Stock markets drift

Confusion reigns in the stock markets, so they just muddle along. Dow is down 25, advancers 30% ahead of decliners & NAZ is up 1. Indices I follow are little changed although Lehman High Yield Bond ETF is up 40¢ (its version of a rally). Demand might up for junk bonds as the rate on the 10 year Treasury is at a record low 2.08%. The VIX, volatility index, is down another 4½ to 45½ indicating there is a small sense of relief in the minds of investors. However, it was just a few months ago that this level was a record:


VIX ---- 1 month




Oil continues weak on all the gloomy news about the worldwide recession. Breaking thru 40 is an important bearish sign for technicians.

CLF09.NYM

..Crude Oil Jan 09

...38.25

.. 1.81 ......(4.5%)

Jobless claims last week dropped to "only" 554K, a little better than expectations. However, the news is not all good. The prior week's claims figure was revised upward to 575K, a new 26 year record level. The number of people receiving jobless benefits declined to 4.38M, or 1% from the previous week.

Jobless Claims Drop More Than Expected- AP


The Conference Board said the index of leading economic indicators fell 0.4% in Nov. The index dropped 2.8% in the last 6 months, worst performance in 17 years. Negative figures for building permits, stock prices & unemployment claims led the decline last month.

• Leading economic indicators fall in November- AP

Mortgage rates while low, need to be measured against historical relationships which indicate they should be another 50 basis points lower. This is one more indication that the reduction in interest rates is not playing out as well as hoped.

•Mortgage Rates Left in the Dust by Falling Treasury Yields, Failed Lenders


General Motors (GM), still a Dow stock, & Chrysler will idle 59 factories next month in the face of declining sales & a dismal outlook for next year. The White House is working on their version of a bailout package. For the autos, time is being measured in hours. Rumors about a GM - Chrysler merger were denied, at least for the time being.

Greta had the CEO of Ford on last night. He said they do not need a bailout presently. Filing for chapter 11 is a bad alternative for any auto company, that would send their sales to zero. When asked about whether he would work for only $1 a year, he dodged the question. He said they are not in a precarious situation with little additional explanation. If required, they will comply with all federal rules & laws. Translation, there is no need to take his salary down to $1 at present.

GM, Chrysler Shutter Factories, Await Bush Decision (Update4)

• GM says report on Chrysler merger talks is untrue- AP

Federal Express (FDX), up 88¢, reported higher profits in Q2 (just completed) but gave a dismal outlook for next year. The execs are all taking pay cuts (including their Chairman, founder, who will take a 20% cut), employees will be laid off as they prepare for for a weak economy with increased uncertainty. As a result,they did not give guidance for the next quarter. FDX is an important company since they feel the pulse of the economy.

•FedEx profit up, but to cut costs as '09 looks bad


Markets may continue drifting until an announcement is made about the auto bailout package.