Late day rally for stocks

A late day rally brought the Dow big gains, up 401 (as shown in the Bigcharts graph on the right). This is hard to figure when decliners led advancers 5-1 (down from 10-1 earlier in the day) but NAZ participated, up 89. 3M, Exxon, Johnson & Johnson, IBM, McDonalds, Procter & Gamble, United Tech & Walmart (up over 4) led the charge up for the Dow. Clearly, hedge fund sellers took the last hour off.

Other indices didn't do as well. S&P 500 FINANCIALS INDEX rose only 3½, Dow Jones REITs rebounded 8 after yesterday's terrible beating & the Alerian MLP index cut losses, down only 9. The change doesn't tie with last night's close, they should be showing a modest gain (maybe it's one of those computer glitches). Junk bond funds were also up, hard to measure without a good index. But some brave souls are willing to gamble to obtain yields around 15-20%. REITs & MLPs also have yields well into 2 digits.

Beware:

The VIX, Volatility Index, reached new heights but closed down 1.64 to 67.61 after topping 81 during the day:


Volatility Index -- 5 days





This measure, some call it the fear index, is in record territory. Fear sounds like a good way to describe as it measures anxieties about job losses, inflation worries & the credit mess, giving investors a lot to worry about (or fear). Just a couple of weeks ago 20 was considered high & 30 was a heavenly kind of maximum. No more:

VIX Options Index Tops 80 for First Time as Stocks Extend Slump


US Treasury securities are highly prized for their high degree of security. The table below shows what investors earn on them today. For the short term, they are willing to accept little interest when "risk averse" becomes their primary focus. The shortest term securities are most highly prized with only nominal or modest interest rates. Proceeds from stock sales can be used to buy Treasuries.

U.S. Treasuries rates, courtesy of Bloomberg:

	COUPON	MATURITY DATE	CURRENT PRICE/YIELD	PRICE/YIELD CHANGE
3-Month	0.000	01/15/2009	0.43 / .44	0.22 / .223
6-Month	0.000	04/16/2009	1.12 / 1.14	0.26 / .266
12-Month	0.000	09/24/2009	1.22 / 1.25	0.17 / .175
2-Year	2.000	09/30/2010	100-24½ / 1.60	-0-03 / .048
3-Year	4.500	09/30/2011	107-16 / 1.88	-0-03½ / .034
5-Year	3.125	09/30/2013	101-12+ / 2.82	0-00 / -.000
10-Year	4.000	08/15/2018	100-15 / 3.94	0-01 / -.004
30-Year	4.500	05/15/2038	104-14 / 4.24	-0-24+ / .044

Today's rally sounds like one of those attributed to "technical reasons" (short covering, whatever). Dreary economic reports during the day were forgotten in the last 2 hours of trading. I am not encouraged by this rally.