Monday, March 31, 2008

Stocks end a dismal quarter on up note

Stocks had a very rough quarter, Dow fell 100 points while NAZ slipped 373 , not a pretty picture. Banks & financials led the way down, although techs also got punished & they generally have minimal exposure to credit problems. However, today they finished on an up note. Dow was up 46, NAZ up 18 & advancers ahead of decliners 3-2. Volume was light (not a lot of conviction in the moves) as it has been during the last week. Sec Paulson's plan for the markets got a lot of attention, but tough to figure out. It may be needed, but more gov intervention is generally not viewed as favorable to markets. It should be kept in mind that this is just a plan which has to go to Congress. In an election year, they will have plenty of thoughts about changes. Plus little major legislation gets passed in an election year. Tomorrow we'll be back to looking at other news releases.

Merck (MRK) had the biggest news release today. Their Vytorin drug (marketed with Schering-Plough) was shown not to be effective for people needing help lowering cholesterol. Both stocks sold off big, MRK down 6.56 which may be worth 25 points on the Dow. Oil dropped 4.04 to 101.58. However it's price rose about 6% in the quarter, a much better investment than most stocks. The dollar continues weak. The Euro has advanced to $1.58, a price not contemplated just a few months ago. Tomorrow Q2 begins but the credit crisis, etc. continues.

Treasury bonds have excellent quarter

Treasury bonds are having an excellent quarter, the best in 13 years. Higher bond prices have reduced their yield to only 3.41%. Some of the money used to buy bonds came from selling stocks which have had a very bad quarter, the Dow being down about 1K for the qtr. Today, Dow is up 58, NAZ up 13 but advancers are only slightly ahead of decliners. Markets are trying to evaluate the proposals to overhaul financial markets with more government regulation.

Merck (MRK), a Dow stock, and Schering-Plough (SGP) plunged on negative news about their anti cholesterol drug Vytorin. MRK is down 6 & SGP over 5.

The MLPs are yield securities & their yields are compared with Treasuries. Typically, a 200 basis point spread is expected. Last summer when the Treasury rate was near 5.2%, the spread narrowed to less than 50 basis points. Today after both yields went in different directions, the spread is over 300 points. There is also the 700 basis point spread between the yields on Treasury vs junk bonds. These differences spell opportunities.

Sunday, March 30, 2008

Asian stocks start week lower

Asian stocks start the week & end the quarter lower, most are down 1% or so. Tokyo is down 17% YTD and Shanghai is down 45% from it's peak just a few months ago. Banks are leading the declines caused by worries about div cuts. This is setting up another down day in the US for the final day of Q1.

Friday, March 28, 2008

Stocks pull back again

Markets declined on weak economic news. Dow was down 86 (putting it more than 1000 points lower than it started on Jan 1), decliners ahead of advancers 2-1 & NAZ down 20 (putting it 385 points lower than it started at on Jan 1). Instead of focusing on credit crunch problems today, a report showing personal spending at its weakest growth in 17 months & a profit warning from JC Penney (JCP), down 3.04, raising concerns about a US recession weighed on the markets. The FED announced it will auction off $100B in April, it's way of helping banks get thru the credit crisis. This is after they have already provided $260B to commercial banks. Oil pulled back to under 106 as concerns about the Basra situation subsided & on strength of the dollar. Analysts don't agree on the future of oil prices, but these levels have to hurt a struggling economy.

I just came from a meeting with a top money manager who sees junk bonds as offering value. The yields are triple the 3.47% rate on the Treasury bond. They feel the default rates will be less severe than some are forecasting. As a result, present yields offer value for those willing to assume a little extra risk.

Mixed markets again

Stocks continue mixed on more dismal news. Dow is up 39, advancers are slightly ahead of decliners & NAZ is up 12. The Commerce Dept said consumer spending edged up just 0.1% last month, the poorest showing in 17 months & the 3rd consecutive month of sluggish activity. The modest gain was due to effects of inflation. Oil pulled back 2 to under 106 as fears about disruptions from Basra eased & the dollar strengthened.

The director of the Office of Federal Housing Enterprise Oversight, James Lockhart, said on CNBC the idea of freezing mortgage rates would be a mistake in a response to a proposal put forward by Sen Clinton. The exact words were, "You'd really cause market dislocations." It will be a shame if politics starts to intrude into an already messy credit situation.

JC Penney (JCP) dropped 3 on it's earnings forecast that Q1 earnings will be below original forecast, another indication that retailers are having a tough time in today's economy.

Thursday, March 27, 2008

Stocks see-saw, ending down

Stocks had another bad day with banks once again leading the way down. Dow was down 120, decliners over advancers almost 2-1 & NAZ down another 43. The decline for bank stocks followed yesterday when they led the way down. The 3 Dow banks (BAC, C & JPM) are each off over 2 in just the last 2 days. More write-offs are in the wind. Dow is down almost 1K this quarter/year, looks like their worst start since 2001. NAZ & tech are doing even worse, off almost 400 (from a lower base) this year. Oracle (ORCL), down 1.51, set the tone today after yesterday's mediocre earnings announcement.

Oil led commodities up, gaining 1.68 to 107.58 on the news from Bazra about supply problems. While not really significant in the big picture of oil, every little thing gets magnified in a big way. Adding to worries, Lehman (LEH) fell 10% on rumors that the 4th largest investment bank may see a run like Bearn Stearns had a couple of weeks ago.

