Friday, August 29, 2008

Stocks sink going into long weekend

Dow was down 171, decliners over advancers 2-1 over decliners & NAZ was down 44. Dow was down marginally for the week but up 1½% in Aug. S&P 500 FINANCIALS INDEX was down marginally. NYSE volume continues very low, struggling to reach 0.7B.

Oil ended about even in the 115s as traders going into a long weekend, especially this very long weekend with a tropical storm hitting the Gulf, do not want to take bets. Behind Gustav is Hannah, another storm that could work into the Gulf in about 9 days. Hurricane season should keep market watchers busy. The Alerian MLP index is up pennies at 273, again traders have to keep cool for the moment.

I still think the Federal Reserve has been working overtime trying to fix the Fannie Mae (FNM/Freddie Mac (FRE) mess. I'm looking for them to make an announcement after the close the markets or over the weekend.

Stocks weak on slow Friday

Dow fell 110, decliners over advancers 2-1 & NAZ was down 43 (all ahead of a long weekend). The S&P 500 FINANCIALS INDEX is only down 1% while trading remains quiet.

Retail gas prices at the pump increased a penny yesterday, first increase in a month & a half, on worries about the storm Gustav. The Gulf is getting ready for the storm to come thru in a few days. Oil is up on the nervousness while the Alerian MLP index is up pennies, trying to figure out which way to turn.

CLV08.NYMCrude Oil Oct 08 __ 117.91 ..Up 2.32 (2.0%)

Oil-Rig Insurers Brace for Biggest Test Since Katrina, Rita Stormed Gulf

In July, after tax rebates were spent, consumer spending rose only 0.2% & prices rose the most in 17 years. Even after revised GDP numbers yesterday, the US economy is still limping along with worrisome inflation & high unemployed producing sluggish retail sales

Consumer Spending in U.S. Slowed in July as Prices Rose Most in 17 Years

Dell (DELL) dropped 3 on its negative earnings report from last night, weighing down NAZ. A lot of traders are away on holiday. Next week, business activity will return at full strength.

Thursday, August 28, 2008

Today, just throw darts to find a winner

Today was one of those days, all news was considered good news. Dow was up a big 212, advancers over decliners almost 4-1 & NAZ was up 29. Impressive rally except for very light volume. At mid July NYSE volume was 1.8B, then a month ago it was down to 1½B. Since then it has been falling & falling to under 1B. Leading today's charge were banks once again. S&P 500 FINANCIALS INDEX was up 12 to 287, clearly off the 267 recent low.

Oil plunged on news oil would be released from stockpiles if the storm (Gustav remains a storm for the moment) does severe damage in the Gulf:

CLV08.NYMCrude Oil Oct 08 ..115.64 .. Down 2.51 (2.12%)

Crude Oil Declines After IEA Says It Will Release Stockpiles If Storm Hits

The Alerian MLP index which tends to follow the lead of oil price swings, even though it's not directly linked, rose 1½ to 272, climbing back to a new high for August.

When all news is considered good, enjoy. Trading should be even slower tomorrow, big picture economic problems in the US economy drag on. For what it's worth, I still think the Federal Reserve is burning the midnight candle trying to come up with a rescue solution for Fannie Mae (FNM).

Dell Second-Quarter Profit Falls Short of Analysts' Estimates; Shares Drop

After the close Dell (DELL), reported disappointing earnings. The stock fell 42¢ in regular trading & another $1 in extended trading setting up a negative tone for tomorrow's slow trading day.

Favorable news sends stocks higher

The Dow is having its third straight day of gains. Dow is up 134, advancers over decliners 2-1 and NAZ rose 18. All on VERY light volume, there is no oomph behind this rally. Much of today's news was favorable, bringing out buyers.

U.S. Economy Grew Faster Than Estimated in Second Quarter on Export Gains

The GDP growth for Q2 was revised upward to 3.3%, better than expected, following 2 weak quarters. Good news, except it signals there is no recession & no need for further rate cuts by the FED.

Fannie's Mudd Shakes Up Management to Bolster Confidence After Stock Falls

Fannie Mae (FNM) shakes up management sending the stock higher. To me it looks like rearranging the chairs on the Titanic. Whopper size problems remain with the mortgage portfolio. It's up from 4½ to 7 in less than a week as markets are taking recent news very well.

Oil rose 2 to 120 on worries about the Gutav storm which is scheduled to reach the US early next week. The biggest unknown is damage it could do in the gulf where is a lot of oil equipment. Last night on CNBC Asia, there was a lot of talk about Gustav & they gave a weather update as this storm gets worldwide attention. The Alerian MLP Index is flat at 272 today after a 6 point rally from the low 3 days ago.

More news, but it's mixed. Caterpillar is one of may favorites as they are doing very well in developing countries (i.e. China), but their US business is struggling in what they call "recessionary conditions." US retail business remain tough, but the sector is up nicely today. Tiffany (TIF) & Zales (ZLC) are each up a good 10% today while Sears (SHLD) is up 1% on a very dreary report. Toyota (TM) lowered its 2009 sales growth target by 7%, sending the stock higher. Even, General Motors (GM), a Dow stock, inched up. Tough to take today's optimism in the stock market seriously.

Wednesday, August 27, 2008

Very good rally on very light volume

Dow was up 89, advancers over decliners 7-2 & NAZ rose 20. All this on very light NYSE volume of 0.8B. The last 5 days have been the lightest volume days in the year. All stocks I follow were in the green, very good, but light volume suggests no conviction. S&P 500 FINANCIALS INDEX rose 4½ to 275. Oil ended up 2 on threats from Gustav:
CLV08.NYM -- Crude Oil Oct 08 -- 118.43 -- up 2.16 (1.86%)

Fannie Mae (FNM) & Freddie Mac (FRE) sold notes indicating they are healthy, to a degree. The premiums over Treasury rates keep climbing indicating investors see these as risky securities. Some think their ability for self financing means the Federal Reserve will have NOT have to come up with a rescue plan. I don't think so, watch for developments this weekend!

Fannie, Freddie Sell $3 Billion of Debt, Suggesting Rescue Isn't Imminent

Ugly news on big mortgage mess continues. In Q2, S&L's had $14B in mortgage writedowns. They set aside 3.68% of their assets for writedowns vs just 0.38% last year. Washington Mutual, the largest in the country, is now a $3 stock.

Alerian MLP Index - 3 months

The Alerian MLP index chart for the last 3 months shows after being caught up in selling has been slugging it out, trying to climb from the recent low at 258. In the last couple of months, 275 has been a ceiling it hasn't been able to crack, now the index is making another attempt. For those interested, the 200 day moving average (at 285) is also shown. Over the last year, the index has had similar kind of short run moves but rally attempts have stalled out. The record high last year was 342. This year, it has been living under 300.

Sideways Wednesday

Dow & NAZ are marginally up & advancers are slightly ahead of decliners on very light volume. Many traders must be away enjoying vacation or a holiday. S&P 500 FINANCIALS INDEX is up pennies, remaining at 270. The most exciting news is oil kicking up on hurricane worries:

CLV08.NYMCrude Oil Oct 08..119.25 -- Up 2.98 (2.56%)

On a quiet day like this, traders need some worry to keep them busy. This time it's the hurricane. Durables goods orders were up 1.3% in July, better than expected.

Pimco, the biggest manager of bonds funds, wants to buy up to $5B in mortgage debt. They see value in distressed debt, always a good sign when there is a big buyer for securities (especially junk kind of debt). The FDIC wants emergency powers to borrow from the Treasury to get through the mortgage writedown mess.
The financial problems are unprecedented & huge. This week the Federal Reserve must be burning the midnight candle trying to figure out how to straighten out Fannie Mae/Freddie Mac. If that weren't enough, they have to keep an eye out for problems at Lehman (LEH). Stay tuned.

