Chrysler bankruptcy, stocks wobble

The third largest US auto maker filed for Chapter 11. Chrysler announced it will temporarily halt most vehicle production while it completes a deal with Italian car maker Fiat to resume car production. The failure of Chrysler was expected, but when it happens it always a shock. Chrysler will still sell cars (they have plenty in inventory) & the gov would back its auto warranties. Its plants will be idled during the legal proceedings. A giant business will have its fate decided by a judge.

•Chrysler Files for Bankruptcy Protection to Shed Debt, Seal Fiat Alliance


Markets absorbed the news fairly well. Dow had been up 100 or so in the AM & fell, not badly, in the PM, staying near break even. Dow closed down 17, advancers ahead of decliners by 40% & NAZ rose 5. Banks have been in charge of the markets recently, they held up well today (the index started the month at 120).


S&P 500 FINANCIALS INDEX

Value 145.40

Change -1.18

% Change -0.8%

Exxon Mobil (XOM), Dow stock, largest company in the world & a Dividend Aristocrat, saw its profits fall more than 50% from lower oil prices in Q1. Exxon & Chevron (CVX), the other Dow oil stock, each fell by about 1½.

Exxon Has Biggest Profit Drop in 5 Years as Oil Falls


Oil was little changed near 51, but MLPs may have felt vibes from the XOM announcement. The Alerian MLP Index dropped 3½ to 210. But they had an outstanding month & are having a terrific year. REITs & junk bonds funds were mixed to up today & in similar fashion to the MLPs had a great month & are up sharply YTD.

MLPs got thru Apr & earnings season in good shape. BreitBurn Energy Partners (BBEP) had to drop its distribution payment to conserve money for debt repayment. But its stock even managed to rebound a point after that announcement. And that's the bad news for MLPs in Q2. Yesterday, Teppco (TEPPCO) received a takeover bid which it rejected, adding a little sex appeal to the industry. There were a few distribution increases (qtr over qtr). Kinder Morgan (KMP), the largest, maintained its 1.05 quarterly rate in Q2, which is according to their giudance & above last year's distribution.


Alerian MLP Index ---- YTD





In Apr, Dow had a strong beginning & a strong finish with sideways trading in the middle. Overall, it gained about 560 (7%). The risker stocks did the beast. Some REITs & junk bond funds saw gains of 50%+ while individual MLPs were up 15-20%.


Dow Jones Industrials --- 1 month

Markets advance despite Chrysler woes

All news is good news which is driving stocks higher! Stocks shot out of the gate with Dow gaining more than 100, but the gusto is subsiding. Dow is up 82, advancers over decliners almost 4-1 & NAS gained 32. Banks are leading the charge.

S&P 500 FINANCIALS INDEX

Value 148.95

Change 2.37

% Change 1.6%

.name.....price......change....% change........volume

BAC		8.99	0.31	3.57%	104,079,939
C		3.19	0.07	2.24%	90,520,034
JPM		34.74	0.26	0.75%	21,087,383
WFC		20.37	0.40	2.00%	26,413,848

The Alerian MLP Index rose .65 to the 214s, another yearly high. REITs & junk bonds were up, giving very nice gains for Apr while the VIX fell to 34.75, lowest level for the year. Oil is little changed despite bullish feelings in the stock markets.


Chrysler is expected to throw in the towel & file for Chapter 11. Then they hope to be able to combine with Fiat. It's not absolutely final, but they only have a few more hours to come up with a rescue package.

•Chrysler to File for Bankruptcy After Some Creditors Balk, Obama Aide Says


The number of newly filed unemployment claims fell to 631K last week, down from 645K in the prior week. The four-week moving average, which smooths out volatility, dropped to 637K, the lowest level since late Feb & a decrease of 20K from the high in early Apr. Goldman Sachs economists said a decline of 30-40K in the four-week average is needed to signal a peak. However the number continuing to draw unemployment benefits jumped to almost 6.3M, the highest on records dating back to 1967 & steeper than predicted.

US Initial Jobless Claims Fell to 631,000 Last Week


Consumer spending fell 0.2% in Mar, first decline in 3 months. Consumer incomes dropped 0.3%, worse than expected. Continued massive waves of layoffs are taking their toll. The drop in spending was the first decline after two consecutive increases & the negative number in Mar is a worrisome sign about future economic prospects.