Sluggish economy sinks stocks

Sluggish economy sinks stocks. Dow is down 33, but advancers are slightly ahead of decliners while NAZ is down 26. The Commerce Dept reported revised figures for economic GDP growth in Q4, down 0.6% (same as the original number). This number while matching expectations pales when compared to a 4.9% rate in the prior quarter, the economy is sputtering. Q1 for 2008 is expected to be worse, probably showing a decline. Oil, after surging in initial trading pulled back to break even near 106. Initial buying was influenced by fighting in & around Basra, Iraq, an important oil center.

Google (GOOG), close to my heart as they host my site, was down 15 as they have to endure slowing click thru growth. Their search clicks were down 4.6% & clicks for paid ads were down 3% in Feb, another small measure that the economy is not well. A court ruled that banks can not hold up the $19½B acquisition by Clear Channel (CCU), up 10%, even if they have to take take $3-4B in writedowns because they are likely to have trouble reselling the debt in this credit market.

Wednesday, March 26, 2008

Weak economy sinks stocks

Stocks declined on weak economic data. Dow was down 109, but decliners were ahead of advancers by only 40% & NAZ was down 16. Volume has been mediocre (1.5B or less) at best in the last 4 days (3 of which were up). Economic news was dreary today. The durables goods orders, a leading indicator, looked bad. Aircraft orders were fine but other measures gave poor readings. Bear Stearns story underscores the need for investment houses to come under federal regulation similar to commercial banks according to Treasury Secretary Paulson. The Senate will hold hearings to investigate the Bear Stearns failure. Can you spell, uh-ho? Commodities are back in the saddle again. Oil shot up almost 5 to 105.90 on a report of low inventories & the weaker dollar. Gold is back to 949, up from under 920 just a couple of days ago.

Oracle, (ORCL) reported earnings after the close. They gave a solid report, but nothing exceptional sending the stock down 9% after hours. That's the kind of market we are in. This sets up a negative tone for the start of trading tomorrow. I keep thinking this looks, feels & sounds like a recession. There seems to be a growing perception we are in one.

Gloomy news

Gloomy news on durable goods & new home sales sent stocks lower. Dow is down 148, decliners ahead of advancers 2-1 & NAZ is down 33. Out of the gate this AM, the Commerce Dept reported durable goods orders were down 1.7% in Feb. In addition, new home sales fell 1.8% last month to the lowest level in 13 years as tighter lending practices by banks hurt home sales. Ouch! In addition, after advancing 425 points in 3 days a breather was in order.

Motorola (MOT) is splitting off it's cell phone business (they brought out the first one years ago) from the rest of the company to help shareholders see value. The announcement was greeted with a yawn, the stock is little changed. Bank of America (BAC), a Dow company, has had a wild ride over the last few days. Starting around 35, it shot up to 43 in 4 days & is now under 40. Gloomy economic news may be the major influence on the markets this week.

I just installed Firefox 3 Beta 4 for my browser & like it better than the version I had been using. They will bring out the final release in June. For the brave, try Firefox (either version).

Tuesday, March 25, 2008

Mixed markets

Markets were mixed or just mixed up. Dow & S&P 500 were little changed, however advancers led decliners almost 2-1. NAZ had a decent day, up 14, as money is flowing back into techs. The downgrade on Bank of America (BAC), down 1.48, hurt the Dow. A downgrade for Merrill Lynch (MER) sent its stock down 53¢ mostly due to late day selling. The Conference Board reported that consumer confidence plunged in March to 64.5, far below expectations. Monsanto (MON) benefited from an up day for commodities & it also raised profit forecasts sending the stock up 10.28.

Today was mostly a mixed up day. Junk bonds were up slightly. This morning, an analyst on Bloomberg TV was saying their selling may be overdone after starting the year with their worst year ever. REITs pulled back after their run-up in recent days. MLPs were up a little, rebounding from a major leg down which sent the index to 265. Today it was up 1.45 at 272. The report from the Conference Board was most troubling to me, confirming the recession scenario everybody is worried about.

Markets slip

Markets are pulling back a little to digest recent gains. Dow is down 59, decliners ahead of advancers marginally & NAZ is essentially even (money is flowing back into techs).

US home prices dropped more than 11% in Jan, largest decline since data was first collected 20 years ago. Oil, after a few rough, days is up to 101. Markets blame this on the weak dollar. The FED auctioned off $50B aimed at providing aid in the credit crisis. They have provided $260B in recent days. By now FED moves are becoming routine, not influencing the markets. Bank of America (BAC), a Dow stock, is down 1.45 on a negative analyst recommendation. Stock markets are overbought & may need more time to absorb recent gains.

Monday, March 24, 2008

Stocks have solid gains again

Stocks had another solid day of gains. If the last 4 days were all in one direction, the Dow would have had either a gain or loss of 1K. However, only 3 days including today were up. Out of the gate this morning, Dow shot up 200 & pretty much remained at that level for the rest of the trading session. Dow was up 187, advancers ahead of decliners 4-1 (down a little from midday) & NAZ was up an impressive 68. Buyers came roaring back encouraged by JP Morgan (JPM) raising the price to $10 per share it will pay for Bear Stearns (BSC). Markets always like to see buyers, better yet is when they raise buying prices. After trading higher, Bear Stearns pulled back closing at 9.38, as buyers were less optimistic about additional price increases in the buyout price. The FED's role in the change of terms remains unclear although it is likely they will not quibble.

The market was also encourage by housing numbers showing Feb sales rose along with a decline in selling prices. The bigger picture for housing says there is still 9+ months of stock which has to be sold eventually. Tiffany (TIF) reported excellent earnings sending the stock up 4.05. However the news was somewhat mixed. US business was soft while overseas business was strong, the same message we have been given by many other companies.

