Dow drops 775 in January

Dow sold off in the PM, it hovered on the 8K line for the last hour. Dow closed down 148, decliners over advancers 3-1 & NAZ sank 31.

Averages I follow were lower in sympathy with the markets. The Alerian MLP Index was down 1½, on the 200 line all day (as shown in the Yahoo badge on the right of my blog). REITs were weak, junk bonds mixed & VIX was up 2½ to 45 on increased fears.


Two of the "safer" stocks in the Dow, which are also Dividend Aristocrats, have gotten off to a bad start this year. It's very unsettling when safer companies are having difficulties during this recession.

Procter & Gamble (PG) reported higher profits in Q2 (just completed), but that was attributable to the sale of the Folger coffee business. PG was "comfortable" with analysts' consensus earnings estimate of $4.29 for this fiscal year. P&G's revised forecast for EPS was $4.20 - $4.35, down a few pennies from earlier guidance. The stock dropped 3.78 to 54.44.

• P&G 2Q profits rise 53 percent, sales drop- AP

Procter & Gamble --- YTD





Wal-Mart (WMT) is the largest retailer in the world & was the best performing Dow stock last year with a nice gain. But this year it's giving back most of last year's gains, bringing it down towards its start in 2008. WMT has lowered its profit forecast for its fiscal year just ended, that's not going over well. They have a new CEO who is taking over & will be earning his pay in these tough times. The stock dropped .88 to 46.98.

CEO brings merchandising to Wal-Mart leadership


Wal-Mart --- YTD





There are an unusually large number of unknowns in the business world. When the strongest & safest in the Dow have to work extra hard to achieve goals & then have to lower the goals, it's a bad signal for many other companies which are not as well off. This reinforces the idea that 2009 will be a very tough year.

Dow slipped from 8776 at the start of the year to close at 8001, down 9% in Jan. Those who believe that performance in the first week & first month sends signals for the year are dreading the next 11 months.


Dow Jones Industrials --- YTD

GDP has biggest shrinkage in 27 years

Dow is down 119, decliners over advancers 3-1 & NAZ is down 23. Grim economic news, highlighted by the GDP report is turning off buyers.

S&P 500 FINANCIALS INDEX continues sliding after yesterday's decline, down 1. The Alerian MLP Index fell 2½ taking it pennies under the 200 floor, dangerous territory for those watching technical indicators. REITs are weak while junk bonds are mixed. VIX, volatility index, is up 1 but in the flattish range where it's been for the last week (low 40s). Oil is slightly higher.


The US economy shrank at its fastest rate since 1982, sinking deeper into a recession. Gross domestic product (GDP), which measures total goods and services output in the U.S., plummeted at a 3.8% annual rate in Q4, after falling at a 0.5% rate in Q3. These were the first consecutive declines in GDP since 1990-91.

•U.S. Economy Shrinks at 3.8% Pace, Most in 26 Years, as Spending Crumbles


Exxon Mobil, a Dow stock & recent addition as an S&P 500 Dividend Aristocrat, earned a record profit for any company, $45B last year. Q4 EPS was down from the prior year, but beat forecasts. The stock was up 89¢. Chevron (CVX), Dow stock & 2nd largest US oil company, also had an excellent report for last year thanks to high oil prices for much of the year. Royal Dutch Shell (RDSA), 2nd largest oil company in the world, reported a loss in Q4, but still achieved record annual profits for a European company. Oil stocks are strong today.

• Exxon Mobil shatters US record for annual profit- AP
• Chevron earnings rise on asset swap gain- Reuters

Caterpillar (CAT), another Dow stock, after reporting dreary earnings along with layoffs, just announced more than 2K additional workers were to be laid off. This brings total layoffs to 20K out of a workforce of more than 110K. I consider CAT as representative of many companies.

• Caterpillar to slash another 2,110 jobs- AP

Asian stock markets have to endure the same problems as in the US. This is their earnings season & they also have dismal reports. Companies we all know, Sony, Toshiba, Toyota, Honda, Canon, Samsung, LG, Lenova, are all reporting the worst numbers in 2 decades (if not the worst in history) resulting in large layoffs. This week, the Shanghai stock market is closed for Chinese New Year.

While still trading in the same trading range, above 8K, Dow is on defense again. But now it's hovering near the 8K floor.

Economic worries sink stocks again

Dow dropped 226, decliners ahead of advancers 4-1 & NAZ sank 50. Two of the sharpest drops came at Kodak (EK), down 29%, & Allstate (ALL), down 21%, on glum reports. As in many recent sessions, financials led the way, this time down.

S&P 500 FINANCIALS INDEX gave up much the gains from Wed (finishing near the low of the day). Representative is Wells Fargo (WFC), yesterday up 5 (31%) & today down 2.

Value 127.12

Change -11.65

% Change -8.4%

The Alerian MLP Index was down 2½ to 202, not serious given the recent move up from the 180s. Dow Jones REIT dropped 12 (almost 10%), it's discussed below. As expected, VIX climbed 3 into the 42s on increased fears.

REITs have been thru a very tough time in the last year. Today was just one example of how brutal it's been. They may be facing more headwinds, REIT investors will need to be brave. They are getting caught up in a cash squeeze. It looks like they will adjust div payments, stock divs may account for a portion or maybe all of the div this year. Presently they are only exploring options, but it looks like a coming event which explains today's big decline. This will allow them to keep more cash at home to pay bills (i.e. interest payments). It doesn't really imply severe financial weakness, but it is not being taken well. Personally I don't mind since the stock div portion is not taxable, it simply goes to buy more shares.


Dow Jones REIT Index --- 1 year




If this plays out, MLPs may take a look at it if accountants will let them. Since they are partnerships, not corps, their tax status is different than for corps. Already 2, Enbridge Partners & Kinder Morgan, also have stock companies, EEQ & KMR respectively, in addition to their units, EEP & KMP respectively, which pay 100% of the div equivalent in stock. If substituting stock divs for part of the cash div "works," it's a good bet cash strapped ordinary companies will also weigh this option. Off the top of my head, Caterpillar (CAT), & they're just one, is thinking about it.

There are growing worries that the recovery will not begin until next year, which would mean more ugly economic news coming for months. Dow has gotten thru a fairly terrible earnings season in decent shape, keeping above 8K (it's only 149 above presently). That floor may get more testing.

•Prospects for U.S. Recovery Dim as Home Sales, Durable-Goods Orders Slump

Lower new home sales & higher jobless claims

Stocks sold off on more dreary economic & corp news. Dow is down 90 (but 50 above its low), decliners over advancers 3-1 & NAZ dropped 26.

S&P 500 FINANCIALS INDEX is giving up gains from yesterday's strong rally.

Value 133.75

Change -5.02

% Change -3.6%

Averages I follow are lower in sympathy with the major market averages. However, the VIX is up 2½ to 42 on increased worries. The Alerian MLP Index slipped 1½ to 203, profit taking after its recent run-up.

