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.NYM

Crude Oil Sep 08

115.18

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.

S&P 500 FINANCIALS INDEX

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.