Today just throw darts

All that's necessary today to find winners is throw darts. Dow is up 239, advancers ahead of decliners better than 5-1 & NAZ is up 65. Buyers responded to JP Morgan (JPM), a Dow company, up 1.12, raising the price for Bear Stearns (BSC) to 10 after all the complaining last week. BSC doubled to 11.91, the market's looking for even more. This gets a little complicated as the FED (guarantor of the debts) thought the price of 2 was fair. Under the revised terms, JPM will absorb the first $1B in losses saving the FED some money. There was no comment from the FED although it's a good guess JPM semi cleared the revised terms with them before making a public announcement. The markets like to see buyers of securities, even better is raising the price.

On the economic front, sales of homes rose 2.9% in Feb, better than expectations of another decline. While this is an indication that bleeding has stopped, this is not a final word. The price for a median home fell to $196K, largest such drop since record keeping started in 1999. Also the base for the increase was a low number, more ugly news could be coming down the road. In the meantime, throw darts to find winners.

Sunday, March 23, 2008

Dow has an up week

Wild swings ended with Dow gaining for the week, not too many this year.


This was an excellent week for REITs as bargain hunters bought these stocks with yields of 6 - 8 - 10% or more. Junk bonds pulled back, sending their high yields even higher. The Alerian MLP index fell 15 to a new 52 week low. Some of their decline may be hedge funds (whatever) dumping at fire sale prices. Generally the S&P Dividend Aristocrats went with the markets. One of my favorites, Coca Cola (KO), did well. The VIX (volatility index) had a wild week going over 34, but ended with only a modest change at 26.62 (still indicating a very bumpy ride ahead for the markets).

Expect more excitement this week!

Friday, March 21, 2008

Asian markets higher

Asian markets were generally open, reporting nice gains in light trading.

While US markets are closed, business goes on. Alcoa (AA), a Dow company, is being investigated by the Justice Dept to see if bribery laws were violated in Bahrain (on the Persian Gulf). AT&T (T), another Dow company, will make an advance payment of $1.3B for its portion of wireless spectrum licenses recently won & the remaining $5.3B will be paid in the next few weeks. This wireless spectrum is key in expanding US telecommunications.

Thursday, March 20, 2008

Stocks spring forward!!

Stocks spring forward finishing an extremely volatile week on an up note. If the % changes in the last 3 days were added together & assuming they were in the same direction, it would have been a 7% change or almost 1000 points in the Dow. Today the Dow was up 261, advancers ahead of decliners nearly 3-1 & NAZ up 48. That followed an even larger decline yesterday & an even bigger gain on Tues. Can you spell volatility? The VIX fell 3.22 to 26.62, still a very high reading. This was also a quadruple witching day, adding extra volatility to the markets. Today, all you had to do to find winners was throw darts. Banks led the charge forward. REITs continued to recover from very depressed levels & even junk bond funds had an up day (from record low levels offering extremely high yields). MLPs, however, slipped a little. Maybe the pullback in energy prices unnerved some investors. Commodities had a wild ride, mostly in reverse ending their worst week in half a century. Gold in just a couple days fell to 920. Oil rallied a little today ending over 101, considered a bullish sign for bullish traders.

The Conference Board said its index of leading economic indicators fell in Feb for the 5th consecutive month. The index dipped 0.3% to 135.0 in Feb after a 0.4% decline in Jan. CIT Group (CIT), down 2.01 to 9.63, said it's tapping into its $7.3B credit lines to repay debt and finance its commercial lending business because it cannot obtain financing from other sources.

Tomorrow will be a day of rest in the US, but overseas markets should generally be open.

Sun enters Aries

Sun enters Aries bringing spring. After a terrible winter, stocks are starting spring on an up note. Dow is up 109, advancers ahead of decliners by 30% & NAZ is up 20. This isn't all that impressive but the best the markets can do. Commodities are getting a lot of attention. Oil dropped under 100 & gold is 931 (1000 just a couple of days seems like a feint memory). Jobless claims rose 22K last week, a higher than expected number. Some feel this is another indication we are in a recession. FedEx (FDX), down 48¢, reported a 6% decline in it's Q3 earnings & said it may miss Q4 estimates. They are especially important since they feel the pulse of the economy. Thornburg Mortgage (TMA) is back down to 1.15, nearing death's door. Their mortgage portfolio is financed by $B, those loans aren't looking good.

Wednesday, March 19, 2008

Night stock markets

The first overseas markets are open. New Zealand & Australia markets are about 2% lower following NY declines. Korea just opened, down 1½%. Japan is closed. Shanghai opens in an hour at 3762, down from over 6K just a few months ago. Selling should continue in Asia based on worries about US recession & credit crisis.

Bear Market Rally!!

This is another bear market rally, a fake rally during a bear market. Over 70% of yesterday's big gain is gone. Dow plummeted 294, decliners over advancers better than 2-1 & NAZ down 58. In addition, oil dropped 5 & gold an enormous 64 (that's right, 64 to 936). Can you spell: "Nervous Markets?" Big oils sold off (down 4 was typical) reacting to the decline for their commodity. The Alerian MLP index pulled back 5 to a new 52 week low of 266.54. This little followed index may give a good feeling of the underlying strength for the economy. The businesses own oil & gas pipelines, basic to the economy.

The FED made no announcements today, so we had to rely on regular news releases. There is a growing awareness that more ugly stories may emerge & there is just so much that FED rate cuts & willingness to help ailing investment houses can do to solve the financial mess. This week may repeat last week, an enormous gain on Tues is followed more market drops.

