the Morgan Stanley retail index (Chicago Options:^MVR - News) dropped 1.1 percent.

Friday, April 1, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +5.70 points ahead of US payrolls. The US stock market yesterday fluctuated between small gain and small losses and settled mixed as a smaller-than-expected decline in weekly jobless claims offset a rally in commodity producers: Dow Jones -0.25%, S&P 500 -0.18%, Nasdaq Composite +0.15%. The Nasdaq climbed to a 3-week high.

                Bearish factors included (1) the smaller-than-expected decline in weekly initial unemployment claims (-6,000 to 388,000 versus expectations of -2,000 to 380,000), (2) the unexpected decline in Feb factory orders (-0.1% versus expectations of +0.5%), (3) concern the European sovereign-debt crisis may worsen after credit-default swaps to insure Portuguese government debt rose to a record 579 bp while default swaps on Irish government bonds rose 8 bp to a 2-1/2 month high of 633 bp after Irish regulators instructed 4 banks to raise 24 billion euros ($34 billion) in additional capital following stress te sts on Irish banks, and (4) comments from Minneapolis Fed Governor Kocherlakota who said the Fed funds rate may need to rise 75 bp by late 2011.

   Bullish factors for stocks included (1) the smaller-than-expected decline in the Mar Chicago purchasing managers index (-0.6 to 70.6 versus expectations of -1.6 to 69.6), and (2) an increase in commodity prices, which sent stocks of energy and commodity producers higher.

Monday, April 4, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +3.30 points. The US stock market last Friday settled higher after better-than-expected data on jobs growth and manufacturing boosted optimism about the economy: Dow Jones +0.46%, S&P 500 +0.50%, Nasdaq Composite +0.31%. The Dow surged to a 2-3/4 year high, the S&P 500 climbed to a 1-1/4 month high and the Nasdaq rose to a 3-week high.

                Bullish factors included (1) the larger-than-expected increase in Mar nonfarm payrolls (+216,000 versus expectations of +190,000), (2) the unexpected decline in the Mar unemployment rate to a 2-year low (-0.1 to 8.8% versus expectations of unchanged at 8.9%), (3) the smaller-than-expected decline in the Mar ISM manufacturing index (-0.2 to 61.2 versus expectations of -0.4 to 61.0), (4) a lack of wage pressures after the smaller-than-expected increase in Mar avg hourly earnings (unchanged m/m and +1.7% y/y versus expectations of +0.2% and +1.9% y/y), and (5) overall strength in global manufacturing, which bodes well for US exports and the sustainability of the economic expansion after China's manufacturing growth accelerated for the first time in four months in Mar, India's manufacturing expanded for a 24th straight month and Russia's factory output rose to near a 5-year high in Mar.
               
                Bearish factors for stocks included (1) the weaker-than-expected Feb construction spending and the downward revision to Jan (Feb -1.4% versus expectations of -0.2% and Jan revised lower to -1.8% versus the originally reported -0.7%), (2) the smaller-than-expected increase in Mar manufacturing payrolls (+17,000 versus expectations of +30,000), and (3) concern the European sovereign-debt crisis may worsen after Standard & Poor's cut Ireland's credit rating after the cost of rescuing Irish banks rose to as much as 100 billion euros ($141.5 billion) and Fitch Ratings cut Portugal's debt ratings and kept a negative outlook on Ireland and Portugal, meaning their ratings may be cut further.


•   Edwards Lifesciences (EW) jumped 6.5% in pre-market trading after Jeffries raised its recommendation on the stock to "buy" from "hold" and lifted its share-price estimate to $103 from $93.

Tuesday, April 5, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading down -4.30 points. The US stock market yesterday finished mixed as increased M&A activity offset a slump in technology stocks: Dow Jones +0.19%, S&P 500 +0.03%, Nasdaq Composite -0.01%.

                Bullish factors included (1) strength in M&A activity that has boosted the overall equity market with total takeover deals this year as of Apr 4 at $635.2 billion, up 25% from $506.5 billion during the same period last year, and (2) strength in raw material and energy producers after silver jumped to a 31-year high and crude oil climbed to a 2-1/2 year high.