Oil keeps slipping on economic worries. This contract is headed for sub 40 like the prior one:

CLH09.NYM

...Crude Oil Mar 09

...40.96

... 1.20 .......(2.85%)

The number filing for unemployment claims last week went up 3K to 588K. The 4 week moving average, a less volatile number, increased to 542K from 518K in the prior week. 4.8M are receiving unemployment checks. The job market is considered lousy because these numbers are expected to climb substantially higher! As a reminder, 400K had been considered a worrisome high number, now 550K has become routine.


•Jobless-Benefit Rolls in U.S. Surge to Record High; Initial Claims Climb

Sales of new homes in Dec dropped to the lowest level since record keeping began in 1963. In 2008, builders sold 482,000 homes, the lowest since 1982.

•U.S. New-Home Sales Decline to Lowest Level on Record Amid Credit Freeze


3M (MMM), Dow stock & Dividend Aristocrat, reported lower sales & profits for Q4. They also reduced the guidance for 2009 EPS to 4.30 - 4.70, down 20¢ from the previous estimate. Markets liked what they heard, up 1.64 in a down market.

3M cuts outlook as quarterly profit falls 37%


Kodak (EK), another Dow stock, reported a loss in Q4 & will lay-off 4½K. EK slipped 1.48, now it has a 5 handle. 4 Dow stocks; Alcoa, Bank of America, Cititgroup & Kodak; are under 10 (that used to be the sign of a speculative stock).

• Kodak posts 4Q loss, plans up to 4,500 job cuts- AP

A stimulus package was passed in the house last night but faces a tougher test in the senate. All Reps along with 11 Dems voted against it. Tax cuts are just one of the key sticking points. Delay hurts markets.

Financials take markets higher

Dow (& related markets) rose early, up 120 where it pretty much remained thru the trading day. A buying spurt in the last ½ hour pushed the Dow to close up 200. After all the excitement in the markets in the last few days, Dow is still less than 5% above its 8K floor. However that floor has withstood an onslaught of unfavorable news. Advancers led decliners by a strong 5-1 & NAZ jumped 53. Banks led the way on Wells Fargo's reporting, &, later, news from the FED meeting.

S&P 500 FINANCIALS INDEX had one of its best days in some time (probably in all time). But financials are still down substantially YTD , it started 2009 at 169.

Value 138.77

Change 15.93

% Change 13.0%

The Federal Reserve signaled it will keep using unconventional (that means new & untested) tools to cushion the fallout from the deteriorating economy. They expect their key interest rate will be at a record low for quite "some time." Specifically, the Fed is prepared to buy longer-term Treasury securities if circumstances warrant such action (at the Dec meeting, they were only evaluating that option). Buying Treasuries will have the effect of raising their prices & subsequently lowering interest rates, already at or near record lows. Credit & financial markets are still stressed & far from normal. Hopefully these moves will work out for the good!

Fed Keeps Rates Near Zero, Pledges to Use All Tools to Revive Economy- AP


Wells Fargo (WFC) had a stellar day after reporting its loss this AM. But there may be more behind those numbers which are a little confusing. Banks like other corps have 2 accounts called write-offs & provisions. Professionals have to remind themselves about the difference between these accounts & what they really mean. WFC made a 3.9B provision in Q4 for future losses only at WFC. In another accounting number, they charged off 294M related to client losses caused by Madoff. Wachovia was taken over after year end close, so their problems, charges, etc. are reported separately. Some are questioning if WFC will still have to take more charges not to mention additional problems absorbing Wachovia. The markets, liked the report, stock jumped $5 or 31%. The chart below shows they've had a wild year, I don't trust rapid, sudden reversals.


Wells Fargo --- YTD




The Alerian MLP Index had a good day but may be maxxing out in the short term (check the Yahoo widget on the right). It rose early in the day, then pulled back to a .77 gain to 205, nice but not great. The Dow Jones REIT index popped 11, a very good gain for a severely depressed industry. Barclays Capital High Yield Bond ETF did well, up 77¢, almost 3%. It's hard not to associate the strength in MLPs with the strength in the junk bond markets, both coming off severely depressed markets late last year. Meanwhile the VIX, volatility index, dropped 2 taking it below 40. A couple of weeks ago it hit 57. Fears continue to ease.

With a new Sec of Treasury on the job, the administration is considering a range of options to get the economy & financials out of the mud they are stuck in. Since it's make it up as we go along, sure hope they get it right.

• Administration says big reforms coming to bailout- AP

Banks lead markets higher

Markets are having a strong day ahead of the FED meeting in the PM. Dow is up 128, advancers over decliners 6-1 & NAZ is up 41. Banks are leading the charge from their depressed lows.

Wells Fargo (WFC), one of Berkshire Hathaway's big investments, rose 3.89 (24%) on what was considered a good report. They are a big home lender, which was responsible for their first loss in 8 years. The Wachovia acquisition also was a drag. But the stock gained 3.54 (20%) when WFC maintained the dividend & added it won’t need more federal aid.

•Wells Fargo Has First Loss Since 2001; Shares Jump as Bank Keeps Dividend

Their announcement lifted all bank stocks as shown below:


S&P 500 FINANCIALS INDEX

Value 135.67

Change 12.83

% Change 10.4%

The Federal Reserve will issue a statement from their meeting this PM, but there is no room left for rate cuts. The FED will probably discuss their ideas about keeping (absorbing) bad loans. That idea is political & is difficult to evaluate. Even more than usual, what they say will move the markets.

• Fed moves to help distressed homeowners- AP

The Alerian MLP Index continues on its recovery road. Oil is little changed, so they must be responding to the general favorable sentiment in the markets.


Alerian MLP Index --- YTD




The Dow Jones REIT Index is up (up 4 today) from its 120 low last week, but that's not saying much. Barclays Capital High Yield Bond ETF is up 50¢ today, high yield bond funds are in demand. YTD it's up only modesty but individual junk bond funds are typically up 15-25% (again from a depressed start). Even after their gains in 2009, 15-25% yields are common. The VIX, volatility index, is down 2 to 40. After a big rise in the last couple of weeks, it's pulling back on easing fears. However in the old days (more than 6 months ago), 20 was considered very high and mid 30s was the stratosphere:


VIX --- YTD




The house is expected to vote on the whopper stimulus package. Then it will go to the senate where the Reps will put up some fight, they're looking for more tax cuts. The good news is they're working on the bill, but the bad news is don't hold your breath.

•House Set for Vote Today on $816 Billion Stimulus, Moving Debate to Senate

Up on a choppy day

Dow gained 58, advancers over decliners 2-1 & NAZ was up 15 in another sideways market.

S&P 500 FINANCIALS INDEX finally had a good day, closing near the highs, but is only modestly above the 108 low reached 6 sessions ago. Banks are still in the doghouse in this sideways market.