Tuesday, August 26, 2008

Boring day for stocks

Many traders may be on holiday or away at the beach as stocks hugged break even pretty much all day. Dow & NAZ were flatish & advancers were slightly ahead of decliners. If my stocks are any indication, gains were usually measured in pennies. NYSE volume was very, very light at only 0.85B. The S&P 500 FINANCIALS INDEX was up 1+ to 270, remaining near its 30 day low. Gloomy news about bank profits in Q2 hardly surprised anybody, allowing for a small gain in financials.

FDIC: Bank Profits Fell by 86 Percent in 2Q- AP

Profits for S&P 500 companies (all but 7 are in) for Q2 were down. After subtracting out the banking group, profits were up 4%. Subtracting out GM & Ford would produce even better numbers. Even though exact numbers aren't available, a chunk of profit gains came from the lower dollar which has been reduced in the last few weeks.

Bloomberg TV had a rep from the mortgage industry taking about their business. After getting burned badly lending institutions are VERY tough on new loans, demanding at least 700 out of 800 credit scores. The premium of mortgage rates over the Treasury bond used to be about 1½ points. Today that premium has doubled reflected added risk priced in by lenders. Loans are being made, but weak candidates are being turned down. No wonder housing sales are in the slump they're in.

Oil was up 1 to 116s on nervousness about the storm in the South Atlantic which won't reach the US until Labor Day.

High Yield Bonds

High yield bonds (more commonly known as junk bonds)
funds, like all other financial product companies, have had a rough year. The last few years have been fairly calm as high yields have been relatively stable. Dividends from high yield bond funds yielded 10-11%. In the last few months, as financials collapsed, they were also dragged down. Lower prices for these securities caused their yields to climb over 12%, more than triple the Treasury bond rate at 3.78%.

The spread between these 2 rates is over 800 basis points, what must be at or near an all-time record. Too bad because they have no mortgages & no exposure to mortgage writedowns. They invest in corp bonds rated BB, B & CCC to earn high yields. Typically they have leveraged portfolios. They borrow additional money to gain an advantage on the spread between the rate they pay on borrowings vs the rates earned on high yield bonds. For the very brave, these high yields should prove rewarding, they deserve more respect.

Stocks little changed on light volume

Dow & NAZ are essentially even & advancers are only slightly ahead of decliners. NYSE volume remains very light in this vacation week. As a result, price swings generally do not have a lot of conviction. On insignificant trading, the S&P 500 FINANCIALS INDEX is up 1% from its monthly level reached yesterday.

The Consumer Confidence Index from the Conference Board rose from 77 last month to 81.3, above expectations of 80. Modest good news is always welcome. However, on the home sales front, the news was not so good:

S&P: Home Prices Drop by Record Amount in 2Q- AP

National Home Price Index dropped 15.4%, a record, during Q2 from the prior year. At least some regions in the US are climbing their way out of deep holes. Oil is up on worries about the latest tropical storm:
An analyst estimates that Fannie Mae (FNM)/Freddie Mac (FRE) can survive losses thru the end of the year (only 4 months away):
He expects losses to represent about 20% of revenues in the last 2 quarters as they are still feeling the effects of massive writedowns.

Today is shaping up as a quiet day on low vacation time volume, a good day to go to the beach.

Monday, August 25, 2008

Financials lead, markets tumble

Dow dropped 241, decliners over advancers 3-1 & NAZ dropped 49. Volume continues quiet, under 0.9B on NYSE. This was a very gloomy day for stocks led by financials:


Value__268.46...Change__(8.63)....% Change__(3.1%)

The financials, compiled for Bloomberg, essentially reached their one month low of 267 (which will drop off the one month grouping tomorrow). Fannie Mae (FNM)/Freddie Mac (FRE) had a good day, rising because they were able to sell more securities. They still are penny stocks selling below 5 (actually - 5.20). Rates on securities they sell keep climbing as buyers price in greater risk.
Bigger news in the financials today was American International Group, (AIG), a Dow stocks, falling 1.09 to a 13 year low!! After $25B in writedowns, they are NOT finished with this mess. It's expected that they will lose money for the 4th straight quarter which will require lower ratings on their securities. Adding insult to injury, they are no longer the largest insurer in North American. The other troubled biggie in the news, Lehman (LEH), may have to go without added financing from the Korean Development Bank, down 96¢.

Oil Rises as Tropical Storm Forms in Caribbean- AP
Ford Shares Fall to 22-Year Low- AP

Oil was up pennies on worries about threats from the tropical storm while Ford fell to a 22 year low. The Alerian MLP index dropped almost 1 to below 267, still hovering near its 52 week low (258) reached a couple of weeks ago.

Markets are clearly on defense & financials look very soggy. Maybe the Federal Reserve will not be able to wait until Friday night to come out with a rescue plan for FNM/FRE.

Financial worries drag down stocks

Dow dropped 220, decliners over advancers 3-1 while NAZ declined 47. Market bleeding continues as I write, shaping up as another dreary day in late Aug trading. The financial index is weak again, heading back for the 267 monthly low.


Value 271.35Change -5.74 % Change -2.1%

Oil is off pennies, still in the 114s, a weaker dollar is partially responsible. Oil at the pump is $3.68, down 10½% from its $4.11 peak just 6 weeks ago. The Alerian MLP index is down one, as selling thoughts bleed to these units.

Home sales continue gloomy. Sales were up, better than estimates but prices were down 7% while inventories rose.

Fannie Mae Alert

Fannie Mae (FNM) & Freddie Mac (FRE) are embarrassments to the financial markets. The Federal Reserve will have to fix them, probably by weekend. The bond holders which really own the entire businesses will be kept whole, but stockholders will get what remains which looks to be near zero. FNM & FRE are getting clobbered by the credit crisis as they endure large mortgage writedowns.

Lehman (LEH) which rose on Fri on rumors that the Korean Development bank would "bail them out" is down 1. The Korean Development Bank is approaching any dealing cautiously, they are only looking for a bargain price.

Sunday, August 24, 2008

S&P Dividend Aristocrats

Portfolio income has become more important than ordinarily after one of the worst stock market declines since the depression. These difficult times may require significant base building before markets resume their upward climb. The S&P Dividend Aristocrat list of companies (currently 59) from the S&P 500 have demonstrated dividend payments that have withstood the test of time. To be included, each company has to show a track record of at least 25 years of consecutive higher dividend payments. Many have track records of 30-40 years, if not more.

Prominent members include: 3M (MMM), Coca Cola (KO), Exxon-Mobil (XOM - added last year), Johnson & Johnson (JNJ), Kimberly-Clark (KMB), Lowe's (LOW), McDonald's (MCD), Procter & Gamble (PG), Target (TGT), Wal-Mart (WMT) & Walgreen (WAG). The best is Stanley Works (SWK) which has paid a cash dividend for 132 consecutive years, increasing the dividend in each of the last 41 years. By way of contrast, widely know companies NOT on the list include: Chevron (CVX), IBM (IBM), Caterpillar (CAT), DuPont (DD), American Express (AXP) & Boeing (BA).

While long term track records are excellent guides for investment, care is always needed before selecting one. ConAgra (CAG) reduced the dividend a couple of years ago (although the stock has held up well following the dividend cut), taking it off the list. Banks deserve special mention. Of the 7 banks in this group at the start of 2005, only 3 remain: Bank of America (BAC), State Street (STT) & US Bancorp (USB). With the yield at Bank of America near 8½%, doubts are included in its evaluation. At the late July directors meeting, the dividend was not increased (traditional time for increases as was the case last year). Two AAA companies, Pfizer & General Electric, have had a tiny bit of doubt included in their yields & should be watched more carefully going forward. Many others have excellent prospects & should be given careful consideration for investment at a time when current income takes on increasing importance.