•U.S. Consumer Spending Declines More Than Forecast as Job Losses Take Toll


Dow has had probably the best 2 months in history. Even with sideways trading, it will be up almost 600 in Apr if it can hold at the present level. However dreary reality including: continuing (& probably growing) high unemployment, banks stress test results, massive gov spending & borrowing, Chrysler & probable GM bankruptcies, etc. should not be ignored.


Dow Jones Industrials --- 2 months

MLPs generate excitement

Teppco (TPP) officially rejected the takeover bid by Enterprise Products (EPD). This is probably the first takeover involving MLPs. The excitement, especially with the rejection, will generate a lot of interest, probably boosting prices for all MLPs in the coming days. TPP was up $1.64 (6%) during regular trading, but no trades after the markets closed.

• UPDATE - Teppco Partners rejects $2.75 bln Enterprise bidat Reuters(Wed 4:39pm)

Constellation Energy Partners (CEP) is scheduling their Q1 earnings call for Fri, May 8. They are a small MLP which slashed the distribution to 52¢ (annualized) in Q1. The units sell in the high 2s, yielding almost 20% on the reduced distribution. Venturesome investors might want to check our what they have to say.

• Constellation Energy Partners Schedules Conference Call to Report First Quarter ResultsBusiness Wire(Wed 5:00pm)

Wall Street likes what it hears from the Federal Reserve

The Federal Reserve told the markets what they wanted to hear. The comments were expected, but it's always nice to read the words in print. Dow rose 168 to 8185, advancers over decliners 4-1 & NAZ was up 34. After advancing in the AM, Dow hled the gains in the PM.

Major banks such as the 3 old line banks in the Dow, Bank of America (BAC), Citigroup (C) & JPMorgan (JPM), were up at least 3% today taking the S&P 500 FINANCIALS INDEX higher.


S&P 500 FINANCIALS INDEX

Value 146.58

Change 6.66

% Change 4.8%

The Alerian MLP Index keeps forging ahead. It began Apr at 191 & closed today in the 213s, a very nice monthly gain with a fairly smooth advance. It's also up 21% YTD. The Dow Jones REIT Index is also having an excellent month, although it has had a choppier ride. It started at 101 & finished today in the 131s, not bad although starting from very depressed levels with extraordinary yields.

Alerian MLP Index --- 1 month




Dow Jones REIT Index --- 1 month





Oil joined in on the ride up today as fears that the flu scare will hurt travel are waning, not to mention a more optimistic view of global economies.

CLM09.NYM

..Crude Oil Jun 09

..50.91

.. 0.99 ......(2.0%)

TEPPCO (TPP) rejected the takeover bid by Enterprise (EPD):

UPDATE - Teppco Partners rejects $2.75 bln Enterprise bidat Reuters(Wed 4:39pm)


The Federal Reserve thinks the worst of the recession is over, so it will stop buying Treasury bonds & mortgage securities. While the economy continues to contract, the contraction is slowing which they view as a favorable sign. Steady as she goes. In addition, Paul Volcker, head of Obama’s Economic Recovery Advisory Board, said the U.S. economy is “leveling off at a low level” and doesn’t need a second fiscal stimulus package. The 6.1% decline in Q1 GDP was “expected.” He added that more recent data show the contraction in housing, business spending and inventories has slowed, and stimulus spending is only just beginning to hit the economy.

•Fed Keeps Purchase Targets Unchanged in Sign Worst of Recession Has Passed

•Volcker Says U.S. Economy Is `Leveling Off,' No Need for Further Stimulus

• No surprises from the Fed- Zacks.com

Chrysler's head, Bob Nardelli, is saying they are making progress. They have to, their life expectancy is measured in hours. Meanwhile some bondholders are holding out, hoping to get more than 225 shares of GM for each $1000 bond.

• Nardelli says Chrysler making progress- AP
• Small GM bondholders rally for better deal- AP

Dow looks like it is trying to break thru to new high territory. It started Apr at 7609 but the first few days supplied almost of the gains for the month. Tomorrow will show if it is serious about trading higher.