The pause that refreshes

Markets paused to digest yesterday's enormous gains. Dow is up 13, advancers ahead of decliners by 40% & NAZ is essentially even. The gov relaxed capital requirements at Fannie Mae (FNM), up 2.60, & Freddie Mac (FRE), up 3.07, to inject an additional $200B of financing for home loans. This is seen as an important step in helping correct the mortgage mess. Oil pulled back to 105 & the Treasury bond yield slipped to 3.44%. VISA (V) went public today raising a record $18B, rising from an initial price of 44 to 59. Adobe (ADBE) beat estimates sending the stock up 4.02. While the news was good, their forecast going forward was a little cautious as they are keeping an eye on the US economy.

Tuesday, March 18, 2008

The FED rate 75 basis point cut brought back buyers sending stocks sharply higher. Dow rose 420 (the largest point gain in almost 6 years), advancers over decliners 8-1 (everything I owned including junk bond funds was up) & NAZ was up 91. Treasury bonds sold off, the yield rose 14 points to 3.45%. The FED cut was up "only" 75 basis points, below expectations of 100 points causing for a knee jerk selloff afterward. But after reassessment, they liked the idea of leaving some powder dry so the FED has more ammunition for the future. The VIX (volatility index) dropped over 6 to 25.79, still at very high levels.

The FED has had unusually active in the last couple of days. Their moves are bold, but will take time to digest & assimilate. Tomorrow, without FED activity, daily news releases again will influence the markets. Last week, Tues was also a 400 point gainer day for the Dow, but there was no follow thru. Tomorrow should be interesting.

Projected FED rate cut sends stocks sharply higher

Stocks rallied strongly ahead of the FED's interest rate cut. Dow is up 258, advancers ahead of decliners 10-1 (don't see that too often!) & NAZ up 45. The markets are pricing in a 100 basis point cut, maybe even 125. The stock market rally caused selling in Treasuries sending the bond yield up 10 points to 3.42% (still a very low number). Oil is up 2 at over 107 while gold is 1006. Goldman Sachs (GS), up 13, & Lehman (LEH), up 7, rose on favorable earnings releases. Favorable means down from last year but ahead of analysts' lowered projections. OK!

The Labor Dept reported Feb inflation numbers a little higher than expected. There was a drop in home construction & new permits fell 7.8% to a 16 year low. Chances are the inflation numbers will not cause the FED to pull back on the today's rate cut. They said helping the sagging economy is their main focus. Today's strong rally may be another version of buy on the rumor & sell on the news.

Monday, March 17, 2008

Following a brutal day,Dow squeaks out a gain

The failure of Bear Stearns sent Dow down 200 on the opening. But it recovered after an hour & survived a midday pullback ending up 21, losers were ahead of decliners 5-1 & NAZ down 35. The volume was 2B, considerably ahead of 1½B which is more common. S&P 500 closed at 1276, 6 points above a very important & sensitive point - 1270. The Treasury bond rallied strongly sending it's yields to 3.31% (a level that can not be sustained over the long run). Oil fell 4½ to 105.68 on worries that a slow US economy will hurt demand for oil. In groups I follow closely, banks & REITs bounced back with modest gains by day's end. MLPs suffered with the oils, their index fell 7.58 to 268. That was an enormous decline. They are low Beta securities which feature generally have only modest moves. Before their run up in late 2006 into the first half of 2007, the index had been going sideways for a year or so (240-260). Today's sell-off could be telling for them & maybe the economy. The VIX (volatility index) was up 1.08 to 32.24, highest level in 5 years promising a very rocky road ahead.

Getting lost in today's news about the FED & Bear Stearn's failure, the Commerce Dept reported the current account deficit fell slightly in 2007 as stronger growth (agriculture products helped) in U.S. exports offset a higher foreign oil bill. There are reports of first sightings of $4 gas at the pumps. Tomorrow will bring the FED meeting where a full point cut in their rate is expected. That should rally the market as long as they don't assume that signals the economy is worse off than expected. The next day, there is no FED announcement expected. Markets will have to survive on general reports which have been by & largely negative lately.

Bear Stearns fails, but market tries to recover

Bear Stearns failure (forget it's symbol) shocked global markets. Overseas markets had an enormous sell-off, 3-5% declines were common. Dow opened down 200, but is off the lows at minus 151, decliners over advancers 6-1 & NAZ down 58. The S&P 500 is hovering around the sensitive point of 1270. It's believed that a close below that number can bring heavy computer selling.

Chart for S&P 500

Bear Stearns collapse in just a couple of days stunned the world's markets. JP Morgan (JPM), taking the news well - up 3.57, is buying Bear Stearns for $2+ a share. Bear Stearns is trading double that, hoping for the best. The FED is providing help, always tricky when some believe less government interference is the correct course of action. The FED, in a rare weekend move, in an attempt to calm the markets on Sun, agreed to become a lender of last resort to Wall Street investment houses. They will be able to secure short-term emergency loans starting today. It also approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately. Pres Bush praised the FED's moves adding emphasis to government's concern about the financial mess we are in. Meanwhile, Lehman (LEH), another major investment house, is down 8 as shorts are betting against them.

These are very troubled times. Very smart investors should use this time to study changing events & companies with excellent values. The credit crisis, crunch, whatever, is bringing excellent buying opportunities for stocks that are becoming undervalued. Homework always sounds dull, but it can pay off handsomely in troubled times.

Saturday, March 15, 2008

Fraidy cats

This is a fraidy cat.

She's learned not to be afraid of me so she doesn't have to run when seeing me. Such reasoning is needed in today's markets. The stock markets have been in a brutal bear market for 4-8 months depending on how you count. But this is not the time to become a fraidy cat.

