As stock market slows down, defensive stocks shine
After sailing through its best first quarter since 1998, the stock market is starting to lose some momentum. The Standard and Poor's 500 stock index, a broad market benchmark, is up just 1 percent this quarter after jumping 5.4 percent in the first three months of the year, in large part because of conflicting data about the health of the economy.
One group -- defensive stocks -- is doing just fine. Utilities, health care and consumer staples are all considered a good defense against a slowdown because they tend to have stable profits no matter what happens in the broad economy. The items they sell aren't ones people stop buying when their budgets are tight. And for the last six weeks, investors have been putting money into stocks of companies like Aetna or Kraft Foods that cater to everyday needs, like health insurance or coffee.
Each of the defensive industry groups has gained more than 5 percent this quarter. Health care -- the best of the three -- is now up 14.2 percent for the year, after lagging sectors like energy and industrials during the first quarter. What's more, the number of shares exchanging hands in defensive industries is also increasing. Higher volume often signifies that a stock on the rise will continue to rise -- or that a declining stock will keep falling -- because it reflects increased investor interest in a stock. The daily trading volume of the SPDR Consumer Staples Select ETF, for example, is double the rate it was in January.
Meanwhile, industrials, a group that investors buy more when they expect an economic pickup to lead to new buildings or machines, are flat for the quarter. Energy companies are down 6.9 percent this quarter because several reports have indicated demand for oil is falling as gas nears $4 a gallon.
"People are becoming more conservative in their outlook and their spending as oil prices have risen," said Quincy Krosby, the chief strategist at Prudential Financial. Investors have begun to worry that energy prices will sap consumer and business spending, she said.
There has been good news about the economy recently. More companies in the S&P 500 are beating analyst sales estimates this quarter than at any other time since the recession ended nearly two years ago. Companies are also adding jobs at the quickest pace in five years, with 700,000 jobs added in the last three months.
Even so, Andrew Goldberg, a market strategist for J.P. Morgan Funds, believes defensive stocks will continue to do well until it's clear that oil prices will not be a drag on overall growth.
"If Americans are spending more money on gasoline, that means less money will be spent on flat-screen TVs and vacations," said Goldberg. "You have to view this economic recovery as a patient in the I.C.U. We're off the respirator and well on the way to a full recovery, but oil prices can cause a relapse."
Investors who think that the growth rate of economy isn't going to lead to higher corporate profits are attracted to defensive companies for two reasons. These companies -- in the business of providing everyday needs like electricity, toilet paper, and telephone service -- are in industries that deliver reliable earnings. Kraft, for example, saw its sales fall only 4 percent in 2009 even though consumers cut back elsewhere. Even with that drop, the company has increased sales by an average of 7.6 percent annually over the past five years.
That allows defensive stock companies to pay higher dividends than, say, a technology company that may be expanding its business rapidly. AT&T Inc. pays a quarterly dividend of 43 cents per share, giving it a 5.5 dividend yield. That's far higher than the 3.18 percent yield on a 10-year Treasury note and vastly more than an investor would get from, say, consumer favorite Apple Inc., which doesn't pay a dividend.
Defensive stocks are also a cheap way to get dividend returns compared with the S&P 500 index, which currently costs 15 times earnings and yields 2 percent. AT&T costs just 9 times earnings, despite gaining 2.8 percent this quarter.
Coca-Cola Co., another defensive stock, costs 13 times earnings after gaining 2.8 percent this quarter and comes with a 2.8 percent yield. Google, by comparison, costs 23 times earnings and doesn't pay a dividend. It's fallen nearly 10 percent over the quarter. Higher yields mean that investors will still benefit even if stock prices stall, Goldberg said.
Of course, some investors are buying defensive stocks simply because many underperformed over the past two years.
Dimitre Genov, the portfolio manager at the $58 million Artio Global Equity Fund, bought Dean Foods last year when its 52 percent drop landed it among the five worst-performing stocks among the 500 companies that make up the S&P index. The Dallas-based company, the country's largest dairy, is up 34 percent this quarter, thanks in large part to quarterly results that topped Wall Street's expectations after the company cut costs and raised its forecast for full-year earnings because grocers are raising costs for store-brand milk, the company's chief competitor.
"The laggards of last year are the winners now," he said.
Late payments on mortgages fall again in 1st qtr
The number of homeowners making late payments -- or no payments -- on their mortgages fell for the fifth straight quarter in the first three months of 2011. But the figure remains stubbornly high compared with the pre-crisis norm, likely because of the huge backlog of homes waiting to be foreclosed.
The rate of borrowers nationwide who were 60 days or more past due on their mortgage payments fell to 6.19 percent for the three months ended March 31, according to credit reporting agency TransUnion. That was down from 6.77 percent at the same time last year.