   Bearish factors for stocks included (1) weakness in technology stocks led by a slump in chipmakers after the Semiconductor Industry Association said global chip sales in Feb fell -1.1% m/m to $25.5 billion, and (2) the action by Goldman Sachs to cut its Q1 US GDP estimate to 2.5% from an earlier forecast of 3.5%, citing poor weather and higher energy costs during the quarter.


•   Apple (AAPL) slid 3.1% in pre-market trading after the Nasdaq OMX said it will reduce Apple's weighting in the Nasdaq-100 Index to 12.33% from the current 20.49% to better reflect market capitalizations.

Wednesday, April 6, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +8.90 points. The US stock market yesterday finished mixed as optimism about takeover deals overshadowed a weaker than expected Mar ISM non-manufacturing index: Dow Jones -0.05%, S&P 500 -0.02%, Nasdaq Composite +0.07%. The Dow climbed to a 2-3/4 year high.

                Bullish factors included (1) strength in technology stocks on increased M&A activity after Texas Instruments agreed to buy National Semiconductor for about $6.5 billion, (2) the statement from the Organization for Economic Cooperation and Development (OECD) that the recovery in G-7 nations is gaining strength and "it seems likely that the recovery is becoming self-sustained," and (3) strength in mining companies after gold soared to an all-time high and silver climbed to a 31-year high.

   Bearish factors for stocks included (1) the action by China to raise interest rates, which may slow its economy and the global economy as well, (2) the larger-than-expected decline in the Mar ISM non-manufacturing index which fell to a 3-month low (-2.4 to 57.3 versus expectations of -0.2 to 59.5), (3) comments from Treasury Secretary Geithner who said the "housing market in the US is still in crisis," and (4) comments from Fed Chairman Bernanke who said that inflation must be watched "extremely closely," which fueled speculation that the Fed may tighten monetary policy sooner than previously expected.

Thursday, April 7, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +0.50 of a point. The US stock market yesterday finished with modest gains on carry-over support from a rally in European stocks along with strength in technology companies: Dow Jones +0.27%, S&P 500 +0.22%, Nasdaq Composite +0.31%. The Dow rose to a 2-3/4 year high and the S&P 500 posted a 1-1/2 month high.

                Bullish factors included (1) carry-over support from gains in European stocks after Feb German factory orders rose nearly 5 times estimates, which signals economic strength that boosts confidence in the global economic outlook, (2) strength in technology stocks after Cisco rallied on speculation it will sell or spin off its consumer business, and (3) comments from Atlanta Fed President Lockhart who said he doesn't expect the Fed to tighten monetary policy by year-end with inflation still low and the economic recovery fragile.


   Bearish factors for stocks included (1) weakness in commodity producers led by a fall in Monsanto after the world's largest seed producer said agricultural-chemical earnings declined, and (2) the 5 bp rise in the 10-year T-note yield to a 4-week high of 3.546% as inflation expectations increased.

Friday, April 8, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +5.50 points. The US stock market yesterday fluctuated on both sides of unchanged and finished with small losses after another earthquake hit Japan and offset the bullishness of a larger-than-expected drop in weekly jobless claims: Dow Jones -0.14%, S&P 500 -0.15%, Nasdaq Composite -0.13%. The Nasdaq slipped to a 1-week low.

                Bearish factors for stocks included (1) a magnitude 7.1 earthquake to strike Japan, which fuels concern that the global economy may slow as Japan's recovery from last month's earthquake is delayed, (2) concern that the continued stalemate over the federal budget will lead to a shutdown of the US government if Congress fails to extend the government's spending authority by Friday, and (3) concern the European sovereign-debt crisis will worsen after Portugal became the third Euro-Zone country to ask for a bailout.


   Bullish factors included (1) the larger-than-expected decline in weekly initial unemployment claims (-10,000 to 382,000 versus expectations of -3,000 to 385,000), (2) strength in retailers after Retail Metrics reported that US retailers industry wide posted an unexpected 2.2% increase in March, stronger than expectations of a -0.5% decline, and (3) the larger-than-expected increase in Feb US consumer credit which posted its largest monthly gain in 2-1/2 years (+$7.617 billion versus expectations of +$4.600 billion).