Down markets provide opportunities to buy good companies at reasonable if not great prices. Last week REITs rebounded a little by week's end, but they remain 40-50% (at least) below last year's highs. Junk bond funds offering high yields again fell to new lows. The MLP Alerian index dropped to a 12 month low. While I don't follow these securities closely, munis have gotten hammered forcing their yields even higher because of the credit crises & related problems. The S&P Dividend Aristocrats have also been selling off even though they have excellent track records of higher divs year over year. A few offering yields over 5% are: Bank of America (BAC), US Bancorp (USB), Pfizer (PFE) & Masco (MAS), something to think about. Higher yields mean risk is factored into the stock price. But these kinds of securities offering high yields will make it easier to endure more stock market declines to be followed by a protracted recovery period. This is time to do homework, selecting the best investments for very smart investing. This is not a good time to be a fraidy cat!

Friday, March 14, 2008

Bear Stearns sinks stocks

Bear Stearns (BSC), that's about all the markets were focused on today. Almost $6B in their market value was wiped out in a couple of mins, that's some kind of haircut! It looks like they sort of had a run on the bank requiring the FED to step in & help. At midday, BSC sent out feelers looking for buyers. As bad as this mess is, the bigger problem is there could be more huge financial houses in trouble. Credit crisis & credit crunch are now popular terms used in everywhere.

By the end of the day, Dow slipped below 12K, down 195. Believe it or not, this was an up week for the Dow thanks to the 400 point day. Decliners led advancers 5-1 & NAZ was down 51. Banks, REITs, MLPs, junk bonds etc. led the way down. Everybody is keeping their eyes on S&P 500. The intra-day low in Jan was 1270 & they're just 18 points above that. Those following technical indicators worry that falling below that support line could signal more ugly days ahead. Gold is 1000, oil is 110 & the Treasury bond rose reducing it's yield to 3.42%. VIX (volatility measure) closed at 31.16, up 3.87, an extremely high level indicating there will be very big bumps in the road.

222 new lows on NYSE

Dow is recovering by the end of the day, down only 165 although decliners are over advancers better than 7-1. There are 222 new lows on NYSE including: BSC, C, LEH, JPM, PFE TWX, GS, UBS, BMY, MRK, LLY, DAL, CAH, ED. These are the ones I recognize quickly, mostly made up of financials & big drug stocks.

Bush's comments

The President gave a speech with his thoughts on the economy. He gives pretty much the same story we already know. Tough times are ahead but the economy will be stronger in the long run. That's the idea behind value investing. Tough times bring opportunities for investing at attractive prices.

Bear Stearns needs bailout

Bear Stearn (BSC), 5th largest investment bank on Wall Street, needs to be bailed out by JP Morgan (JPM) & the FED. The FED will supply extra cash to help in this serious credit crisis. Rumors about BSC having significant financial problems proved true. Today BSC is down 24 on the news & it looks like all plans were made in the last 24 hours. Now other rumors will be taken more seriously.

Dow, down over 100 in pre-trading, quickly rose over 100 when the inflation report came out & proved to be mild (showing the kind of markets we have). Then BSC news dominated & Dow sank 300 but recovered to only down 115, decliners are ahead of advancers 5-1 & NAZ is down 30. This is what the markets feared, adding nervousness to already tense market environment. Banks, REITs, MLPs, among others, are selling off. Given this problems, the FED's meeting next week may be of secondary importance as investors will be more interested in trying to figure out this financial mess.

Chart for Dow

Thursday, March 13, 2008

S&P call lifts stocks

Stocks recovered nicely after the S&P call about seeing the light at the end of the tunnel. After being down 200 in the AM, Dow rose 300 points ending with a gain of 35, advancers ahead of decliners almost 3-2 & NAZ up 20. The S&P call was focused on sub-prime mortgages, not other financial debts such as Alt-A loans which have also caused major problems. It should be kept in mind that S&P's track record on calls in recent weeks has not been very good.

A technical guy evaluating charts said he is focused on a support level of 1270 for the S&P 500, same number somebody used last week. The S&P is 1315 after having held at 1270 a few days ago. He thinks that buyers aided by weak shorts who panic easily caused the move up in stocks suggesting S&P 500 will test 1270 & fail, sending the markets even lower.

Gold flirts with 1000, oil is 110 however the Treasury bond fell today sending the yield up to 3.53%. Bear Stearns (BSC), fell 4.58 & down as much as 10 at midday, as vulchers are circling. One analyst said yesterday said the FED couldn't let them go under because it would bring on a worse mess. Junk bonds offer very high yields. For example, a GM bond yields 13%. Risk is there but that should whet some appetites. Muni yields have shot up from 4% to 5% in recent weeks. The Alerian MLP index pulled back 2 to 279 another 12 month low.

S&P call send stocks higher

S&P in the AM said we can see "the light at the end of the tunnel" regarding the massive write-downs at financials. The Dow rallied 300 points from down 200 to up 75 presently.

Down down 216

Dow tumbles again, down 216, decliners lead advancers 5-1 and NAZ is down 41. First thing this morning, I saw on Bloomberg TV that Dow futures were trading down 153 following the lead of Asian & then European stocks. There is growing recognition that quick fixes do not help with the mess that financial markets are trying to deal with. Meanwhile, gold is at the magic 1000 level, oil is 110 & the Treasury bond yield is down to 3.41% (flight to safety).

Investors were told by Treasury Secretary Henry Paulson of a plan to provide stronger regulatory oversight of mortgage lenders. Lax standards are blamed for today's credit mess. Such changes appear to be like shutting the door after the cows are already out of the barn. A gov report showed retail sales fell in February 0.6% rather than increasing as had been expected. The number of homes facing foreclosure rose 60% in Feb. Carlyle Capital Corp. said it expects creditors to seize all of the fund's remaining assets after missing margin calls last week on its $22B portfolio of residential-mortgage-backed bonds. There are fears that more ugly news will be coming from depressed mortgage-backed securities. The markets do not look very pretty & this could keep dragging on.