Value 122.84

Change 4.43

% Change 3.7%

The Alerian MLP Index keeps plugging along making its way up the recovery ladder, up 2½ to 204. It's above former 200 ceiling, 220 will be the next ceiling (where it stalled before). So far MLP distributions have been favorable except for the one from Constellation Partners (CEP) pre-announced in Dec. Favorable announcements bring out buyers. Watch out for cuts from weaker MLPs, including even big cuts, coming in the next week. They should not hurt the stronger MLPs unless selling bleeds over.


Alerian MLP Index --- 3 months





REITs were up a little but junk bond funds have a more interesting story on another up day for them. They are up 50-75% off their overly depressed lows (when yields were approaching 30%) set 2 months ago. Barclays Capital High Yield Bond ETF shows a less dramatic move than most of the actual junk bond funds, but the picture is clear. Extremely high yields continue to attract buyers.


Barclays Capital High Yield Bond ETF - 2 months





Oil had its 2nd down day, but today it tumbled badly. Grim economic numbers sank oil which looks to be heading under 40.

CLH09.NYM

..Crude Oil Mar 09

..42.09

.. 3.64 ......(8.0%)

• Oil tumbles sharply on jobs, housing, consumer data- AP

During earnings season & when congress is coming up with a stimulus package, stocks are in a rut:


Dow Jones Industrials --- 2 weeks

Markets higher on unsteady footing

Dow is up 36 as it struggles to gain traction, advancers are barely 3-2 ahead of decliners while NAZ is up 10.

Meanwhile MLPs are having a very good year, the Aleran MLP Index is up 1½ to 203. The chart below shows how well the Alerian MLP Index has performed this year when the Dow has been slipping badly.


MLPs vs DJI --- YTD





Other indices I follow are modestly higher in an unexciting day for stocks.


Consumer confidence fell to 37.7 in Jan from a revised 38.6 in Dec, a record low because of a weak housing sector & a worsening job picture. Consumers are just plain pessimistic, waiting to see signs of improvement.

• Consumer confidence falls again to record low- Reuters

DuPont (DD), a Dow stock, reported a loss in Q4, larger than analyst expectations, down pennies. This has become a routine story in the flow of earnings (losses) reports. Their decade long chart is fairly common for large industrial companies:

• DuPont posts 4Q loss, lowers 2009 forecast- AP

DuPont --- 10 years





An unexciting market is not a lot of fun to watch, but there may be more such days ahead. Dreary earnings reports can not get the better of enthusiastic buyers, the tug of war persists.

Stocks finish higher in uneven trading

After a strong start in the AM, markets drifted south for much of the day. The Wyeth (WYE) buyout sounded good, but dreary earnings & fears of more such news got the better of the markets. Dow rose 38, but down from its peak when it was up 150 early in the day. Caterpillar (CAT) & Pfizer (PFE), 2 of the big news-makers, were the biggest weights on the Dow, down 3½ & 2 respectively. Advancers were over decliners 2-1 & NAZ was up 12.

The Alerian MLP Index, a standout story, jumped out of the gate & remained above 200 all day despite the gloom in the markets. MLPs were helped by distribution increases where they were expected. 200 was an important psychological ceiling, now the test will if can be reversed to a floor (a 5 day graph of MLPs is also shown in the Yahoo stock widget on the right):


Alerian MLP Index --- 2 days





Otherwise, the S&P 500 FINANCIALS INDEX was down a couple as bank stocks remain in the dumps. REITs & junk bonds were mixed while VIX dropped 1½ to 45, still at an elevated level. Oil slipped a little.

CAT's negative guidance for 2009 may be repeated by many other big industrials. More Dow stocks will be reporting this week. Meanwhile, congress & the new administration are working on a political stimulus package. Last year's went thru congress in a couple of weeks, this may take longer. Job layoffs keep coming & they will be an important consideration shaping a stimulus package. 74K were announced today bringing the total for JUST this month to 150K. Let's hope that the stimulus package will get it right even though the TARP program already seems to be broken. Dow still can't climb very far above the 8K floor while it waits.

•Caterpillar, Home Depot, ING Among Companies Cutting Total of 74,000 Jobs

Job-killing recession racks up more layoff victims- AP

Markets advance on mixed news

Dow rose 89 (but pulling back off its highs) getting further above the 8K floor on mixed news (at best) from Dow stocks, 4 are discussed below. Advancers ahead of decliners 4-1 & NAZ rose 22. The Alerian MLP Index rose 5 to 201, breaking thru the important 200 ceiling. S&P 500 FINANCIALS INDEX, REITs & junk bonds were higher while VIX dropped 2 on easing market fears.

Todays' major Dow stocks:

Pfizer's (PFE) buyout out of Wyeth (WYE) is cheering stocks but not at Pfizer. Pfizer announced terrible earnings, layoffs & a big div cut which will remove it from the S&P 500 Dividend Aristocrat group at year's end (assuming they don't have a whopper extra div later in the year). PFE is down 9% on the news. Their chart below defines dreary.

• Pfizer to buy Wyeth for $68 billion, cut jobs- AP

Pfizer --- 10 years




Caterpillar (CAT) had another dreary earnings report. Q4 earnings were down over 30%. They forecast 2009 sales will $40B instead of $51B while EPS will plunge to $2.50 from $5.66 last year. The div will be earned but it is logical to expect that shareholders will have to share pain along with laid off workers & management salary cuts. The stock is down 2 to the 33s, but off it's lows.

• Caterpillar earnings below expectations, to slash jobs- AP

Caterpillar --- 10 years




McDonald's (MCD) reported lower EPS due to a special credit last year. Factoring that item out, they reported a nice gain in Q4 with higher same-store sales in the US & globally. They gave encouraging guidance for 2009, stock up slightly. Their 10 year charts look fairly good, especially considering the depressed state of security prices today.


McDonald's 4Q profit falls due to year-ago benefit

McDonald's (MCD) --- 10 years





Home Depot (HD) is going thru a period of major belt tightening, job cuts & only opening 12 stores in 2009. Markets liked the news, up 1.20. Their 10 year chart is respectable, all considered.

• Home Depot to cut 7,000 jobs, close Expo chain- AP

Home Depot (HD) --- 10 years




These 4 are all div payers but will share various degrees of pain in 2009. The stocks should provide excellent rewards going forward, but that involves the long term. In the mean time, they have to deal with major bumps in the road.

Dow keeps testing the 8000 floor

Dow has been in a trading range for more than 3 months. 8K has been a solid floor, as shown in the first chart. Last week, it kept bouncing, bouncing & bouncing off that floor. More earnings will be reported in the next 2 weeks, when that floor will be retested.