•   Expedia (EXPE) surged 13% in European trading after the company said it will split into two, giving investors a chance to own shares in its TripAdvisor unit.

Stocks fall after Japan raises crisis level
Stocks drop after Japan puts nuclear crisis on par with Chernobyl; Alcoa's revenue disappoints

Tuesday April 12, 2011, 4:39 pm
NEW YORK (AP) -- The Dow Jones industrial average lost more than 100 points Tuesday after Japan raised the severity of its nuclear crisis and Alcoa Inc. reported disappointing sales. A drop in oil prices pulled down energy stocks.

Markets also fell in Asia and Europe after Japan said the crisis at its crippled nuclear plant was as serious as the 1986 Chernobyl accident, though much less radiation has leaked.

The plant in northern Japan was damaged in the March 11 earthquake and tsunami disaster.

"It means slower growing coming out of Japan in the short term, and that's going to weigh on global growth," said Peter Cardillo, chief market economist at Avalon Partners Inc.

The Dow Jones industrial average fell 117.53 points, or 0.9 percent, to close at 12,263.58. That's the largest drop since March 16, when the Dow lost 242 points on fears of a nuclear meltdown in Japan.

The Standard & Poor's 500 index fell 10.30, or 0.8 percent, to 1,314.16. The Nasdaq composite index fell 26.72, or 1 percent, to 2,744.79.

The situation in Japan and an unexpected drop in U.S. exports sent bond prices sharply higher and their yields lower. The yield on the 10-year note fell to 3.49 percent from 3.58 percent late Monday.

The Commerce Department said in its monthly trade report that exports fell 1.4 percent in February, more than economists had expected and a worrisome sign for U.S. economic growth. Exports had climbed 2.6 percent in January to an all-time high.

Alcoa dropped 6 percent to $16.70 after the aluminum maker's first-quarter revenues fell short of expectations. Alcoa, one of the 30 companies that make up the Dow average, is the first large company to report quarterly earnings.

Other big companies reporting results this week include JPMorgan Chase & Co., Google Inc. and Bank of America Corp.

The energy industry lost the most of the 10 that make up the S&P 500 index. Oil prices slid 3 percent to settle at $106.25 per barrel, the lowest price this month.

Goldman Sachs, which had expected higher oil prices, surprised oil traders with a report early Tuesday saying it now expects a "substantial pullback." Chevron Corp. lost 3 percent and Exxon Mobil Corp. 2 percent.

Slot machine makers dropped after WMS Industries Inc. warned that its latest earnings will fall short of expectations. WMS sank 17 percent. International Game Technology dropped 3 percent.

Three shares fell for every one that rose on the New York Stock Exchange. Trading volume was 4.4 billion shares.

Monday, April 11, 2011...

Overnight U.S. Stock News

•   June S&Ps this morning are trading up +3.50 points. The US stock market last Friday gyrated between slight gains and losses and finished lower as the surge in crude oil prices to a 2-1/2 year high boosted energy producers but dragged down transportation and consumer companies: Dow Jones -0.24%, S&P 500 -0.40%, Nasdaq Composite -0.56%. The S&P 500 climbed to a 1-1/2 month high and the Dow posted a 2-3/4 year high but they both gave up gains and closed lower.

                Bearish factors for stocks included (1) weakness in airline stocks on concern the surge in jet fuel prices will undercut earnings, (2) comments from Dallas Fed President Fisher who said the Fed is "near a tipping point" and risks over-stimulating the economy and generating inflation, (3) concern the government may shut down for the first time in 15 years as Congress remained divided over a federal budget, and (4) the increase in the 10-year T-note yield to a 1-3/4 month high of 3.614%.

   Bullish factors included (1) carry-over strength from gains in European stocks after Feb German exports rose more than forecast, (2) a rally in energy and raw-material producers as the weak dollar prompted a broad-based gains in commodities with gold at a record high and crude at a 2-1/2 year high, and (3) comments from Atlanta Fed President Lockhart who said the Fed should be "patient" in withdrawing stimulus due to the fragile quality to the economy.