Wednesday, March 12, 2008

Stocks fall in Asia

Stocks in Asia continue the decline starting in the US, most markets are down 1-2%. Shanghai is 4030, down 1%, was over 6K just a few months ago. China has worries about inflation, recession in the US & dealing with the worst winter in half a century. Japan's market is down 2% reacting to the sharp appreciation in the Yen. $1 buys 101 Yen (or ¥), a 12 year high against the $. Dow futures are down 50, Thurs is shaping up as another rough day in the US.

Markets fall in late day selloff

Markets sold after after the first couple of hours. At the high Dow was up over 100, then it sold off 200 to finish down 46. Decliners were ahead of advancers 2-1 & NAZ was down 12. Yesterday featured strong volume, today was only average as reality kicked in. Banks led the charge down. Bank of America (BAC), a new member of the Dow, was down 69¢ along with the rest of the group. Wachovia (WB) was down 1.73 as it defended it's purchase of a Cal mortgage lender. Even Thornburg (TMA) pulled back 40¢ from it's midday price. The volatility index remains in very high territory, gaining .86 to 27.22. The Alerian MLP index dropped back to 281, the low level from a couple of days ago & very near the low end of it's trading range over the last 8 months. Meanwhile NY oil closed at 109.95 & gold was 978.80. The long Treasury bond had an excellent day gaining almost one point bringing it's yield down to 3.48%.

Dow strong again

Markets continued yesterday's rally. Dow is up 74, advancers ahead of decliners 2-1 & NAZ up 13 (stocks pulled back a little in the last few mins). Buyers were encouraged by the FED's move to add liquidity to the securities markets & oil pulled back to "only" 108. Just a couple of weeks ago they were trying to figure if 105 oil was possible. The volatility index pulled back 1 to 25 (above 20 is considered very high).

Last night Caterpillar (CAT), a Dow stock, up $3.09, said they expect growth of 5-15% this year. UPS (UPS), down 40¢, said they may miss Q1 forecast. This is an important company since they feel overall economic activity. Thornburg Mortgage (TMA) doubled today to $3.25, getting them away from death's door. Billions are at risk if they fail. Alerian MLP index pulled back a point to 282 erasing yesterday's a modest gain. I'm a little attached to these companies & their pipelines. But once again, they are at the heart of the economy although high oil & gas prices may get factored into today's decline.

Tuesday, March 11, 2008

Asian markets surge

Asian markets are following the lead from higher markets in NY. Their focus is Wall Street's biggest gain in over 5 years, most gapped up initially with gains around 3%. They are also talking about reducing expectations of a rate cut by the FED next week for "only" 50 basis points (vs 75 assumed before). However, markets already open have started to pull back.

Dow's biggest gain in 5 years

Dow had it's biggest gain in 5 years, up 417. Gainers outnumbered advancers 10-1, an eye popping event. NAZ was up a whopping 86. The rally followed the FED's announcement that they would accept mortgage backed securities as collateral. This is technical & tough to understand, I'm still struggling to figure it out. It's not open ended, only AAA, etc securities can be used. Markets took this as a huge plus aimed at helping relieve the credit mess the US & world are in. Around midday, when the Dow was up 135, it took off & didn't stop rising until the close. Steady buying is considered very nice but also worrisome. A one day rally conjures up amateurs piling on, driven by emotion.

Just yesterday evening, I saw a money manager talk about the short term future (roughly 6 months) for financials as being uncertain with a strong bias on the ugly side. He said problem loans will get worse & high yields on bank kind of securities are suggesting more div cuts are coming. Bear Stearns (BSX), up ONLY 61¢ on a very strong day, remains under a cloud which first appeared last Aug. Meanwhile, Asian markets will be open in a couple of hours & should follow thru on the gains in US markets.

FED eases liquidity

Fed has a new plan to help major financials, big banks & investment banks. They will provide $200B in Treasury securities so there will be an ample supply of treasury securities. This is a bit technical for ordinary investors to digest but banks rallied big out of the gate gaining 4%. Now they're pulling back after investors got a chance to think about it. Bank of America (BAC) a new member of the Dow, was up almost $2 but has sold off so it's only up 61¢ presently. Dow is up 150, advancers over decliners 4-1 & NAZ is up 29.

Back to ordinary news, gas prices inched up to a record level $3.23 & are poised to go higher. The price of oil got within a hair's breath of 110. The US trade deficit widen in Jan to $58 as the weak dollar benefits exports but we continue to import a lot of gas.

Enthusiasm following the FED's announcement will diminish going forward. The steady stream of negative news reports on the economy should keep taking it's toll.

Monday, March 10, 2008

Dow falls to new low

Dow fell 153 to 11,740. The losers lead advancers better than 5-1 & NAZ was down 43. Last week, an analyst from Asia said 1270 was an important resistant level for S&P 500. It closed at 1273, can you spell uh-oh? The Alerian MLP index (on the right side of this page) fell to 281, another new low for it. Meanwhile the Treasury bond rallied, reducing its yield to 3.44%. When stock are sold, money goes into bonds.

Negative news keeps coming. Thornburg Mortgage (TMA) is at 1 (not down 1 but at 1). It looks like billions more will have to be written off the books of it's lenders. The head of OPEC gave a gloomy outlook for oil prices as oil reached 108. Texas Instruments (TXN), up 35¢, reduced forecast for Q1. Bear Stearns (BSC), down 7.58, dropped as Moody's downgraded BSC securities backed by Alt-A mortgages (home loans given to people lacking proof of income or with minor credit problems). During the financial crunch in the summer, there were all kinds of worries about BSC & its survival. BSC survived but the stock is almost 40 points lower.