Dow Jones Industrials --- 2 weeks




Dow Jones Industrials --- 3 months




During these troubled time, new investments should be thought about. I'm a dividend guy & especially favor higher yields. The S&P 500 Dividend Aristocrats are an excellent place to look for buying opportunities. I have published articles on this group at SeekingAlpha.com & istockanalyst.com, which have attracted interest. Some companies in this elite group have not only stood the test of time in paying higher divs but, even in today's difficult economic environment, should be able to continue increasing divs. A few I favor, for no particular reason other than they have long records of higher divs & strong financial statements, are:


3M (MMM)
Coca Cola (KO)
Exxon Mobil (XOM)
Kimberg-Clark (KMB
Johnson & Johnson (JNJ)
McDonalds (MCD)
Procter & Gamble (PG)
VF Corp (VFC)
Wal-Mart (WMT)
Caterpillar (CAT)

OK, CAT is not in the group. They have been paying divs annually for most the last century, but have not been able to increase divs continuously year over year. However, with a long track record of paying divs, a strong balance sheet & a global business which will do well when economies return to a growing mode, they deserve consideration.

Earnings should dominate this week when the future economic stimulus package is being kicked around in DC. Let's see if the Dow breaks thru the floor or buyers keep that from happening.

Indecisive markets are mixed

After a weak start, the Dow came back spending the rest of the day in the red but above the 8K floor. With a strong finish in the PM, Dow lost only 45, decliners modestly ahead of advancers while NAZ was up 11 helped by Google (GOOG) reporting favorable numbers. For the week, Dow fell 200.

Despite all the gloom, the Alerian MLP Index hangs tough remaining above 190 while Dow is down 8% YTD:


Alerian MLP Index --- YTD





By way of contrast, REITs have had a very bad year following their severe sell-off in the closing months of last year:


Dow Jones REIT Index --- YTD




Today MLPs & REITs were up while junk bonds were weak & VIX slipped back pennies. The S&P 500 FINANCIALS INDEX rebounded 4, remaining near its low set this week.


Oil had a good day. The Mar contract is several dollars above where the Feb contract was when it expired 2 days ago. This may be a signal that oil prices will be heading up.

CLH09.NYM

..Crude Oil Mar 09

...46.06

.. 2.39 ......(5.5%)

Economic damage has not been limited to the US. CNBC Asia & Bloomberg TV nighttime report on markets in Asia & Australia. Their biggest companies have been pummeled. This week, in addition to the flood of profit warnings from Chinese companies, LG Electronics & Samsung (Korea) along with Sony & Canon (Japan) have been reporting some of their worst losses in history. Toyota, now the #1 auto company in the world, is laying off thousands this month.

There is a tug of war between optimism betting on the success of a stimulus package versus pessimism based on reality coming from earnings (losses) reports. Earnings will keep coming for a couple of weeks.

Markets drift lower

Dow started down, but recovered going into midday. Dow is down 84 (just above the 8K floor), decliners over advancers 2-1 while NAZ rose 7. The S&P 500 FINANCIALS INDEX is up marginally after its recent drubbing. The Alerian MLP Index & Dow Jones REITs are each up 2 while Barclays Capital High Yield Bond ETF is down 1%. However, VIX rose 2 to 49 & sharply off its lows under 40 at the start of the year. The strength of the MLP index holding above the 190 floor continues to be impressive.


General Electric (GE), a Dow stock, reported dreary earnings as they had warned, stock down 67¢ taking it into the 12s. This 13 year low brings the yield up to almost 10%, plenty of risk is being priced into the stock. GE reaffirmed its intention to (only) maintain the div & hold on to its coveted AAA rating.

•General Electric Profit Declines 43% as Immelt Backs Dividend, AAA Rating


Pfizer (PFE), a Dow stock & Dividend Aristocrat, is trying to buy Wyeth (WYE). Pfizer is down 34¢ while Wyeth is up $3. Pfizer has just 3 years of patent protection left on Lipitor, which accounts for about ½ its profits. Such an acquisition is intended to help them get thru the post patent protection period.

•Pfizer Is in Talks to Buy Wyeth as Lipitor Competition Threatens Revenue


Corp earnings keep coming & by & large they're depressing:

• Xerox 4Q profit plunges, misses Wall Street view- AP
• Schlumberger 4Q tumbles; sees rough year ahead- AP
• Harley to cut 1,100 jobs as 4Q profit falls- AP

Today is shaping up as an uneventful day for trading. But Dow is close to its important floor, late day selling taking it below would be a very negative sign. Congress & the president are working on a stimulus package. It all will be in the details.

Dow down triple digits

After a sharp fall in the first hours, when Dow plunged 275, the Dow had a major rally bringing it near break even. But sellers took over in the PM, Dow ended with a loss of 105, decliners 3-1 over advancers & NAZ fell 41.

The 8K floor for the Dow has been quite strong under a lot of pressure in recent weeks. The chart below shows that the Dow held above 11K during the spring-summer period, before the Sep crash. Since then the 8K floor held, with one exception which didn't last long. Bulls point to this a base building. However, if it gives way there probably will not be support for some time as seen when the floor was lowered from 11K to 8K.


Dow Jones Industrials --- 6 months





Banks continue under all kinds of selling pressure. Bank of America (BAC) after the nice pop yesterday dropped almost 1 into the 5s. US Bancorp (USB) dropped 2 bringing it into the 13s with a yield of 14%. There is a lot of talk that banks may not survive this mess, just take a look at Citigroup (C) & Bank of America, etc. The S&P 500 FINANCIALS INDEX recovered from its lows but was still weighted down by some of the biggest banks:

Value 116.90

Change -7.26

% Change -5.8%

The Alerian MLP Index continues to hold up well under selling, closing at 192 down only 1½. The Dow Jones REIT Index didn't do as well, down 7. Junk bond funds were flattish, the news about 2 forthcoming offerings may have helped. VIX rose 1+, but well off its highs, & oil fell 50¢.


Junk bonds have rallied sharply from overly depressed lows in mid Dec. Crown Castle plans to raise $900M selling B rated debt costing over 11% & Petrohawk Energy is raising $500+M in debt costing around 13%. Merrill Lynch said the average rate on junk debt has fallen 5 percentage points since the high last month, making these offerings possible. Those who bought junk bond funds at their lows made nice gains. However, their immediate future is cloudy. Rates are still at extraordinary levels as they price in a terrible default rate.

•Junk Bond Offerings Reach Most Since June on Crown Castle, Petrohawk Sales


Congress is stuck in the mud trying to get out an enormous stimulus package. Maybe that's to be expected. Now the talk is it will be approved in a few weeks. I hope the economy & stock markets can hold out until then.

Dow crumbles, below 8000 again

Dow tumbled 262, decliners 6-1 over advancers & NAZ fell 60.

On more dreary banking news, S&P 500 FINANCIALS INDEX is heading back down to the 108 low set 2 days ago.

Value 113.95

Change -10.21

% Change -8.2%

More banks results are coming in, and their reports are just plain depressing. In the link below, M&T Bank Corp (MTB) posted higher earnings while BB&T (BBT) & Comerica (CMA) had lower profits which at least matched lowered estimates. The 4 other banks just had ugly news.