Delinquency rates were highest in Florida, at 14.37 percent, down from 14.65 percent a year ago, followed by last year's leader, Nevada, at 14.19 percent, down from 15.98 percent.
Arizona was next, at 9.14 percent, compared with 10.94 percent in the 2010 first quarter. California, fourth at 8.58 percent, showed the biggest drop of any state in the past year, falling from 10.68 percent. These four states were the hardest hit by the housing meltdown.
North and South Dakota continue to have the lowest delinquency rates in the country, at 1.54 percent and 2.53 percent, respectively.
South Dakota's rate actually rose, from 2.44 percent last year, one of nine states that saw an increase in late payments compared with last year. The biggest increase was in Maine, where delinquency climbed to 5.04 percent of borrowers, from 4.64 percent in the 2010 first quarter.
While the rates in most states and the nationwide rate are down from their peaks, they are still not near the pre-recession normal of around 2 percent, said Tim Martin, TransUnion's group vice president for the U.S. housing market. Nor has the mortgage delinquency rate improved as much as similar statistics for credit cards or auto loans.
"It's still a long way from the norm, and not improving as much as some of the other credit types," he said.
One reason for the rate to remain stubbornly high is the length of time it takes to foreclose on a house. There are up to 3.7 million seriously delinquent homes in the country, according to some estimates. And foreclosure listing firm RealtyTrac Inc. said last week that processing delays appear to be getting worse. In states like New York, for example, it now takes an average of more than two years for a home to go from the initial stage of foreclosure to being repossessed by a bank.
TransUnion's data is culled from 27 million credit reports, representing about 10 percent of all U.S. consumers who actively use some form of credit.
If delinquency continues to improve at its current pace, Martin said rates won't return to normal for another 8 years. "It just gives you a sense for how high these rates are, historically speaking, and how far we have to go at this kind of slow improvement pace," he said. TransUnion expects rates to continue drifting down through the rest of the year.
Data show that home prices and unemployment are strongly correlated with delinquency. While few mortgages written in recent years are falling into delinquency, Martin noted that housing prices appear to be falling again, which could discourage homeowners with little or no equity in their property from making their payments.
Weak economic signals steer Asia down
A loss of momentum on Wall Street and worries over Europe's debt problems dampened investor enthusiasm and led Asian stock markets lower Monday.
Oil prices fell below $99 a barrel Monday in Asia as crude became more expensive for investors with other currencies amid a U.S. dollar rally.
Japan's Nikkei 225 index dropped 0.6 percent to 9,587.85 with banking shares incurring losses following comments last week by Chief Cabinet Secretary Yukio Edano suggesting that Tokyo Electric Power Co. will need help repaying its debts. Mitsubishi UFJ Financial Group Inc. lost 1 percent. Mizuho Financial Group lost 0.8 percent.
Edano said Friday that TEPCO may need adjustments to its loans to help it cope with financial losses incurred following twin natural disasters on March 11 -- an earthquake and subsequent tsunami that smashed into one of the company's nuclear plants in northeastern Japan.
The utility has been struggling for two months to bring a radiation leak from the crippled Fukushima Dai-ichi plant under control. TEPCO has sought a 2 trillion yen ($24.8 billion) loan to tide it through the initial emergency period.
It also expects to pay 50 billion yen ($620 million) in initial compensation to nearly 80,000 residents evacuated from around the plant. Overall damages are expected to be much higher.
South Korea's Kospi lost 0.5 percent to 2,108.45, and Hong Kong's Hang Seng was down 1.1 percent to 23,024.82. Benchmarks in Australia, Singapore and Taiwan were also lower.
Analysts said investors were worried about Greece's debt crisis and the absence of an energetic global economic recovery.
On Wall Street, stocks finished lower "as investors continued to worry about slowing global growth and European debt concerns," said Ben Potter of IG Markets in Melbourne.
After sailing through its best first quarter since 1998, U.S. stock markets are starting to lose some momentum. The Standard and Poor's 500 stock index, a broad market benchmark, is up just 1 percent this quarter after jumping 5.4 percent in the first three months of the year, in large part because of conflicting data about the health of the U.S. economy.
Meanwhile, industrials, a group that investors buy more when they expect an economic pickup to lead to new buildings or machines, are flat for the quarter. Energy companies are down 6.9 percent this quarter because several reports have indicated demand for oil is falling as gas nears $4 a gallon.
Benchmark crude for June delivery was down 84 cents to $98.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $99.65 per barrel Friday, up 68 cents.
In currencies, the dollar rose against the euro to $1.4096 from $1.4110 in late afternoon trading Friday in New York. The dollar strengthened to 80.99 yen from 80.84 yen.
Whoo Weee! Serena’s Sexy Photo Creates New Controversy
Question. Did Serena Williams cross the line with her super sexy Twitter picture/avatar? Yes, we’re talking about the one of her seen through sheer curtains in noting but a bra and panties.