Here are 2 fact pages on the group, such information is difficult to get as S&P does not release much. Good luck checking out these companies.

Friday, August 22, 2008

Stocks soar on very slow day

Dow is up 193 (closing on the high), advancers over decliners better than 2-1 & NAZ was up 34. As typical of a summer Fri, NYSE volume continues low at only 0.9B (very slow). This was one of those days in the markets when all news was considered encouraging even though they gave more of a mixed picture. Financials had a great day helped by the Lehman (LEH) story at the opening.


Value 276.74Change up 8.00 %change up 3.0%

Oil lost its big gain yesterday, bringing it near the 112 lows made earlier this week.

CLV08.NYM--Crude Oil Oct 08-114.52 -Down 6.66 (5.5%)

Oils were weak but the Alerian MLP index was up a couple to 267, off 1 from the opening (maybe influenced by oil's decline).

Slow day, stocks up big. The Lehman story while nice is not over. Fannie Mae (FNM) should make news next week, maybe with a recovery package from the FED after the close next Fri. Oil, housing, credit markets, retail continue with big problems. Here are some closing thoughts about the future of the economy from Warren Buffet.

Lots of good news has stocks soaring

The day began with a Reuters report that troubled Lehman (LEH) might be bought out (or at least would receive a significant investment) by the leading Korean Bank which wants to become the #1 bank in Asia. This report sent LEH up 1¾, very good for a low priced stock. Details have not been announced, just the idea was good enough to lift stocks. Then Ben Bernanke, Chairman of the FED, said in a speech that inflation outlook was "uncertain" & the FED would be there to lend a helping hand (if needed). A key statement was:

The Federal Open Market Committee "is committed to achieving medium-term price stability and will act as necessary to attain that objective," Bernanke said.

If that wasn't enough oil prices fell, partially related to strength in the dollar after its recent couple day decline:

CLV08.NYMCrude Oil Oct 08 119.05 Down 2.13 (1.76%)

As shown on the right the Alerian MLP index is up 4 to 268. That strength is more puzzling as the 2 Dow oil stocks are only even on lower oil prices.

On all this "good" news, Dow is up 147, advancers more than double decliners and NAZ is up 22. However, they pulled back from the highs. Banks took the news well:


Value-272.56___Change-up 3.82___%Change-up 1.42%

Day traders may cash out by day's end, let's see if they listen to me.

Thursday, August 21, 2008

Stocks after recovering from losses, end little changed

Dow was up 12, decliners over advancers 1¼ to 1 while NAZ pulled back 9. Volume continues quiet at 0.9B, just one of those summer days. Today oil made headline news. Oil surged over 5 to 121 on growing tensions between the US & Russia with the possible threat Russia (world's 2nd largest oil producer) could cut off oil supplies. Problems with Georgia continue plus Russia is worried about the defense system the US will install in Poland. The last 2 days are first in a month that headlines news impacted oil prices causing them to rise. Oil stocks rose nicely on this news helping the Dow. The Alerian MLP index went up 1½ to 268.32, getting a little further away from the 260s, its 52 week low area.

S&P 500 FINANCIALS INDEX pulled back 2.90 to 268.74 (near the important 267 monthly low) as worries about the financials drone on. After being down on more deary news, Lehman (LEH) rose 1 point ending at break even. An analyst recommended buying LEH on the hopes they could be the subject of a hostile takeover. Sure! Even if it happens, difficult to imagine a significant premium given all the confusion over what financials are really worth.

American Intl Group (AIG), a Dow stock & billed as the largest insurance company in the world, pulled back under 20 (down 1.02 to 19.78), lowest price since 1996. Merrill Lynch (MER), down pennies, will announce a deal with NY Attorney General about a settlement in auction-rate securities sales. It will not be pretty & cost them plenty, money & reputation. This is another case where big financial boys who are supposed to be professionals knowing what they were doing, really weren't. Now their shareholders & all shareholders, among others, are paying. Expect more enormous size problems for financials, even in this quiet late Aug period.

Stocks drift down on financial worries

In quiet times, markets are looking for direction. Financial worries are grabbing everybody's interest. It is becoming increasingly apparent that Fannie Mae (FNM)/Freddie MAc (FRE), whopper size institutions which are gov supported, will not survive as is. On Aug 29, after the markets close, would be a logical time for the FED to announce changes which are desperately needed. Chances are great stockholders will get pocket change, if anything, following the changes.

Meanwhile markets have to keep trading. Dow is slipping, down 81, decliners over advancers 2-1 & NAZ is down 27, all on quiet volume. Oil, once again, is acting up. Tensions between US & Russia, with a possible shutdown of the important Russian oil pipeline got bulls excited. Oil is back up to 119s, up 4. Headlines once again are bringing traders into oil, not a good sign. Jobless claims fell again, down 13K to 432K (over 400K brings recessionary thoughts). The 4 week average is 446K. These numbers are increased as the Labor Dept has been informing people they may still be eligible to file new claims.

Burger King (BKC) with a good report fell 1.85, Heinz (HNZ) rose 32¢ on their good report while Barnes & Noble (BKS) fell 1¼ on a not favorable report. A sluggish US economy keeps getting a lot of mentions.

Wednesday, August 20, 2008

Little changed markets on quiet day

Dow was up 68, advancers slightly ahead of decliners & NAZ gained 4. NYSE volume continues light just over 1B. My chart on the right shows Dow, while in green territory, was generally not too far from break even. Fannie Mae (FNM)/Freddie Mac(FRE) shared center stage in the markets, they are each below 5 (not eligible as margin collateral). Despite reassurance from the Treasury, their future is unclear. The S&P 500 FINANCIALS INDEX is taking this fuzzy outlook well, up 3 to 270 (getting off its monthly low). Bank of America (BAC) & US Bancorp (USB) were each up 3% today despite the overall dreary thinking about mortgages. The motivating force behind today's rally in bank stocks may have been bargain hunting (BAC yields 9%). After a volatile day, oil was up pennies to 115 on the 9MM increase in weekly oil inventories. The Alerian MLP index was up 2, near 267 allowing it to get away from the 52 week low area of 262.

Mortgage applications dropped to the lowest level in almost 8 years. The number of applications is down 61% from the peak just 6 months ago. Average mortgage loan rates are around 6½%, high priced mortgages are not the problem. The housing depression is dragging on & on.

REITs are at or near their lows, today they were soft again. The higher quality ones yield 4-6%, others have yields over 8-10%. For personal accounts, many REITs, because their flow thru to shareholders, have dividends which are partially tax free or taxed as capital gains. Junk bond funds with yields of 12%, over 800 basis points higher than the Treasury rate of 3.80%, are at record lows. They have no exposure to mortgage debts, nice yields for the brave.

Markets up on mixed news

After down on the opening, Dow & NAZ are rose nicely & advancers ahead of decliners 1¼ to 1 on NYSE. Oil is up 1½, going over 116, ahead of the weekly inventory report due shortly.

The S&P 500 FINANCIALS INDEX is up 3 to 270. As traders wait for more word about Fannie Mae (FNM)/Freddie Mac (FRE) & their future, they are down another 20% maybe heading for zero. Still hard to believe, just a couple of years ago they were thought of as AAA companies because of their huge mortgage loan portfolios (AAA kind of debt). Plus gov backing was there to solve problems. Times change fast. Asian/Australian markets half way around the world are watching developments which impact their banks. This is one ugly mess. Last night on CNBC-Asia, 2 analysts were recommending that one or 2 big banks should be allowed to fail here as a way of cleaning out the credit mess. A few months ago at a conference I heard much the same thoughts, the FED should have allowed Bear Stearns to go under. These debates are keeping a lot of potential buyers away from financials.

