Fate of automakers drags Dow down 427, to below 8000

Markets were down all day but sold off big time in the last hour (getting to be a habit). Uncertainty about the automakers, their customers (car dealers) & suppliers is a lot for markets to absorb even though the talk has been around for some time. Dow tumbled 427 bringing it just under the important 8K support line, decliners over advancers 10-1 & NAZ dropped 97 bringing it below 1400.

S&P 500 FINANCIALS INDEX reached new lows with one of their worst days in history. They are connected with the future of the automakers, auto loans represent a portion of their loan portfolio & is now under a very dark cloud:

Value 139.84

Change -18.29

% Change -11.6%

Amidst all the uncertainty, the Alerian MLP Index dropped 12¼, to 173, another low (aside from the spike down in early Oct) & the Dow Jones REIT Index dropped an enormous 16 to 108. However, the VIX shot up 6.62 to 74.26, approaching its record of 80 set a couple of weeks ago. Fear is going to extremes.

In sympathy, oil slipped pennies taking it below 54.

The Federal Reserve, at their last meeting, expects the economy to shrink thru the middle of next year. As a result, they are prepared for more rate cuts (among other measures) but little is left when interest rates are already at 1%.

•Fed Policy Makers Saw Economy Shrinking Through Mid-2009 at Last Meeting


Dow stocks: Bank of America (BAC), General Electric (GE) & Intel (INTC) have fallen below 15 while American Express (AXP), Microsoft (MSFT) & Pfizer (PFE) are under 20. The 3 under 10 have already been mentioned many times. These are vastly different times when the Dow holds so many "low priced" stocks.

High yield (junk) bonds got a relatively nice mention. One index has their yields topping 20%, one of the highest rates ever. They point out that either they deserve these valuations because the economy is going to get soooo bad or there are extraordinary values out there which can be used to lock up record high yields. One of my junk bond funds dropped 10% today, taking the yield over 25%. I just don't know!

•Junk-Bond Yields Reach Record 20% as Weaker Economy Boosts Risk of Default


Speaking of extraordinary high yields, Kayne Anderson Energy Total Return Fund (KYE) is a closed end fund which invests in MLPs & shown in my Finance badge on the right. At the current price, it yields over 19%. The market is pricing in many distribution cuts on their MLP holdings. It should be mentioned, this is a corp with stock which pays dividends & some of the divs may not taxable (for those interested).

The "big 3" are trying to justify their existence to Congress but that's a tough battle. They have to beg for another $25B to keep them afloat for another year, whatever. I really don't know, but the thought of just one bankruptcy is frightening.

While the auto cloud overhangs the markets, it's difficult to see buying returning in a meaningful way. It could also be this is just another one of the many clouds overhanging the markets.

Those Websense guys are back, off & on, blocking my picture. Sorry about it, was hoping that Google straightened them out. I guess not.