• U.S. bank results plummet as credit problems soar- AP

Other averages are weak. REITs are hurting but the Aleiran MLP Index is down "only" 3 to 190. The 190 floor is providing support. Junk bonds are mixed, not all that bad, while the VIX spiked up 5+ towards 52. Fears are on the rise.

Oil fell on the increased fears of the global economic recession.

CLH09.NYM

...Crude Oil Mar 09

...41.11

... 2.44 .......(5.6%)

Jobless claims jumped 62K to 589K, the worst level in 26 years. What's there to say? This spells a very serious recession.

• Jobless claims surge, housing starts tumble- Reuters

China's economy grew in the last quarter at a 6.8% rate, lowest figure in 7 years. China is hurt by shrinking export business & recession problems at home.

China’s GDP Growth Slowed to 6.8% in Fourth Quarter


Microsoft (MSFT), a Dow stock, will cut 5K jobs, the first time it has had to layoff employees, after a disappointing earnings release. In their Q2 (just completed), they only eaked out a 2% sales gain which was almost $1B below their forecast. EPS fell to 47¢ from 50¢ last year. MSFT, once THE growth stock, is selling at an 11 year low & may be headed even lower.

• Microsoft to slash 5,000 jobs, misses on 2Q profit- AP
• Steve Ballmer's Entire Memo to the Microsoft Troops About Layoffs and Weak Results- All Things Digital

Microsoft --- history





General Electric (GE), another Dow stock & S&P 500 Dividend Aristocrat, is down 50¢ to 12½, a 13 year low. There is widespread talk that they will have to cut the div after earnings are released tomorrow. Dow is under 8K again, looks like it wants to test the 7½K floor set 2 months ago.

Kinder Morgan increases distribution

Kinder Morgan (KMP) increased their distribution after the close. The annualized rate was increased to $4.20 from $4.08 in the prior quarter.

They are the largest MLP & have increased distributions 35 times in their 12 year history. The earnings statement is excellent, however they say they expect the $4.20 rate will be paid this year (i.e. no more increases until next year at the earliest). The release, linked below, gives an excellent review plus the outlook for 2009.

Kinder Morgan Energy Partners Increases Quarterly Distribution to $1.05 Per Unit; up 14% over Fourth Quarter 2007

Rebound day

Encouraging tech forecasts (especially IBM) lifted the markets. Dow rose 279, advancers over decliners 3½-1 & NAZ was up 66. The 8K floor has held for the Dow over 3 months.


Dow Jones Industrials --- 3 months





Oversold banks led the charge up as S&P 500 FINANCIALS INDEX rose off its low yesterday but couldn't take out the prior Nov low of 125:

Value 124.16

Change 15.83

% Change 14.6%

Helping the index, execs at Bank of America (BAC) bought a lot of BAC stock yesterday at 6, always an encouraging sign. The stock soared 31%. Another way to look at, it went up $1.58.

•Bank of America Soars After Lewis, Five Directors Disclose Share Purchases


The Alerian MLP Index bounced again off its 190 floor. MLPs continue to outperform the averages in 2009, flatish after the first day pop:


Alerian MLP Index --- YTD




The Dow Jones REIT Index popped 11% off yesterday's low while junk bonds were up, mostly around 1%. Meanwhile the VIX pulled back 10 on lower market worries.


The near term contract for oil is now March & it had a very good day on the optimism seen in the stock markets.

CLH09.NYM

..Crude Oil Mar 09

...43.80

.. 2.96 ......(7.3%)

Rally days always feel good, especially when they represent a bounce off what appears to be a floor. More earnings reports are coming. General Electric (GE), it's only $13.04 - up 11¢ in today's rally, will report later this week & expectations are not good.

Initial market rally fades fast

Buyers were encouraged that the world didn't come to an end, so they returned. The Dow started with a 100 point gain but that has evaporated, now it's down 11, advancers 3-2 ahead of decliners & NAZ is up 8. Banks, in particular, found buyers but that enthusiasm withered.

The S&P 500 FINANCIALS INDEX rebounded a little after the drubbing it's been taking. However, it remains well below the 125 low set on Nov 20. Banks look to have more head winds in front of them:

Value 110.64

Change 2.16

% Change 2.0%

US Bancorp (USB) saw its profits take a beating. Even though they have avoided the ugliest write-downs that other large banks have taken, they were still hurt. EPS fell in Q4 to 15¢ from 53¢ in the prior year, stock down 2.69. They are an S&P 500 Dividend Aristocrat that will have to struggle this year to keep its status in the group, but I think they will. Even though their chart is dreary, this is one of the best for any bank.

• U.S. Bancorp profit falls to lowest since 2001- Reuters

US Bancorp --- 10 years




Other yield securities have bounced back a little from yesterday's lows. The Alerian MLP Index got up to 191, but has settled back to 189. 190 may become a difficult ceiling to break thru. As with the major averages early gains are being trimmed while I write. Meanwhile the VIX is down 5 to the 51s.

Mar oil is in the 41s, above the 38s that the Feb contract closed out at yesterday.

CLH09.NYM

...Crude Oil Mar 09

....41.65

... 0.81 .......(2.0%)

• Oil around $41 amid grim economic news- AP

Toyota (TM) became the largest auto company in the world in 2008 because their sales fell only 4% to about 9M cars while General Motors (GM) was hurt more badly by the global slowdown in auto sales. TM is still getting pinched hard. They are cutting back the workforce in Japan, a very touchy subject for them.

•Toyota Passes General Motors as Biggest Automaker Amid Global Sales Slump


Obama's team is coming up with a stimulus package which will have to be combined with the $825B package congress is proposing.

•Obama Team Readies Bank-Rescue Plan to Bolster Capital, Cull Toxic Assets


Markets continue playing defense.

Banking problems multiply!

The AM selling continued into the PM & thru to the closing! Dow Jones plummeted 332, taking it below the important 8K floor. Decliners were 7-1 ahead of advancers & NAZ fared even worse, down 88.

Banks had one of their worst days in history as banks around the world reported enormous losses. Speculation about survival of the largest banks has been called into question. Banks that were only lightly affected by the negative news dropped 10+%, others did much worse.

The S&P 500 FINANCIALS INDEX plunged setting another multi year low.

Value 108.33

Change -21.77

% Change -16.7%

MLPs, REITs & junk bonds also suffered badly. The Alerian MLP Index finally broke thru the 190 floor, closing at 186 down 6+. This move worries the technical guys. The Dow Jones REIT Index plunged an enormous 15+ to 119, again looks like it will test the sub 100 low recently set. Junk bonds slipped modestly, although Barclays Capital High Yield Bond ETF dropped 4% to 31 (with its 14% yield). VIX had one of its biggest days, up 10 to 56 on higher worries in the markets.


Dow Jones REIT Index --- 3 months





VIX --- 3 months





Oil ignored all the dreary news on banks, having one of its best days in some time. The Feb future contract rose $2, prices further out are even higher showing how traders feel about the direction of oil prices.