EEQ Enbridge Energy Management

This chart for Enbridge has an interesting story. This is the stock equivalent of EEP, their basic MLP unit. However, each share does nothing. It's backed by one unit & pays out only a stock equivalent div making it friendly to retirement accounts & tax statements, since there is no 1099 needed for a stock div. Yesterday on the opening, the stock dropped 1 on just 3200 shares (out of total volume for the day of 22K). I follow this stock in my Finance widget, it hardly moves. The last year has been tough on MLPs, but it has not strayed much from 51. But yesterday somebody sold quickly at a big discount. The only other MLP to have a stock equivalent is Kinder Morgan, again shown in my Finance widget.

Hewlett-Packard, HPQ, (a Dow stock & #1 in computers worldwide) reported good earnings, up 2+. Laptops sold very well & they were aided by the weak dollar. BJ's had good earnings, but slipped 3 on those familiar "worries about the economy." They should do OK. My friend is one of their customers, she buys a lot at BJ's.

Tuesday, August 19, 2008

Highest yielding Dow stocks

CNBC had an interesting story yesterday on the Dow stocks with the highest yields. Bank of America leads the list with a yield over 9% today. Citigroup (C) and Pfizer (PFE) have yields in the 6s, although the div for Citigroup is very suspicious. Then AT&T (T) and Verizon (VZ) have yields in the 4s. Of course high yields imply a risk factor, homework needs to be done before investing.

In the old days, there was a concept called "Dogs of the Dow." The idea was to buy the 10 with the highest yields. There was a mechanism to reset every year. It fell out of favor in this decade, but maybe deserves another look-see.

Another dreary day, stocks down on low volume

Dow dropped 130, decliners over advancers almost 3-1 & NAZ dropped 32. A test of 11K for the Dow may be coming soon. NYSE volume remains at 1B, at least quiet volume does not indicate a lot of conviction. Leading the negative news in the PM was Lehman (LEH), troubled especially in recent months, dropping 2 to 13, lowest price in 10 years! There are all kinds of rumors that the 4th largest investment banking firm in the US won't survive. Nothing new, this was a $60 stock 6 months ago. This negative thinking bleeds thru to other financials. The S&P 500 FINANCIALS INDEX closed at 267.17, down 8.39 at its 30 day low. Bank of America (BAC), one of the Dow financials, is down 6 from the recent interim high of 34 just 7 trading days ago.

Meanwhile, oil bounced back to 114.53, up 1.66 helped by a weaker dollar against the Euro (up to $1.48). The dollar has been unusually strong in an 11 day winning streak. At the high for the dollar, Euro was almost $1.60. The 2 Dow oils, Exxon-Mobil (XOM) & Chevron (CVX), each rose 1½ today. The Alerian MLP index fought its way up a point nearing 265, trying to get away from the 260 yearly low area.

CNBC has interesting ideas on how to deal with gloom & doom thoughts. Unfortunately there are strong reasons for this gloom & the reasons won't go away soon. Slow & quiet late Aug is turning out to be slow but averages are not getting help from buyers to stop the downward slide.

Inflation numbers send stocks lower

After a leg up in the 2nd half of July, Dow is heading back down to 11K. Dow is down 98, decliners over advancers 4-1 & NAZ dropped 17. News driving away buyers remains the same, the economy is struggling at best. Wholesale prices for July rocketed ahead 1.2%, highest rate since 1981. The core rate increased 0.7%, again much higher than expectations. The Commerce Dept reported housing construction fell 17.7% in July to the worst performance in more than 17 years. No surprise, housing remains in the firm grips of its most severe slump since the great depression. Going forward, grim inflation numbers should be less severe as moderating oil, metals & farm prices work there way thru to consumer inflation. However, even these numbers should be high enough to be worrisome.

Corp news doesn't get better.
4 major retailers are feeling a lot of pain at retail. But they're not alone in today's big sell-off. The S&P Financial Index continues to pull back, flirting with its low for the last 30 days:

Value ..267.78___ Change.. (7.78)

Gloomy thoughts about the future of Fannie Mae/Freddie Mac even hurt Asian markets last night. Oil is having a quiet down, down pennies in the 112s. Bigger picture, it has fallen 35 points from the high reached just a few weeks ago.

The last 2 weeks in Aug are generally quiet times in markets. 10 years ago markets sold off, but that was the exception. With continuing problems in banking, housing, retail, etc., this vacation period may be another downer.

Monday, August 18, 2008

Financials' worries scare stocks

Financials had another brutal day, getting to be a common occurrence. Dow settled down 180, decliners over advancers almost 3-1 while NAZ dropped 35. Volume continues light, at only 1B, typical low volume expected for end of Aug. Dow had been down 200 for much of the PM, but rallied a bit near the close. The index from Bloomberg tells it all.


Value 275.56____Change.. (10.22)___% Change.. (3.6%)

Worries about financials today revolved around Fannie Mae (FNM), Freddie Mac (FRE) & Lehman (LEH), all down big. A Barron's article raised the possibility of FNM/FRE shareholders may not survive this credit mess while Lehman is writing of more mortgage related debts. FNM & FRE were down 25% to lowest levels in 20 years while LEH fell 1 to 15. It's sad, the credit crisis just drags on & on & on. Oil slipped under 113 as fears of the tropical storm eased, problems of the financials are taking center stage. As shown on my badge on the right, the Alerian MLP index slipped pennies to the 263s remaining near the important 262 resistance level & the 52 week official low in the 258s.

The continuing financial mess is bleeding thru to other thoughts. More are talking about not being able to see the light at the end of the tunnel. Business Week has an article about the inflation threat with a forecast of double digit inflation next year. Ben Bernanke, chairman of the FED was trying to define what institutions the FED might be willing to rescue, not a cheery thought. One positive taken from all this talk is when many experts agree the cloudy future looks grim, maybe they are overstating the case.

I checked with my friend the fraidy cat over the weekend, she was at rest while her son, the very fraidy cat, stayed in a closet. OK!

Sunday, August 17, 2008

Stock market damage in 2008

2008 is turning out to be one of the worst years for stocks in some time. Dow is down more than 1500 YTD & has been under 12K for 2 months. Major damage has been done across the boards, even to the mightiest. Of the stocks held by the largest number accounts at Charles Schwab, YTD gains are limited. IBM is up 17% & another 3 are up marginally. The list for those which have fallen 10% or more of 16 decliners are:


Bank of America............26%

Exxon Mobil.................18%
General Electric.............20%
JP Morgan...................12%

Widespread damage across many industry groups will take time to repair. I think higher yielding investments will help investors endure the waiting period

Tropical storms brewing in the South Atlantic are threatening US coasts. These threats are especially important for MLPs, however they ride out storm season every year. Pipelines & terminals for oil & gas are built to deal with storms.

I'll be away tomorrow AM, be good. Will return for closing markets.

Friday, August 15, 2008

Strong dollar strengthens markets

The dollar has been on a winning steak, up 11 days in a row. This is the longest winning streak in 37 years. The strong dollar sent Dow up 44, advancers were a little ahead of decliners & NAZ was essentially even. NYSE volume continues low at 1B. The S&P 500 Financial Index rose 3 to 285, down from the earlier highs for the day.

Oil is down again, hitting a 3 month low:

CLU08.NYMCrude Oil Sep08113.82 Down 1.19 (1.03%)

Oil is not the only commodity to fall in recent weeks. Gold at 787 is down from 950s a few weeks ago. Corn is back down to 5.30. While still high, these prices are far below recent peaks. Money coming out of the commodities seems to be going into stocks. The strong dollar sounds good but it also makes US exports more expensive, exports have been the only bright spot for this year's US economy.

