Strong gains cut in half during last hour

Markets finally had a very good day, the kind anticipated when they are so greatly oversold. However, selling in the last hour cut gains almost in half. Dow rose 149, advancers over decliners 4-1 & NAZ shot up 32.

S&P 500 FINANCIALS INDEX struggled & struggled, trying to eek out a gain but failed. Sentiment is negative, financials could not gain traction. Bank of America, Citigroup & General Electric (which closed above its 18 year low set early in the day) fell while US Bancorp (USB) dropped 1.59 on the div cut.

Value 92.06

Change -0.70

% Change -0.8%

The Alerian MLP Index rose 6 in all the enthusiasm, Dow Jones REIT Index gained 2 & junk bonds were up, good but not impressive gains. VIX was down 3½ to 47s on the renewed market enthusiasm.

Oil had a nice day from a favorable weekly inventory report. Inventories rose 0.7M barrels vs an expected increase of 2.2M (on a base of 350M).

CLJ09.NYM

..Crude Oil Apr 09

..45.16

.. 3.51 ......(8.4%)

A major uh oh, the debt of Berkshire Hathaway (BRK.A) is priced as junk bond debt, ignoring the AAA rating assigned by Moody's. Investors buy credit-default swaps to protect against default on Berkshire debt. The premium climbed 29 basis points today to 529 basis points. That's the kind of premium associated with junk bonds. There is even talk that the credit crisis could drain the $25B in cash Berkshire has. BRK.A has had a very bad year & is up only marginally (that means 25) in today's up market. We all hate to find out what happens if their stock price sinks much further.

•Berkshire Credit Swaps Climb to Record on Buffett's Bets, Implying `Junk'


Berkshire Hathaway --- YTD





The Federal Reserve sees more pain ahead for the economy. Economic activity deteriorated further in early 2009. They do not see any near term improvement with a turn around coming in late 2009. The unemployment report on Fri will likely add fuel to their dreary assessment.

• Fed: Little hope for quick improvement in economy- AP

Dow had a big rally off severely depressed & a heavily oversold level. 5 stocks in the Dow are selling for less than $7 each (Alcoa, Bank of America, Citigroup, General Electric & General Motors). $20 is enough to buy one share of each. Not too long ago, a stock price of $20 signified that it was a speculative stock. Today's gain in the context of where the Dow has come from in the last 2 weeks was not very impressive, 7K easily held as the ceiling:


Dow Jones Industrials --- 2 weeks