Dow sinks to under 11,800

Dow is down 104 to under 11.8K, decliners ahead of advancers 3-1 & NAZ is down 24. The next important downside level for the Dow will be 11.5K. In pre-trading markets, there was a rumor that FED would have an emergency rate cut in a few minutes. So much for that rumor. They were also talking about a rate cut of 75 basis points at next week's meeting. Meanwhile, the usual array of gloomy news continues. Gasoline prices are nearing record levels of $3.23 a gallon as oil reaches 107. Based on these trends, analysts are looking for gas to go to $4 a gallon. Blackstone (BX), down 55¢, reported a major write-down on it's bond insurer FGIC. Blackstone was the sexy darling of Wall Street when it went public last June, now it's down 50% from the original price. Recently the markets have had to absorb a lot of negative news on bond insurers, key players in credit markets.

An interesting article that caught me eye is Citigroup (C) sees write-downs of an additional $9B by investment banks. If they are right, that can bring forced selling in stocks when these funds try to liquidate. This is shaping up as another tough week even as the projected FED rate cuts nears.

Friday, March 7, 2008

Job report sinks stocks

Stocks were down largely based on the negative job report suggesting we are already in a recession. Dow was down 146 to 11.9K (yes, it broke 12,000), losers outnumbered advancers 2-1 & NAZ was down 8. There were 396 new lows on the NYSE. As bad as the numbers sound, it wasn't that bad for beaten up stocks. REITs were up, bargain hunting helped. Financials did fairly well, betting that the FED moves announced this AM will help. However, some worry the FED is doing everything it can but that's not helping. MLPs continued their decline, down 2.97 to 286.56. Oil closed over 105. Thornburg Mortgage (TMA) is on the verge of failing which will only add to bad debts at major financial institutions.

Comparisons are being tossed around between this bear market & the major one early in the decade. This one isn't as big (yet) but it has fallen at a faster rate & it's not over yet. We'll see what next week brings.

Stocks down after FED moves

Stocks sold off but not too badly. Dow is down 112, however NAZ is down 8 & decliners are only slightly ahead of advancers. Many of the beaten up ones I follow are up. i.e. bargain hunting.

The Labor Dept reported employers cut jobs by 63K in Feb, the most since March 2003. The unemployment rate fell to 4.8% reflecting people leaving the labor force. The FED announced it will boost the size of the next 2 auctions by $50 billion each up from the $30 billion limits it had previously announced. Additionally, the FED said it will make $100 billion available to a broad range of financial players starting on Friday. Consumer confidence was reported at the lowest level in 6 years. Oil reached another record, over 106.

In the last hour, Dow pulled back 100, sending it below 12K. It looks like the PM will see more selling as traders want to lighten up going into the weekend.

Thursday, March 6, 2008

Asian markets tumble following US decline

Asian markets tumble following the decline of US markets. Most are down 2-3% in their Fri morning sessions. YTD they are down 12-18%, worse off than US markets. They are heavily influenced by the US economy since it is typically their largest market.

Alerian MLP index

The Alerian MLP index closed at 289.53, just below the line of 290 which has pretty much held in recent months. Once again, this is a technical indicator testing whether buyers will support this line as in the past or give up. 4 times in recent months it held. This is also important for fundamental reasons. Limited partnerships own pipes moving oil & gas around the country. If this line can not hold, the markets are giving up on basics. For the brave who like high yields & are willing to put up with tax hassle, they offer excellent values as their long term track record indicates. The index was started on 12/31/96 at 100, today they are triple, a second index including reinvested distributions is 662.

Chart for  (^AMZ)

Down down 215, testing 12,000

Ugly day in the markets. Dow as down 215 very near 12K & testing that sensitive level. Decliners led advancers 7-1 & NAX was down 52. S&P 500 and NAZ are at 52 week lows. Dow closed at the lowest close (intra day in Jan was lower) in almost 18 months. Retailers & financials led the markets down. Nothing really new, same old negative news getting the better of the markets. Negative stories & credit concerns got the better of buyers. Oil closed at 105.47, another record. The FED issued a report that homeowners equity dipped below 50%, first time since they've been keeping records. Citigroup (C), a Dow stock, said it will shrink its mortgage business by $45B.

Junk bond funds yield 11%. Many REIT's yield 6%, 8% or more & generally have partially tax free divs. The S&P 500 Dividend Aristocrat list has 56 companies with excellent long term track records of paying divs. Today the Alerian MLP index closed just below 290, for the last 8 months it has largely lived in the 290-310 range. They offer attractive yields. However they are sending out their K-1 tax reports next week, offering a fair mount of tax hassle. But I like them.

Credit problems sink markets

More ugly credit news is sinking the markets again, although not as badly as might be expected. Dow is down 101, decliners over advancers better than 3-1 & NAZ off 7. Thornburg Mortgage (TMA) & investment management firm Carlyle Capital missed margin calls, indicating the end is very near for them. $B of loans will have to be written off by others. Home foreclosures were at a record last quarter according to Mortgage Bankers Assoc. The proportion of mortgage foreclosures nationwide reached a record high 0.83% in Q4 surpassing the previous high of 0.78% in the prior quarter. As expected, financials led today's decline. Oil prices reached 106 following yesterday's surprise announcement of lower inventories. However, retailers reported mixed results for Feb which can be interpreted good news.

