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