The decline in oil has been a drag on the Alerian MLP index:

Alerian MLP Index

____________ AMZ _____AMZX


This comparison for the Alerian MLP Index (AMZ) shows recent dates along with its related index. July 15 was the low for the Dow, today it's 700 points higher. The MLP index did not change in the last month, closing at 264.05 today, sending the yield up to 8%. The AMZX index shows the performance with reinvested distributions. Both began on 12/31/96 at 100, they've done quite well. The 2nd column shows the value of reinvesting high yearly incomes giving an annual compounded growth rate of over 16%. Based on my eyeballs, betas for the indices are low as they have generally had mild price swings.

For the new or nervous, these are limited partnerships which sell units, not shares, and pay distributions, not dividends. However many have yields near or even more than junk bond funds with their 12% yields and 80-90% of the distributions are not taxable in the current year.

Stronger dollar brings higher stock prices

The dollar has had surprising strength in recent weeks. Today the Euro is worth less than $1.47 (down 12¢ in just a few weeks) & it takes over 110¥ to buy a dollar. The strong dollar has helped sink oil prices while sending stock prices north. Dow is up 54, but advancers are just barely ahead of decliners while NAZ is up only 7. Helping stocks is oil falling below 114. Lower oil prices are from increased awareness that slowing economies around the world will use less oil plus it's less desirable as a way to profit from a rising dollar. As oil goes, so goes the Alerian MLP index, down 1 to the 263s.


Value.....286.96__Change...up 4.34__% Change...up 1.5%

Financials are having another good day, maybe they're going to make another attempt to reach 302 resistance.

Sorry but there is more gloomy news on consumer confidence, rising to "only" 61.7 in July vs 61.2 in the prior month. Forecasts were for 62. Disappointing numbers dovetail with those early signals about a disappointing back-to-school retail selling season.

For lighter reading, here's an article about Warren Buffet's investment changes during Q2.

Thursday, August 14, 2008

Market rally trumps negative news

Dow rose 83, advancers over decliners almost 3-2 and NAZ was up 25. NYSE volume just topped 1B, a very light day. Financials led the charge, the S&P 500 Financials Index gained 2½% (a very good performance given problems announced today). Morgan Stanley (MS) & JP Morgan (JPM) agreed to pay fines of $35M & $25M respectively after agreeing to repurchase $7B of securities from a securities auction. MS was up 39¢ & JPM up 81¢. The NY Attorney General is going after additional financial companies in this matter. There is a prediction that Merrill Lynch (MER), up 39¢, will have to cut its 35¢ quarterly dividend after the recent massive write-downs. Oil helped drive markets after falling 1.30 to 114.70. The Alerian MLP Index closed even at 264.80.

Bloomberg TV had an interview with a retail analyst, talking about back-to-school selling season. She said it got off to a bad start. Consumers are being careful when going to malls & shopping. Early signals are that this will not be a good time at retail. Worse, this gives first glimpse signals about the important holiday shopping season. If trends continue (very limited sales growth at best), that could be one of the worst in several years.

Stocks shrugged off early bad news on inflation, housing, etc. Instead nervous investors wanted to buy, afraid of missing the next leg up in the markets. Volatility is still here, but no so bad. The VIX, volatility index, fell 1 to 20, still high but below the extraordinary levels seen recently.

High inflation & jobless claims, but stocks up

After starting off lower Dow is up 68, advancers ahead of by 40% & NAZ is up 17. Inflation rose 0.8% last month, double the forecasts. Core inflation was up 0.3%, beating 0.2% expectations. The number of home foreclosure notices increased 55% over last year & were ahead of the June numbers. The Euro economy shrank 0.2% in Q2, they're also feeling the effects of higher food & gas prices. No economy is in a recession, but that word is on everybody's minds going forward. The Labor Dept reported jobless claims fell 10K last week to 440K, a smaller drop than expected. The 4 week average rose 19½K to 440½K. Oil is down a few cents in the 115s after yesterday's oil & gas inventory report. Macro economic numbers remain gloomy.

Wal-Mart (WMT), a Dow stock, reported profits from continuing operations rose 9% in Q2, the stock slipped back pennies. In Q2, same store sales increased 4.5% (vs 1.9% last year) but growth should slow to 1-2% in Q3. Intl sales rose 19% while US sales were up 8%.

Dow Jones Industrials - YTD

The graph shows Dow, kicking around the 12Ks early in the year, fell to the 11Ks over the last 2 months. Not a pretty chart.

While macro economic news continues dreary, the inflation picture should ease a little as the decline in commodity prices works thru to inflation numbers. Inflation will remain worrisome with housing, auto, retail sales, credit problems, etc. dragging on.

Wednesday, August 13, 2008

Higher oil prices send stocks lower

The headline seems like a common refrain. Dow is down 109 (after a slight recovery on the close), decliners over advancers almost 3-2 while NAZ was down only 2. NYSE volume continues quiet at 1.2B. Last week gasoline inventories fell 6.4MM barrels or triple the number forecasted. Oil jumped 3 on this good news for oil & oil stocks. Never a dull moment with oil:

116.10 Up 3.09 (2.73%)

Higher oil prices is not bad news for all stocks. Oils rallied nicely today & the Alerian MLP index was up 2½ to about 265. 262 had been its low which was breached last week. Since then it has been muddling slightly above. Some call this base building, but that's been said before. Storms brewing in the eastern Atlantic Ocean could produce 2, maybe 4 tropical storms. That always brings excitement to these units. Their high yields may be getting lost, 8-15% yields are common today. Limited partners have to put up with some tax hassle but high yields with a low beta index attracts the brave.

Financials continued to bleed, leading the decline, following yesterday's rough news:


Value 275.59___Change (8.42)___% Change (3.0%)

Bigger picture, they continue to waffle under 300, but above the 232 low of July 15.

This is an election year prompting Dems in Congress to push for another stimulus package given the early glum news in Q3 for the economy. The Bush administration has opposed the idea, being concerned about implications for the budget deficit which could reach a record $482B. Tropical storms, fighting between Russia & Georgia, more fiscal stimulus, never a dull moment in the markets.

Lower retail sales

Dow dropped 140, decliners over advancers 3-2 and NAZ was down a more mild 8 as disappointing retail sales dragged stocks down. US retail sales slipped only 0.1%, but it was the first decline since Feb & expectations were for flat sales. Autos had their worst month in 16 years, but excluding auto sales produced a meager gain of only 0.4% (again below expectations). Much of these gains came from gas sales. Customers are being squeezed & retailers are feeling it. Ahead of the weekly inventory report, oil is up pennies in the 113s.

Banks are taking another drubbing after yesterday's ugly news:


Value...277.30_ Change.. (6.71)_ % Change.. (2.4%)

Macy's (M) reported slightly lower earnings in Q2, stock down 29¢. More importantly, they reduced their 2008 guidance to $1.70-1.85, below forecasts of $1.86. Deere (DE) reported good but not good enough earnings, down 6. The commercial & consumer group suffered a 1% decrease in sales. Their outlook, like many others, remains cautious with worries about the economic slump in the US & higher prices for their costs.

Markets are feeling the effects of dreary economic news.

Tuesday, August 12, 2008

Banks punished

Dow dropped 140, decliners over advancers 2-1 but NAZ was down only 9. Volume continues low at 1.1B. JP Morgan (JPM), a Dow stock, fell 4.20 on very bad news about losing $1½B already in this quarter. UBS (UBS), the big Swiss bank, fell 6%, on more gloomy news about not knowing what it was doing. Their investment write-downs will cost another $5B bringing the total to $42B. Wells Fargo (WFC), down 1.23, got slammed with just embarrassing news. It was one of those days for banks & they were punished badly, leading markets lower:


Value 284.01__ Change -15.56___ % Change -5.2%

JPM is the most serious story. They had been one of the best performing major banks with a high of 50 in the last 12 months. They were getting by without severe damage other banks endured, even after today they're 38. Today's sell-off suggests that ugly credit crisis/banks problems are not over or even ending soon.