CLG09.NYM

..Crude Oil Feb 09

...38.74

.. 2.23 ......(6.1%)

• Oil prices rise with some traders buying cheap- AP

Goldman Sachs said that Q4 of 2008 for the S&P 500 will be awful & 2009 will be worse than anticipated. Their strategist forecasted S&P 500 earned $55 per share in 2008 (11% below the average analyst estimate) & S&P EPS is forecasted to be $53 next year. That puts S&P 500 at 15½ times 2009 earnings

•Goldman Says S&P 500 Profit in '09 Will Drop More Than Wall Street Average


The ugly news from banks is alarming. Bank of America (BAC) is selling at 25 year lows as its impressive dividend record going back to the 1970s was shattered over the weekend. Citigroup, HSBC, Royal Bank of Scotland, etc. look like they're all coming apart! Until the banking mess gets fixed, stocks will be on defense. Dow is at 7949. The recent low of 7500 may be tested shortly & it looks like the test will not be successful!

Banks plunge again

Dow down 166, decliners over advancers 6-1 & NAZ dropped 47. Grrr!!

The S&P 500 FINANCIALS INDEX plunged once again, reaching another new multi year low (2 years ago the index was at 500):

Value 117.80

Change -12.30

% Change -9.5%

Banks are reporting earnings & they are just down right ugly. Foreign banks which get less attention here include HSBC selling at a 10 year low in Hong Kong & the Royal Bank of Scotland which will need their own whopper bailout package. Here the sell-off in banks was led by State Street, the other index S&P 500 Dividend Aristocrat I haven't mentioned very much. They were expected to have 1.14 in earnings in Q4. Instead EPS came in at 15¢ with a very weak outlook for 2009, the stock dropped in HALF. I repeat the stock dropped in half to 18 on the open. The chart below is one of the worst ever for a major company. Their div is modest at 96¢, they may be able to raise it to remain a Dividend Aristocrat -- but now there are doubts. Wells Fargo (WFC), another big bank in which Warren Buffett has a large investment, is down 2½ to 16 with an 8½% yield, on all the nervousness in the bank sector. Meanwhile, 2 banking stocks in the Dow, Citigroup (C) & Bank of America (BAC), have handles of 3 & 5. As hardship for banks go, this has to be one of their worst times since the depression.

• State Street reports rising losses, shares plunge- Reuters

State Street --- 2 weeks





Other yield securities are selling off. The Alerian MLP Index is down 2 to 190, the low end of its trading range this year. If the floor holds, that will be a positive sign for the group. REITs & junk bonds are also off while the VIX Index shot up 5 to 52. Fears in the market have shot up sharply this year:


VIX --- YTD




In this financial mess, oil is up 1 to the 37s. At least it represents a ray of optimism on one of the dreariest days in some time. More earnings are coming. General Electric (GE), Dow stock & for the time being a Dividend Aristocrat, reports later this week. They have a very strong presence in the financial field. Get ready for one more very ugly report!

Weak banks take markets lower

Last week was another sluggish week but downward for the markets. Dow slipped 300, remaining near the 8½K sideways trading level. Banks took a pounding as the biggest were humiliated!

S&P 500 FINANCIALS INDEX fell from 170 to 130, wow!! Banks took one of their worst beatings ever. Citigroup (C) is coming apart, now they have to separate into 2 businesses, taking the stock under 4 (Dow stocks aren't supposed to trade that low). Bank of America, another Dow stock & until a few months ago a Dividend Aristocrat, will get even more money in its gov bailout package requiring it to slash the quarterly div to only one penny. Bank problems which were supposed to be over at various times last year, ain't going away soon!


•BofA posts 4Q loss of $2.4B, cuts dividend


Other indices performed flattish, a little better than the Dow. The Alerian MLP Index retains its supporters. After a spike up on the first day of trading in 2009, it has been pretty much even, not straying far from 195. The next couple of weeks will a time of trial when distributions & guidances are announced. Strong ones should maintain or increase distributions, but weak ones are clearly vulnerable to cuts. Constellation Partners (CEP) has already announced a 75% distribution cut. It will be interesting to see if the strong can keep the average on an even keel (at least) or the weak ones will drag it down.


Alerian MLP Index --- 1 week





After all the depressing news from the largest banks in the country combined with a new congress struggling to come up with a stimulus package, markets may be seeing more pain ahead.

Stocks up for the day, down for the week

A choppy day for stocks ended with gains. Dow rose 68 to 8281 (but is still down almost 500 this year), advancers 3-2 over decliners & NAZ rose 17.

Banks had a tough day. At the low, the index touched a new low of 124. This week the S&P 500 FINANCIALS INDEX started at 155, but closed substantially lower (just another tough week):

Value 130.10

Change -3.18

% Change -2.4%

MLPs, REITs & junk bond funds found buyers in the PM, they rose modestly on the day. VIX pulled back 4½ to the 46s.


Oil finally had an up day, maybe because of all that cold weather out there. But it still remains down sharply from its start this month near 50.

CLG09.NYM

..Crude Oil Feb 09

...36.05

.. 0.65 ......(1.8%)

Chrysler Financial (a sub of Chrysler) will get a $1½B loan from the gov under TARP. This is a little controversial since the gov is financing a commercial business, but this loan allows Chrysler to remain in business.

•Chrysler Financial Gets $1.5 Billion Treasury Loan to Help Boost Car Sales


Almost $2B of client money at Morgan Stanley (MS) was invested in Bernie Madoff's funds. This information has come to light after their proposal to take of Citigroup's brokerage business.

•Morgan Stanley, Citigroup Clients Said to Invest in Fund Exposed to Madoff

Stocks barely up on another bank bailout

Big bank news dominates the markets. Bank of America (BAC) & Citigroup (C), both in the Dow, reported big losses. This is disappointing for investors since they were supposed to be smarter & better than the weak ones we have read so much about.

BAC after posting its first loss in 17 years is trying to deal with enormous problems after acquiring Countrywide & Merrill Lynch. BAC will get a $138B bailout from the gov, things are just that bad! C is trying to figure out which end is up. They will split into 2 companies, reversing years of working to create 1 enormous company. Both stocks are little changed in price. Percentage wise the changes are bigger, but that's because they are starting out with handles of 3 & 7.

•Citigroup Will Split in Two After Posting $8.29 Billion Loss; Shares Gain
•Bank of America Has First Loss in 17 Years, Gets $138 Billion U.S. Bailout


On this dreary news, Dow is up 18, advancers over decliners 3-2 & NAZ is even (all fading fast). Banks are weak, the S&P 500 FINANCIALS INDEX is down 4 to 129 (very near the recent multi year depressed low of 125). The Alerian MLP Index, Dow Jones REIT Index are each up a few while junk bonds are mixed. The VIX dropped 4 to the 46s, as fears ease a bit on the bank bailout. Oil is still kicking around the 35s even though temps in the northern hemisphere are COLD.