Anyway, the question was did she cross the line with this photo, which by the way, has been removed from said Twitter page. We ask because it hasn’t been two weeks since we reported that a man, 40-year-old Patenema Ouedraogo, had been arrested and charged with stalking the tennis star.
In the wake of that incident Williams went and uploaded the photo above which a lot of folks see as inappropriate and reckless. Hmm, maybe someone told her it wasn’t smart and bordered on hypocrisy.
So what do you think? Was it the wrong move in light of the stalker situation or should Serena, who has a history of showing her body in sexy ways, say damn the critics – and would be stalkers – and keep it moving?
Kelly Rowland Happy with Her Music
Kelly Rowland has somewhat struggled to get where she wants to be in her solo career, but with her latest single, “Motivation” featuring Lil Wayne, she thinks she may have found what she’s been looking for all along.
“I was talking to my product manager,” Rowland told Billboard. “I said I wanted people to know that this is the record, the sound I¹ve been working toward… that here I am. And she said, that’s the title. It just connected with my heart and the music as well. It stands for everything I’ve gone through and thought about for this record as a woman. It’s very strong.”
“Motivation,” her single from forthcoming album, “Her I Am,” sits at No. 4 this week on Billboard’s Hot R&B/Hip Hop Song charts.
And as she celebrates her career movement, she also congratulated Beyonce for being honored this year with the Billboard Millennium Award.
“I’m so excited for my sister. Nobody deserves it more than she does,” says Rowland. “Ever since we were kids, we’ve worked hard, and she’s carried that into her solo career.”
Beyonce Gets Millennium Award
Beyonce has been unstoppable since her coming out 10 years ago.
For the singer’s achievements, Billboard is honoring her with the 2011 Billboard Millennium Award at the May 22 ceremony.
“The Billboard Millennium Award will recognize Beyonce’s career achievements and influence in the music industry, from her role as the frontwoman of Destiny’s Child to her three-chart-topping solo albums, which have collectively earned her 16 Grammy awards and ASCAP’s Pop Songwriter of the Year award.”
Presenters of awards will include artists Nicki Minaj, Jennifer Lopez, Pitbull, Rihanna, Taio Cruz and several others.
The event will take place at the MGM Grand in Las Vegas and will air on ABC from 8 to 11 p.m. EST.
Sheryl Lee Ralph and Pharrell Williams Trying Something New
Sheryl Lee Ralph has a new role coming up this Christmas in the new holiday film, “The Lot,” starring Keith David from “Lord of the Rings.”
Others to appear in the film include Omar Gooding and Eric Roberts.
Production has already started.
“This film is a feel good family picture and I’m proud to join the cast,” said Ralph, who is also working on a book “Redefining DIVA.”
The composition is supposed to be a divinely inspired story filled with modern advice on love, live and living.
And speaking of doing new things, Pharrell Williams is expanding his empire from music to help create a TV network aimed at the online generation. The producer has been named the creative director of Karmaloop TV as of Monday.
The new network will feature original productions and movies geared toward 18-34-year-olds.
Rihanna to endorse "Vita Coco"
Rihanna will now be endorsing the coconut water brand Vita Coco, starting this summer. Vita Coco, a New York base company was started in 2004 and is considred the best-selling fresh coconut water brand in the country
"I love Vita Coco! It's real coconut water from hand-picked coconuts," Rihanna said in a press release announcing the partnership. "It's delicious and so good for you!"
Rihanna will join investors Madonna and Red Hot Chili Peppers frontman Anthony Kiedis, both of whom are staunch advocates of the brand.
"Rihanna is a natural fit for the Vita Coco brand and I'm so happy to have her on the team," Madonna said of her endorsement.
Israeli forces open fire at Palestinian protesters
Israeli forces have fired on groups of protesters at borders with the Palestinian territories, Syria and Lebanon.
Reports say that at least 12 people have died and dozens more have been injured.
In one incident, thousands of Palestinian supporters from Syria entered the Golan Heights, Israel says.
Palestinians are marking the Nakba or Catastrophe, their term for the founding of the Israeli state in 1948.
Hundreds of thousands of Palestinians fled or were forced out of their homes in fighting after its creation.
Responding in a televised address to Sunday's violence, Israeli Prime Minister Benjamin Netanyahu said he hoped "calm and quiet will quickly return, but let nobody be mistaken, we are determined to defend our borders and sovereignty".
Later on Sunday, security forces in the Egyptian capital Cairo fired warning shots and tear gas to break up protests outside the Israeli embassy.
UN Secretary General Ban Ki-moon has called for calm and urged all sides to show "utmost responsibility".