Oil was down while fighting goes on in Georgia. A few weeks ago, this fighting could have added $10 to oil. Today, as with other bad news, is largely ignored in oil markets:

Crude Oil Sep 08 113.22 Down 1.23 (1.07%)

Oil is driven more by the weak dollar. The dollar was risen sharply while oil & other commodities were declining in recent weeks. The Euro has fallen to 1.49 (down 10¢) in recent weeks while it takes more than 109¥ to buy a dollar. The strong dollar helps their economies export more (vital for Japan) but muddies the investment picture here. Strong dollar has brought a strong stock market, there is a connection. The Shanghai market sold off 10% in the first 2 trading days of the Olympics & slipped a little more today to a 20 month low. They are not getting benefits from the Olympics.

Tomorrow US retail sales, hang in there. This is the kind of day I'll leave you with glum forecast from the Philly FED.

JP Morgan losses & oil prices sink stocks

Dow is down 107, decliners over advancers 3-2 & NAZ is down 10. The chart below keeps track of movements in the Dow.

There is a lot of news getting investors nervous. Fighting between Russia & Georgia led to closing a pipeline sending oil up 1½ to 116. The Alerian MLP index is up 1 to 263, still flirting with its yearly lows.

JPMorgan (JPM) lost $1½B ALREADY in Q3 from credit crisis problems, stock down 2½. Obviously, financials are weak, can't get back to that 302 recovery level achieved a couple of weeks ago.


Value 289.95
Change -9.62 % Change-3.2%

Tomorrow July retail sales are due, they should be glum. Also, oil has not been the only commodity to pull back in the last few weeks. The entire commodity complex, grains, metals, etc. have all pulled back sharply from their peaks. However like with oil, prices remain at high & troublesome levels. Inflation threats & worries remain.

Monday, August 11, 2008

Early gains for Dow didn't last

Dow rose 48, advancers over decliners 3-2 & NAZ was up 25. NYSE volume was sluggish at 1¼B. Stocks rose nicely out of the gate but peaked at 2PM. Then the FED issued a statement that banks tightened mortgage lending standards in July bringing Dow back to break even. But Dow ended up slightly on a rally in the closing minutes. The FED announcement said that 75% of banks, compared with 60% in the prior release, had tightened lending standards. Oil prices dropped to the 112s, but rallied by day's end paring the loss to only 75¢, at 114.45. Gas prices at the pump keep slipping, down 30¢ in 25 days to "only" $3.81 as of yesterday.

Banks had a good day, up 5½, approaching the 302 peak reached last week:


Value...299.57____Change up...5.49___% Change...up 1.9%

Sorry I'm late. Had a computer problem, it didn't want to go online. Toshiba reminded me to use the old reliable "Restore." That fixed the problem! Adding a personal item. A junk bond fund I own increased their div 10% last month but I didn't know until they sent me the reinvestment statement. Their divs were reinvested at a new yearly low price. I call that, can't get no respect!

Sunday, August 10, 2008

Dow Jones & Alerian MLP Index - 2008

Dow Jones Industrials started the year in the 12Ks, mostly going sideways with a modest downward bias. Then it ran into the large sell-off from mid May to mid July falling from 13K to below 11K with financials leading the sharp decline.

Dow Jones 2008


The Financial Index (courtesy of Bloomberg) started the year at 382, falling to a low of 232 on July 15, followed by a 1 week sharp recovery & then leveling off under 300. Their chart performance is similar to the Dow Jones & the Financial Index remains in the dumps. Last week large losses reported by Fannie Mae (FNM)/Freddie Mac (FRE) were reminders the credit crisis, or whatever it is called, drags on.

I follow MLPs because I like their prospects & high yields. They have had a different ride as shown below, but, like the Dow, are also dealing with an unclear future:

Alerian MLP Index

3 years ago, the Alerian MLP Index had a sideways run for about a year. Then 2 years ago, it had a beautiful increase going from 250 to 330s, followed by a bumpy few months barely attaining new highs. Then came the rapid sell-off to 300, a level it has gotten used to living under.

Reasons for the moves are difficult to understand. The sell-off a year ago may have been related to hedge fund guys panicking, selling off a lot of units quickly & not caring about the price declines. More recently, the 2 month decline for the Dow starting in May, dragged the index down to the 52 week low where it trades today.

At present, the Dow chart looks more optimistic after bouncing off its low under 12K while the MLP index is clearly on defense. Both face serious but different challenges & I feel each one will be going through tough times in the short term.

Friday, August 8, 2008

Return of the Monster Rally

Dow Jones rose 302, advancers ahead of decliners 5-2 (again, less spectacular than might be expected with a hug rally) & NAZ up 58. However, NYSE volume was subdued at 1.2B. Lower oil prices carried the day:

CLU08.NYMCrude Oil Sep 08115.18Down 4.84 (4.03%)

One key reason for the decline in oil is the rise in the dollar. It now take more than 110 ¥ to buy a dollar and the Euro, at $1.50, is down 10¢ in recent weeks. Driving forces for the strong dollar are lower oil prices & the weakening economy in the US (not to mention the rest of the world). Sounds good but a struggling economy with tons of banking related problems doesn't sound good to me.

Not as pretty day for financials as it should have been. UBS is settling a securities case requiring them to buy back $19B in bonds after they misled investors. This is one more case where smart bankers don't seem to know what they are doing! Banks had a good day, but not their best, as shown with BAC & USB in my widget on the right.


Value...294.08___ Change...up 10.05___% Change...up 3.5%

The index, courtesy of Bloomberg, is trying to get above the 302 level which has become resistance in the last week. Next week another try at going above. Ugly Fannie Mae news about its losses & confusion about where it's going keeps some buyers away from these stocks.

The Alerian MLP index was up pennies (as shown in my widget on right) but remains a whisper away from the 52 week low. REITs rose, basically joining in with the general market. Even junk bond funds inched up a couple pennies following the gains in the Treasury bond whose yield pulled back to 3.95%.

There have been a number of big gain days in the last month. But after the 5 day rally at mid July, the Dow Jones has not been able to build on those gains.

Lower oil prices lifts stocks

This is one of those go figga kind of days. Fannie Mae (FNM) reports an uglier loss than expected but markets are up on good news about lower oil prices. Dow is up 188, advancers over decliners a more modest 2-1 while NAZ is up 39. Oil dropped 3½ to the 116s encouraging stock buyers to charge forward. Oil is now down 30 from its recent peak.

Fannie Mae reported a 2.3B Q2 loss, more than triple expectations. Among the many questions around FNM are: when will the bleeding stop, how much added money will they need & will they need even further additions to capital? Their chart tells a dreary story especially in the last few years:

Fannie Mae

Banks are up but surprisingly only moderately on a big rally day. REITs in sympathy are up, but not as much as might be expected. The Alerian MLP index is down pennies, on lower oil prices, flirting with its new 52 week low set a couple of days ago.

Macro economic conditions drone on. Housing & autos, 2 large industries, are in a severe recession, retail sales are sluggish at best & the financial loan picture is gloomy. Let's see what the PM holds for stocks.

Thursday, August 7, 2008

Monster Decline

Stocks never had a chance today. Dow was down 224, decliners over advancers 3-1 & NAZ dropped "only" 22. NYSE volume continues low at 1.3B. Low volume indicates bleeding will continue. A dreary unemployment report combined with a weak, at best, outlook for retail sales sunk stocks.