While the MLP index has been stable this year, keeping its head above the 190 floor, the Dow Jones REIT Index has been weak. REITs have sold off badly on the ugliest fears about how much damage the recession will do to their rental properties:


Dow Jones REIT Index --- YTD






The Labor Dept reported consumer inflation dropped at a 0.7% rate, less then the 0.9% rate analysts forecasted. Lower gas prices contributed to this decline. For 2008 the inflation rate was only 0.1% (essentially even), the lowest rate in 54 years.

• Gas price plunge pushes consumer prices down- AP

Banks are losing just about all their fans. Yesterday I mentioned US Bancorp (USB), an S&P 500 Dividend Aristocrat, in which Warren Buffett has a large investment. In the very troubled last 12 months, their stock held quite well, around 31. But it was clobbered in the fall sell-off, then tried for a rally late in the year. That failed, now they are setting new lows after a div hike raising the yield to over 9%. I still like the stock, but enthusiasm is being tried severely as it languishes near its 10 year lows. Such a change in attitude towards stocks is common among many investors, the reason Dow is stuck around a depressed 8K level .


US Bancorp --- 1 year

Stocks barely up after afternoon rally

The morning was dominated by gloomy news & grim outlooks for bank earnings. The Dow sunk to down 200 at the low. However the PM brought buyers back, taking the Dow up for an 86 point gain at the high & settled back to a 12 point gain. Not bad all considered.


Dow Jones Industrials --- YTD




This year, markets have gotten off to a very bad start, worse than last year. Below is a review of the first 15 days for the Dow (10 days of trading, last year vs this year):

12/31/07......13,264
01/15/08......12,501___down_5.7%


12/31/08.......8,776
01/15/09.......8,212___down_6.4%


Today, advancers were 20% ahead of decliners & NAZ was up 22 despite the negative news at Apple (AAPL) - we all wish Steve Jobs a speedy recovery.


S&P 500 FINANCIALS INDEX rebounded off their lows, trimming the loss to 7, at 133. Oil sank below 35 despite the extremely cold weather in the northern hemisphere.

On a day when banks saw heavy selling, I'd like to mention US Bancorp (USB), an S&P 500 Dividend Aristocrat, closing at 19.02 - down 2.05. They raised the div to 1.70 for this year, yielding 9%. They've avoided dreadful times bigger banks are going thru. But they are still getting pinched. Earnings this year & next are projected to only cover the div. This a bank in which Warren Buffett has a large investment. Obviously, USB is not for those weak of heart. Their fundamentals appear to be strong (whatever that means in today's world) & might appeal to the brave of heart.

MLPs have put in a strong showing this year. The Alerian MLP Index began the year, at 176, with a nice pop on the first trading day. Since then, it has been trading sideways, above 190.

Alerian MLP Index --- YTD




General Motors (GM), still in the Dow, lowered its estimate for the auto sales in 2009, from 12M to only 10½M. Gloomy for them & even gloomier for the rest of the economy.

•GM Says U.S. Industrywide Auto Sales May Tumble to 27-Year Low on Economy

Grim bank reports sink stocks

Banks dominate the news with dreary reports. In the Dow, Citigroup (C) is a $3 stock, Bank of America (BAC) is a $7 stock, American Express (AXP) is a $17 stock while JP Morgan Chase (JPM) is high priced at $25. Dow is down 128, decliners over advancers 6-1 & NAZ is down 20.

Leading the way down are banks. S&P 500 FINANCIALS INDEX is getting punished badly on the sell-off for bank stocks. Just a couple years ago this index was at 500, now is pushing to take out its recent low of 125:

Value 132.19

Change -8.21

% Change -5.8%

Punishment is being spread around, all the indices I follow are down substantially. Oil now has a 35 handle, hmmm!

• Oil tumbles close to $35- AP

The bank story is deteriorating into just a plain UGLY mess! Bank of America is down 25% TODAY to a 17 year low. Besides loan problems, which has become a routine story at big banks, they are trying to back out of taking over Merrill Lynch. They say the losses are too big to deal with but the gov, now a big stockholder, wants the deal to go thru. Remember the former chief exec who was told to take this $150M package & go after they found out he gave them this mess?

•Bank of America Plunges on Concern Company Needs More Aid for Merrill Deal


JPMorgan eaked out a profit in Q4, but the outlook is grim, especially if the economic picture worsens. Earnings were hurt by costs related to the Washington Mutual takeover along with a loan story that was not pretty.

• JPMorgan posts profit, but 'disappointing' one- AP

Major foreign banks are not doing any better. It seems like all European & Asian banks are also posting multi $B losses & looking for help to stay afloat. The European Central Bank (ECB) cut rates again, it probably won't make a big difference. Last week the Bank of England cut its lending rate to the lowest rate in history (it was founded in 1694)!

• ECB cuts rates to 2 percent- AP

On the macro economic front, jobless claims last week jumped to 524K up from a revised 470K in the prior week. This was substantially higher than the 500K expected. More announcements about layoffs are swelling the rolls.

• New jobless claims increase more than expected- AP

Congress is proposing a whopper $825B stimulus package (more spending along with tax cuts) to help the economy. Now there is greater recognition that any plan first, has to be passed by congress, no easy task, & 2nd, money has to reach businesses & individuals. Last year serves as a reminder, the tax rebate passed in mid Feb only reached taxpayers 3-5 months later.

•House's Stimulus Bill Seeks $550 Billion in Spending, $275 Billion Tax Cut


Dow is sinking to 8K. That low may be tested, probably today or tomorrow. If it falls the floor, there is not a lot of support below:

Dow Jones Industrials --- 3 months

Lower retail sales are too much!

After dropping 275 in the first hour, Dow remained flat for the rest of the day. Dow closed down 248, decliners over advancers 7-1 & NAZ fell 56.

Dow's performance led the other averages I follow, selling off in the first hour & then steady for the remainder of the day at the reduced level. VIX pulled back slightly from it's high but still jumped 5.87 to 49.14. Growing fears worry markets. Oil continues to slide downward, in the 37s, on gloomy economic news

General Electric (GE), just another big Dow stock with big problems, pulled back into the 14s near it's recent low, taking it's value back to 1996 levels. GE will release earnings next week, markets are already preparing to be disappointed. This is an S&P 500 Dividend Aristocrat. Last year in announcements regarding the div, GE only said that it would be maintained. Their last increase was Q4 in 2007, thus 2008 was another record year for their div. Unless they increase this year, they will lose their standing as a Dividend Aristocrat. In addition, they are still working to maintain the coveted AAA debt rating (only a handful of companies remain in that elite group).


General Electric --- 3 months





General Electric --- 28 years





Speaking of divs, MLPs will try to increase Q1 distributions. In the next couple of weeks, most announcements will be made for Q1. 2 announced increases last week. Today, Plains All American Pipeline (PAA), announced a Q1 distribution the same as the Q4, 2008, annualized rate of $3.57 & is above the $3.40 rate in Q1 2008. I count a year over year increase as a baby increase. More will probably try for increases. However, some are selling in single digits. They are struggling to keep the existing distributions. There is still time to place bets for the adventuresome.