In a statement, he said there was an "unsustainable status quo in the Arab-Israeli conflict, which is only thrown into sharper relief by the profound political changes now under way in the region" and called for a renewed effort to reach comprehensive peace in the region.
Impetus
Clashes have been taking place at four separate borders or crossing points - at Erez in Gaza, near Ramallah in the West Bank, on the Golan Heights and at the border with Lebanon.
The BBC's Jon Donnison, in the West Bank town of Ramallah, said this year's Nakba protests have been given impetus by the uprisings in countries across the Middle East and North Africa.
Clashes at the Qalandiya checkpoint in Ramallah continued for hours, with dozens of Palestinians injured.
Palestinian protesters threw stones at Israeli security forces, who fired tear gas and rubber bullets.
On the occupied Golan Heights, the Israeli military said it had only fired warning shots as a large number of protesters tried to breach a border fence near the village of Majdal Shams.
But reports said at least two people had been killed and dozens injured.
Israel's army says this is a "serious" incursion. Brig Gen Yoav Mordechai said soldiers were still trying to control the crowds and that dozens of protesters had crossed.
The army has reportedly sealed off Majdal Shams and is carrying out house-to-house searches for "infiltrators".
Israel seized the strategic territory from Syria in the closing stages of the 1967 Six-Day War.
On the Lebanon-Israel border, a large number of protesters also approached the crossing with Israel.
Dozens of buses had brought protesters to the area under the rally slogan of "March for the return to Palestine".
Lebanese soldiers had fired in the air to try to disperse the protesters, who were chanting: "By our soul, our blood, we sacrifice ourselves for you, Palestine."
Gen Mordechai says Israeli troops fired as demonstrators began vandalising the fence.
Lebanese military officials say 10 people have been killed and scores wounded.
"We are seeing here an Iranian provocation, on both the Syrian and the Lebanese frontiers, to try to exploit the Nakba day commemorations," Gen Mordechai said.
A spokesman for the UN peacekeepers in southern Lebanon called on both sides there to show restraint.
Syria denounced Israeli actions in the Golan Heights and Lebanon as "criminal", Agence France-Presse news agency reported.
"Israel will have to bear full responsibility for its actions," the foreign ministry said.
However, one Israeli official told AFP: "Syria is a police state. Demonstrators do not randomly approach the border without the prior approval of the central government."
On the Israel-Gaza frontier, at the Erez border crossing, Israeli troops opened fire with tanks and machine guns, injuring dozens, Palestinian medical officials said.
Police in Jordan fired tear gas to break up protesters gathering at a village near the Israeli border.
In Cairo, police used tear gas and warning shots to drive back a crowd of several hundred people who were attempting to reach the Israeli embassy in protest.
The Mena state news agency said at least 24 people were injured in the clashes.
Meanwhile in Tel Aviv, Israeli police are investigating whether an Arab-Israeli lorry driver deliberately ploughed into pedestrians, killing one Israeli man.
Hearing in IMF Chief’s Sex Assault Case Delayed
A court appearance for the head of the International Monetary Fund facing sexual assault charges has been delayed until Monday, after he agreed to undergo a forensic examination.
Lawyers for Dominique Strauss-Kahn said late Sunday they agreed to postpone his arraignment in New York City while police gather more evidence in the case.
Police said Strauss-Kahn has been charged with criminal sexual assault, attempted rape and unlawful imprisonment following a complaint by a hotel maid.
An attorney for Strauss-Kahn says he will plead not guilty to the charges.
The International Monetary Fund says the IMF remains fully functioning and operational. It says it has no comment on the arrest.
Strauss-Kahn was considered a leading contender to run as the Socialist party's candidate against President Nicolas Sarkozy in France's 2012 election.
The head of the Socialist party, Martine Aubry, appealed for party unity Sunday and said that the news “struck like a thunderbolt.”
Police say Strauss-Kahn was taken into custody late Saturday afternoon when he was pulled from his first-class seat on an airplane that was just minutes away from taking off for Paris.
Police say a 32-year-old chambermaid at the Sofitel Hotel says she entered Strauss-Kahn's hotel room to clean it Saturday afternoon. The maid told police Strauss-Kahn came out of the bathroom completely naked and attempted to force her into performing sex acts. The maid says she broke free, fled the room and told other hotel personnel, who called police.
Police say when they arrived at the hotel, Strauss-Kahn had already left for the airport, leaving behind his mobile phone and other personal items.
New York Police spokesman Paul Browne said early Sunday the maid was treated for minor injuries at a local hospital and released.
Strauss-Kahn is married to a prominent French television reporter, but has weathered previous sex scandals. In 2008, he apologized for what he termed “an error in judgement” for an affair with one of his subordinates.
The deputy director of the IFOP polling institute, Jerome Fourquet, told French radio that if the charges prove true, it will be extremely hard for Strauss-Kahn to resume a political career.