American International Group (AIG), a Dow stock having its worst day in 26 years (plunging 5¼) led the way down. Citigroup (C), another Dow stock, will have to return $B to investors after paying $100MM in fines, down 1.23, aggravated the negative feeling on Wall Street. The picture of AIG stocks shows they're at the lowest level since 1993:

American International Group

Financials sold off big (courtesy of Bloomberg TV):


Value .. 284.03 .... Change (15.01) .... % Change (5.0%)

The Alerian MLP index dropped only 2 to 259½, straddling it's new 52 week low from a couple of days ago. By comparison that's good. REITs sold off in sympathy with financials as gloom, & doom carried the day. Tomorrow Fannie Mae (FNM) reports what should be another ugly picture of big losses.

In times like these, the idea is keep your cool. Look for good values. I like oversold stocks with high yields which will make the waiting period go better until there is a meaningful recovery.

Walmart & jobless claims sink stocks

More negative macro economic news sent markets lower. Dow is down 109, decliners over advancers 3-1 & NAZ is down 10. Jobless claims rose slightly to 455K, worse than expected & a 6 year high. The 4 week moving average rose to 419½K, highest in 5 years. Wal-mart (WMT) reported same store sales were up 3% & Target (TGT) reported a decline of 1.2%, both below expectations. Wal-mart said, "With the end of the stimulus checks, we know consumers are spending more cautiously." Retail sales for July are looking grim & the important back to school sales season is not going well. Oil rose 1½ to over 120 on supply concerns, this time from a fire on a Turkish pipeline.

American International Group (AIG), largest insurance company in the world & a Dow stock, reported a much larger than expected loss last night, down almost 5. Today's decline is after the stock had fallen 50% YTD. They are heavily involved in credit default swaps, insurance policies to protect bondholders against defaults. AIG lost more than $25B pretax on credit default swaps in the last 9 months. Talk about not knowing what they are doing!!

The Alerian MLP index, remains near its 52 week lows, up fractionally to 262. REITs continue to pull back. Enough already with this dreary news.

Wednesday, August 6, 2008

Freddie Mac problems move markets

After all is said & done, stocks ended up a little. Dow is up 40, advancers were only slightly ahead of decliners & NAZ rose 28 helped by Cisco, up 1.28, after last night's earnings. Volume continues light, at 1.2B on the NYSE. S&P 500 FINANCIALS INDEX, after an AM sell-off taking it down from the interim high yesterday of 302 to a low of 295, rallied back to 299 down 3, not too bad.

Oil closed down on routine news:

CLU08.NYM ...... Crude Oil Sep 08 .... 118.46 ..... Down 0.71 (0.60%)

After an early morning 3 point rally, the Alerian MLP index held in the 261s, officially closing at 261.65 up 3.02. Not too bad. REITs did not rally, just sold off.

Freddie Mac (FRE), down 1.55, dominated talk today. Everybody's trying to figure out how bad their situation is & when they will need more capital. They share many of the same problems with Fanne Mae (FNM), down 2, reporting earnings on Fri. They're getting clobbered by lower home prices sharply reducing equity behind their loans. Foreign investors who bought about $1½ trillion of FRE/FNM bonds are trying to cope the new situation, these bonds originally viewed as AAA are turning out to be junk rated. They know about the mortgage mess because they read about their local banks writing off $B on investments.

Tonight, another biggie financial, American International Group (AIG), largest insurance company, reports earnings & expectations are not pretty. The stock is the worst performing Dow stock this year, down 50%. They share similar financials headaches as the competition only their numbers are bigger & uglier.

Financial realities return

Dow is down is down 68 (check the graph below for today's decline), decliners over advancers more than 3-2 & NAZ declined 10. Euphoria is being replaced by reality. Oil is little changed. Keep in mind that Iran, once again, is rattling its sabers with a wimpy reply to the concept of inspections for the nuclear facilities.

Monster Rally Over

Freddie Mac (FRE) reported an ugly loss, down 1½ or 12%. Most interesting to me was a decline in revenues of 25% to $1.7B. Uggggh! All financials are being dragged down:


Value.....295.61........Change (6.44).........%Change (2.13%)

Yesterday this index reached 302 matching the interim high on Jul 23. Looks like it wants to head south. The FRE news is nothing new. Fannie Mae, etc. will be reporting more ugly news. Yahoo has a forecast by a professor that housing recession will drag into next year. Where housing goes so go financials. This negative mood also drags down REITs, not to mention the markets in general. The Alerian MLP index rebounded from yesterday's 52 week new low, up 3½ to the former 262 low. For the big boys, Exxon Mobil (XOM) is down slightly while Chevron (CVX) is up 1%.

I think this sell-off will carry the day & maybe the rest of the week.

Tuesday, August 5, 2008

Stocks roar ahead on steady rates from the FED

Investors bought on the rumor & bought even more on the news. Dow was up an impressive 331, advancers ahead of decliners almost 3-1 (not so impressive) & NAZ rose 64. NYSE volume was subdued at 1.4B, mediocre for what was an impressive rally.

FED did not change interest rates plus their kind words afterwards encouraged investors. News on the oil front was also good as oil traded near its low for the day, not to mention a 3 month low:

CLU08.NYMCrude Oil Sep 08118.65 Down 2.76 (2.27%)

Oil stocks sold off, Chevron (CVX) dropped 31¢ but Exxon Mobil (XOM) rose 1¾ (possibly helped by my comments yesterday). The Alerian MLP index dropped 4 to the 258s, setting a new 52 week low. Financials, led by banks, found plenty of buyers, as did many stocks. However junk bond funds sold off slightly in sympathy with lower prices for the Treasury bond, even though they have little in common. Maybe they wanted to maintain that 800 basis point spread.

Cisco (CSCO) reported earnings after hours beating estimates by a penny. The stock rose 66¢ during the day & is adding another almost $1 after hours. NAZ will be starting tomorrow's trading with following winds.

Asian markets are expected to follow thru with strong gains. But tomorrow, in the US, will be a new day day with more news stories as Cisco's news fades in influence.

Falling prices oil brings higher stocks

Dow is up 165, advancers ahead of decliners 3-1 & NAZ is up 29. Nothing like lower oil prices to give stocks a boost. Oil fell to the 118s before recovering (Yahoo's current quote):

CLU08.NYM Crude Oil Sep 08 119.74 1.67 (1.38%)

Traders worry that a weak economy in the US (not to mention the rest of the world) will reduce demand. We've been thru this before, but maybe this time reality will sink into the markets. For the 2 Dow stocks, Exxon Mobil (XOM) is up 70¢ while Chevron is even on these lower prices. Going along with lower prices, the Alerian MLP index is down one to the 261s, barley into new 52 week low territory.

The service sector did not do well in July, but that beat expectations. The reading was 49.5 up from 48.2 in the prior month & beat the 49 number forecasted, helping to bring out stock buyers today. However below 50 signifies contraction.

Procter & Gamble (PG), a Dow stock & very long time member of the S&P Dividend Aristocrat list, reported excellent earnings sending the stock up almost 2. They also raised their guidance for 2009 (beginning in July) slightly. Better than expected earnings were helped by raising prices & strong businesses especially in emerging countries. We hear a lot of that.

This rally could be a variation of "buy on the rumor & sell on the news." We'll see how it plays out in the PM after the FED meeting.

Monday, August 4, 2008

Asia & Australian markets a little lower

Markets are pulling back in Asia/Australia, maybe that's better than lower prices in the US. Australian stocks are down over 2% led by lower resource shares, hurt by lower oil & commodity prices. Resources commodities are down typically 5+%. Hong Kong stocks are down 1.7%. HSBC after large loan write-offs causing profits to decline 29% is leading stocks lower. Taiwan stocks are also down 1%. However, Tokyo stocks, at lunch break, are up ¼% & Shanghai stocks are up slightly. Oil is down 1 to 120.