A second judge ruled that Madoff can remain free (confined to his apartment) awaiting trial.

•Madoff Has Bail Ruling Upheld, Will Remain Out of Jail Pending Fraud Trial


Earnings season will be in full force next week. Lower markets suggest that GE is just one of many companies expected to disappoint.

Markets tumble on weak retail sales

Dec retail sales plunged 2.7%, down for the 6th straight month. The sales decline was more than double expectations. In 2008, retail sales dropped 0.1% compared with a 4.1% gain in the prior year. This is the first annual decline in the 17 years that figures are available. Figures for the 2nd half, not made available, must be dreadful. The slump in sales is affecting all retailers, even Tiffany (TIF), down 29¢, reported holiday sales dropped 21%.

•U.S. Retail Sales Slump Twice as Much as Forecast on Rising Unemployment
•Tiffany Holiday Sales Plunged 21% Amid Credit Crisis; Forecast Is Reduced


Stocks sold off badly on the news. Dow is down 292 taking it to the low end, a bad sign, of its recent sideways trading range:


Dow Jones Industrials --- 3 months




Decliners were over advancers 9-1 & NAZ was down 55.

S&P 500 FINANCIALS INDEX looks to be heading back down to the 125 low. Banks just can't buy friends these days. Bank of America (BAC) is getting less attention, as attention is all focused on Citigroup (C), both Dow stocks. Each is at a 15 year low.

Value 140.33

Change -8.55

% Change -5.7%

The Alerian MLP Index is down 5 to 190½, the 200 ceiling is even harder to break thru. As expected, REITs & junk bonds sold off. However the VIX shot up 8. It's now over 50, up from 38 just a few days ago as fears are up dramatically:

VIX ----- 2 weeks





Oil is back below 38 on the weak retail sales report.

• Oil slips back below $38 on retail sales data- AP

Citigroup is breaking up, selling its brokerage unit to Morgan Stanley which will dilute their ownership to 49% & maybe zero down the road. Confusion about breaking up is not take well, C is under 5. Now there are 2 Dow stocks under 5 (C & GM).

Dow may be setting up to test 8K shortly. Another one of the stories which just hit & is so common: Walgreen (WAG), down 31¢, an S&P 500 Dividend Aristocrat, is cutting 1K positions in 2009.

Stocks muddle along

This was another lackluster day. Stocks had been down for much of the day while not drifting far from break even. However, Alcoa (AA) & Bank of America (BAC), 2 Dow stocks with prospects of major div cuts, sold off significantly (down 51¢ & 78¢ respectively). Dow slipped 25, advancers were slightly ahead of decliners & NAZ was up 7.

The Alerian MLP index & Dow Jones REIT Index were each up about 4 after weakness in the last few days. The MLP Index is back to 195, bringing it nearer to the 200 ceiling. However, the REIT Index is still wallowing around in the mud. Junk bond funds were generally up again today as high yields are pulling in the venturesome seeking extra income.

The VIX, volatility index, dropped 1+ to 44½ but off a nice recent bounce. It's still up 6½ points in the last 5 days, reversing a 6 week downward trend which had been an encouraging sign for the bulls.

Oil is down 30% from its interim high (50+) last week. Today it rallied, the first gain in 7 days. Maybe the prospects of a big stimulus spending package brought out a few extra buyers.

CLG09.NYM

..Crude Oil Feb 09

...38.52

.. 0.93 ......(2.47%)

Chairman Bernanke said that a fiscal stimulus package may not be enough to promote lasting recovery. He called for more capital injections & guarantees to normalize credit markets. We're still in the make it up as we go along period.

•Bernanke Says Stimulus May Be Inadequate, Signals Asset Buying, Guarantees


Markets are waiting for more word on the stimulus package & additional earnings reports (which may not be very encouraging).

Stocks little changed

Alcoa (AA), a Dow stock, kicked off earnings season last night with a large loss. Asian markets followed by European markets sold off heavily on this disappointing news.

• World markets tumble on US earnings concerns- AP
• Alcoa reports $1.19B loss in 4Q on low prices

US markets are digesting the news. After starting with gains, Dow slipped back to a slight loss, advancers are 25% ahead of decliners & NAZ is up 7. Oil is even but still in the 37's, near the lowest level in years.

MLPs & REITs are up modestly.

Bloomberg has a story about junk bonds finding new friends in recent weeks. After investors sold these funds all year (largely after Sep 15), they have been buying aggressively recently. For example, one of mine is up 50% from its recent lows a month ago. They are betting that extraordinarily high yields more than compensates for the risk of higher defaults.

Junk Debt Signaling Great Depression Defaults Lures TCW


Alcoa's report yesterday was felt the world. Their customers are auto companies, aircraft & construction industries. This was just one more reminder that these prime businesses are hurting badly. However revenues came in ahead of forecasts, but the loss of per share was 1.49. Grrr!! They've paid a div for 60 years but the company's outlook is uncertain raising fears about a large div cut (which will be announced later this week). More pain is coming for AA in Q1. Today AA is down again, to 9.60.

S&P 500 FINANCIALS INDEX is down pennies after a big loss yesterday. Banks keep selling assets to shore up balance sheets. Provisions for loan losses still have to be increased, explaining why they are reluctant to lend. This dreary outlook may sink the index to another new low.

Energy & banks weigh down the Dow

Stocks retreated on bearish news for energy & financials. Major decliners (down more than 1 in the Dow were: Citigroup (C), Bank of America (BAC), JP Morgan (JPM), Exxon (XOM), Chevron (CVX) & Caterpillar (CAT). OK, there was one industrial in there. Dow fell 125, decliners over advancers 3½ to 1 & NAZ declined 32.

This is the start of earnings season & thoughts of reality are in the minds of traders. Lower oil prices & what could be another terrible reporting period for financials is weighing heavily on the stocks. Banks were hit hard as S&P 500 FINANCIALS INDEX looks like it's heading for its recent lows. Less than 2 years ago this index was at 500:

Value 146.91

Change -8.88

% Change -5.7%

Oil fell sharply on greater worries about demand destruction from the global recession.

CLG09.NYM

..Crude Oil Feb 09

...37.72

.. 3.11 ......(7.6%)

The Alerian MLP Index (energy related) dropped 4, the Dow Jones REIT Index dropped 8, Barclays Capital High Yield Bond fell 1% (losing a few of its recent new friends) while the VIX was up 3¼ (fear is on the rise).

Citigroup (C), a Dow stock, is trying to sell most of its brokerage business to Morgan Stanley (MS), but traders were not impressed. C dropped 1.15, it's a $5 stock once again.

• Citi shares plunge 18 percent despite talks with Morgan- AP

A sense of reality is biting traders hard. Earnings reports may pinch stocks. The stimulus package is in the wind & it already has critics from both parties. One safe bet, it will be close to $1T requiring gov to borrow substantially more.