Wednesday, March 5, 2008

Stocks higher on late day rally

Stocks rallied in the closing minutes to end up. Dow was up 41, advancers over decliners 3-2 & NAZ was up 12 in what was a choppy day. The FED issued a report that the economy has weakened this year, pretty much what I have been talking about. At midday, the big news was Ambac (ABK), the troubled bond insurer, down 2.02, said they will raise $1½B to get over their troubled times. The AP story below talks about trying to hold back downgrades for their debt from AAA to AA (of huge importance to a bond insurer):


Standard & Poor's and Moody's said Wednesday that Ambac's plan to raise $1.5 billion would be enough to avert a downgrade. Both said the offering represented an important part of the company's overall plan to strengthen its credit profile.
But competitor Fitch Ratings, the only major ratings agency to downgrade the New York-based bond insurer, was less optimistic. If Ambac successfully raises the capital, it would likely affirm the insurer's "AA" rating, said Thomas Abruzzo, a managing director at Fitch and head of the financial guaranty team. But Fitch said it doesn't believe it will be possible to regain a "AAA" rating until its subprime risk can be contained.


That's not all, oil surged an eye-popping $5 to 104 from a surprise drop in crude oil reserves. In addition, the Euro rose to $1.53 (another record). Financials had a very tough day but overall, the markets digested this news very well. Let's see what tomorrow brings.

Service sector report sends stocks higher

A favorable report on the service sector sent stocks higher in a broad advance. Dow is up 91, advancers ahead of decliners better than 2-1 & NAZ is up 21. Institute for Supply Management said its new service sector index registered was 49.3 in Feb, up from 44.6 in Jan (a 6 year low). However a number below 50 indicates a contraction, but at least Feb was less bad than Jan. The Commerce Department reported new orders for manufactured goods in Jan fell 2½% from the previous month marking deterioration from the 2% increase in Dec. This was also the biggest decline in five months.

On the retail front, BJ's (BJ) was up 2.86 on good earnings. Jan numbers were very good & they raised earnings guidance for 2008. I think my friend helped, she gave them a lot of business over the weekend.

Tuesday, March 4, 2008

After late day rally, Dow closes down

After Dow tumbled to almost 12K (down 200), it rallied in the PM. Bargain hunters brought Dow back to "only" a 45 point loss. The tricky part is trying to assess the concept of "feeding the ducks," i.e. are savvy investors selling into rallies? Decliners led advancers 2-1 while NAZ squeaked out a gain. Oil remained near 102 & the effects of it's record price is starting to weigh heavily on the markets.

Citigroup (C), a Dow stock, was down 99¢ to the lowest level in 9 years on worries it needs to raise even more money. Can you spell, uh-oh? This is after raising $12½B just a few weeks ago. After losing a key officer, Google (GOOG) was down 12 to a 52 week low, first time they've had to deal with that. Ambac (ABI) was up 78¢ as it moves towards a deal to raise capital aimed at keeping their AAA credit rating not to mention surviving. Mortgage mess has become an even larger worry & may be a key driver in the markets for the next few days.

Stocks down again

Stocks continue their declining ways. Dow is down 134, decliners over advancers 2-1 & NAZ down 24. It looks like Dow will be testing lows of 11½K from Jan. From the present level this would suggest another 5% drop just for testing. Ben Bernanke, FED Chairman, in a speech in FL said more needs to be done to to prevent home foreclosures. Banks are leading today's market decline.

(SPLS), down 56¢, reported lower earnings & reduced forecast for 2008. The markets keep drifting down based on these company reports, expect more of the same.

Monday, March 3, 2008

Late day rally saves stocks

Stocks were trading at a loss for most of the day following the down markets overseas. However in the last hour, a rally brought the Dow up from down 100 to essentially break even although decliners beat advancers almost 3-2. Economic data remains weak. Oil closed at 102.45 & gold is at 984. The Treasury long bond was even holding the yield at 3.53%. One of the little noted items from last week was nibblers were attracted to junk bond funds which typically yield 11%, a good 750 basis points above the Treasury rate. After these bond funds have been punished badly in recent months, nibblers saw value.

The 3 US automakers reported lower sales in Feb. Especially hard hit were luxury & sports vehicles, a reaction to higher priced gas. Oil set another record at 103.95. Higher oil prices result from, among other things, the weak dollar. Exporters are paid with dollars which are slipping in value against other currencies. The Euro hit a new high, over $1.52. The dollar remains weak & I think one of the drivers for Dow being 2K below its all-time high just a few months ago.

Stocks slip slightly

Stocks pulled back but only slightly. They did not continue major declines overseas. But markets still face ugly news. Oil reached a new record at 103.95 propelled with possible military action by Ecuador, Bolivia & Venezuela. Confusing situations can be expected to push oil prices up. US manufacturing declined in Feb to the weakest level in 5 years. The Commerce Dept reported construction spendin in Jan fell to the lowest level in 14 years. And gold pushes to record prices around 980, thousand dollar gold is no longer only a wishful dream.

A lessor followed story is Thornburg Mortgage (TMA), one of the biggest mortgage companies, down over 50% today to 3.96. It's hardly necessary to state the obvious. they're facing margin calls on their mortgages which could sink them. Such a failure would adversely affect many major financials, they are weak today. This PM we'll see if all the negative news brings out more bears.

Sunday, March 2, 2008

Asia markets tumble

The Fri market decline continues Mon morning in Asia. Japanese stocks are down 4% before breaking for their lunch period. Japan is following the Fri lead from NY & the yen is up to 103 to the dollar making exports to US more expensive. Just a couple of months ago, that rate was around 114. Korea, Taiwan, & Australia are down around 3% & Shanghai is down only 1%. Additionally, Shanghai is off more than 30% from it's highs set a few months ago. Hong Kong just opened down 3½%. Gold is up to 980. Venezuela is mobilizing tanks sending them to the Columbia border, a bullish signal for oil currently at 101. These are early signals that Mon will be another tough day for NY markets.