Following up on my Exxon comments, below are earnings estimates (courtesy of Yahoo) for a 76.60 stock:

Exxon Mobil Corp. (XOM)

Avg. Estimate__________9.76________10.37
No. of Analysts__________17___________17
Low Estimate__________8.60_________8.25
High Estimate_________11.21________15.64
Year Ago EPS__________7.28__________9.76

The stock doubled in the last 5 years, a nice story followed by the sell-off in the last 3 months:

Oil stocks drag markets down

Dow fell 42, decliners over advancers 2-1 while NAZ pulled back 25. NYSE volume remains quiet at 1¼B indicating nothing was decided, bleeding will continue. Oil declined almost 4 to 121½, the lowest price in about 3 months. Largely overlooked, the slide in oil prices has dragged down oil stocks. Exxon Mobil (XOM), a Dow stock & as big as they come, is down about 20% from its high less than 3 months ago:

The energy index is down 20% from its high, signaling its bear market. Where oil goes, so goes the Alerian MLP index. As shown in my widget on the right, it fell 8 today, back to the important 262 support line. Some of the decline was attributable to ex-distributions (i.e. EEP & EEQ) but the bulk was due to old fashioned selling. Declining energy stocks tells me markets are thinking negative thoughts about economies going forward.

Tomorrow everybody is betting the FED will stand pat on interest rates, but their words will move markets. I've been having router problems all day, better post while I can!

Dreary Monday

The negative tone to Asian trading carried into the US. Dow is down 11 (recovering from down 80 when I first began writing), decliners ahead of advancers 5-2 and NAZ is down 14. There's just no way to hide the macro economic news is not pretty. Consumer spending fell 0.2% in June excluding inflation. Their measurement of inflation was 0.8%, highest since a 1% increase in Feb. This is the same news reported before, rebate tax checks went to pay for higher food & fuel prices. Commerce Dept reported factory orders increased 1.7% in June, best showing this year (from higher petroleum prices & military orders). Good news, but not really so good after thinking about it. Oil prices fell 1 to the 124s, had been in the 120s earlier, lowest in a couple of months. Once again, good news but 120 remains a painful price for the economy. The FED is widely expected to leave rates alone at their meeting this week after having to deal with various stagflation kind of forces.

HSBC (HSC), Europe's largest bank, reported sharply lower earnings for H1 (that's how they report), stock down 1.28. Their biggest problem was North America & in that area: Household Intl which lends to consumers. Speaking of earnings, Bloomberg TV had an analyst from S&P talking about earnings which are largely in. They tend to be very good or very, very bad, not much in the middle. Excluding banks/financials, earnings are up. Taking out GM & Ford, earnings gains are impressive. What he didn't mention is that on the margin, business outside the US probably is responsible for much of those gains.

Sunday, August 3, 2008

Lower markets continue

Markets in Asia are down, following the US decline on Fri. All are lower, the Korean market, down 2+%, is the leader. Oil is up more than 1 on rising tensions from Iran. The 8th US bank to fail was mentioned. This is a small bank in FL, their insured deposits have been taken over by a larger bank.

July & stagflation

Stock markets have been thru a lot in recent months, June qualifies as an awful month. Even NAZ which has been doing well in recent times fell in June. Dow Jones Industrials & S&P 500 were clobbered dragging stocks to their lowest levels of the year.

July may have seen an end to the downward slide. Stocks continued falling until mid month. Then the FED put together a rescue package for Fannie Mae/Freddie Mac & some home owners with mortgages which brought a lot of encouragement to stock buyers. From the lows, the Dow rebounded (led by oversold financials) more than 600 followed by a pullback returning prices to near the start of the month. Financial stocks roared. Bank of America (BAC), rose 15 from a low of 18½ while marginal ones (like FNM/FRE) doubled from their lows. Now the bulls & bears will argue about who has the upper hand:

The Alerian MLP index had a bumpy ride, going sideways between 276 & their 52 week low of 262. Oil set records at 147 followed by a sudden 20 point pullback. MLPs this year have been following oil prices, but this time they were dragged down like oil stocks. In July, Exxon Mobil (XOM) dropped almost 10%, much of it in recent days after reporting record earnings. MLPs however are different, they are partnerships (not corps) generally with thousands & thousands of miles of boring of pipelines. At month's end & in early Aug many are/will be going ex-distribution, which can be 2%, a downward influence on the index.

Real estate stocks, REITs, have had a very rough year, not helped by the market down-draft in recent months. Many are selling at lows not seen in 10 years, even though divs have been trending up. In June they were pulled down by concerns over financials. They did not get significant relief in July, some falling to new multi year lows. Yields are 6-10%, some even higher. In personal accounts, many divs are partially non-taxable and/or have a portion taxed as capital gains. Those with excellent track records of raising divs are becoming attractive. They proved to be excellent buys 10 years ago when they were down in the dumps offering similar high yields.

Junk bond funds still can't get no respect, yielding 12% with NO mortgage exposure. Their yields have widened to 800 basis points above the Treasury yield, what has to be a record spread. The brave may start giving them some respect.

The stagflation word has been bandied about as a fear dragging down markets this year. Compared to the early 80's when inflation & unemployment rates were in double digits, this is mild. Growth declined then, today it's bumping along squeezing out small gains. I think this is a mild form of stagflation driving fears which drag down stocks.

Last night I saw the 2 fraidy cats. The older one, she's the mother, seemed to be her usual mellow self with me, relaxed. The younger one, Tom Cat (black cat), came out. He is the most afraid, but ventured out to visit with me for a few seconds, then ran under the futon. Maybe that's a sign the scariest days are behind us, even if the future looks gloomy with no shortage of fears.

Friday, August 1, 2008

Markets sink after job reports

Dow declined 51, advancers & decliners are about equal & NAZ dropped 15. NYSE volume remains quiet, just over 1B, as is typical on a summer Friday. Oil rose 1 to 125 on worries about an Israel - Iran conflict. AAA reported gas at the pump yesterday averaged 3.89 down about 20¢ from the high reached a couple of weeks ago. Car industry gloom spreads around the world. GM, BMW, Nissan, Toyota, etc. have been warning about problems going forward in their businesses. After reporting decent but not great earnings, oil stocks sold off. The Alerian MLP index dropped 1 to 270 remaining stuck under the 275 resistance level. REITs did OK today although First Industrial Realty Trust (FR), in my right column, dropped on an analyst downgrade. Junk bond funds continue offering 12% yields.

Macro economic issues are taking front stage. Analysts are talking about whether we are in a recession or drifting slightly above that level. The GDP & job numbers put them largely in the grim camp. The export sector is driving the economy aided by the weak dollar (making our products cheaper overseas). That had a slower growth rate in Q2, not good. Meanwhile stores are beginning their back to school season, very important. Since most tax rebate checks have been spent, they will have to rely on old fashioned marketing to boost sales. July sale numbers are due shortly, they should give a hint about their outlook in coming months.

Jobless rate hurts stocks

Dow was down 41, advancers & decliners were about equal & NAZ declined 14. The Labor Dept reported the jobless rate rose to 5.7%, highest in 4 years. July was the 7th straight month of job losses, total jobs lost this year were 463K. Losses were highest in housing & financial services. Manufacturing was flat in July, helped by strong exports. The reading was 50, down a smidgen from June but only at break even (the 50 number) which signals growth. Oil rose 3 to 127. Today's excuse for higher prices was a surprise spike in gasoline futures.

Chevron (CVX), a Dow stock, made $6B in Q2 which had little effect on the stock. EPS of 2.90 came in a little under estimates. General Motors (GM), another Dow stock, had a whopper loss of $15B, 3rd worst in history. Without special charges, GM lost "only" $6B. The stock fell 87¢. Grim!

In the last couple of days, sluggish, at best, GDP growth was reported followed by grim news on the unemployment front. No great surprises, but not the kind of news investors like to hear as deary news from housing, autos & mortgage/credit mess keeps dragging on.