Dow Jones Industrials --- 1 month




More comments from Paul Volcker:

Still, the economy is functioning only by “the grace of government intervention” and “we’re in for a long slog” before a recovery takes hold, Volcker said on Bloomberg Television’s “Conversations with Judy Woodruff airing this weekend. Government help will continue, and the administration won’t let any banks fail, he said.

“I’m not here to tell you the economy is going to recover very strongly in the short run,” Volcker said. “There is reason to believe that it should be leveling off, at a low level.”

GDP decline fails to stop market advance

Buyers ignored gloomy GDP numbers to bid up stocks. Dow is up 150, advancers over decliners 7-1 & NAZ rose 35. Banks were strong. S&P 500 FINANCIALS INDEX is having a good day in spite of worries that banks may need more capital after stress test results are announced next week. One way to get more capital would be for the gov to convert loans to stock, making the gov the largest stockholder in these banks. A 12 month chart for S&P 500 FINANCIALS INDEX is also shown:

Value 145.05

Change 5.13

% Change 3.7%

The US economy shrank at a 6.1% rate in Q1, similar to the dreary Q4 rate of 6.3%. This is the sharpest 6 month contraction in 50 years. Consumer spending rose at a 2.2% rate, limiting the overall decline. However businesses cut spending on home building, commercial construction, equipment & software while inventories contracted. The Federal Reserve may stop buying Treasury bonds as it sees a glimmer of hope for an improving economy. Even with their buying (sometimes $7B per day), Treasury yields have gone up modestly to 2.99%!

•Economy in U.S. Shrank at 6.1% Annual Rate in Quarter, Worse Than Expected
•Fed May Refrain From Increasing Treasury Buying as `Green Shoots' Emerge


The Alerian MLP Index shot up 1.85 to 213+ (another 2009 high) helped by buyout news. TEPPCO Partners (TPP), up 1.12, received a offer by Enterprise Products Partners (EPD), down 46¢, to buy their units for EPD units & $1 cash. Management has a business relationship with EPD & is studying the offer. There aren't many MLPs, any buyout proposal, & they're both big ones, gets a lot of attention.

• TEPPCO Partners, L.P.'s Special Committee Responds to Enterprise's ProposalBusiness Wire(Wed 8:10am)

Other high yield sectors are strong while the VIX dropped 2 to the 35s, nearing yearly lows.


Time Warner (TWX) had a fairly good report for Q1, stock up 1.41. They are looking for a way to get rid of AOL. Google (GOOG) invested $1B in AOL 4 years ago & is now forcing them to take it public or buy back their interest.

•Time Warner Plans to Begin Spinoff of AOL Unit; Profit Exceeds Estimates


The FED is having its meeting, but lowering interest is no longer an issue with the rate near zero. As usual their comments about the future will be of great interest to the markets. Swine flu worries are diminishing around the globe. Chrysler will find out if it's allowed to live by tomorrow evening.

The guy who authorized spending $328K to fly a 747 over Manhattan for a photo op, will probably have to find another job. But in DC that should be no problem, plenty of work available at high salaries. Sadly the culture of unlimited gov spending remains & it will haunt all of us.

Stocks fluctuated, going nowhere

Late day selling brought the Dow into the red after holding on to modest gains during the day. Dow down 8, advancers & decliners were even while NAZ fell 5. Banks led the way, this time down again. Bank of America (BAC), Citigroup (C) & Wells Fargo (WFC) sold off 4+% on increased worries about stress test finding that they will need more capital. The S&P 500 FINANCIALS INDEX dipped to the low end of its recent trading range:

Value 139.92

Change -2.61

% Change -1.8%

The chart below shows MLPs (line graph) have been having a good month compared with the Dow. Today the Index broke thru to a new 2009 high, up 1.43 to 211.25. REITs & junk bonds were also higher but the VIX pulled back pennies, still in the 37s. Oil slid a little, taking it below 50.


Dow Jones vs MLP Index -- 1 month





The Treasury Dept reached a tentative agreement with 4 of Chrysler's major debt holders to avoid Chrysler bankruptcy protection. The banks will forgo claims to $6.9B in debt for $2B in cash at the close of deal. This is viewed as a first step to keep Chrysler alive on Fri. The Fiat deal is also supposed to be near completion. Meanwhile, General Motors (GM) will force more than 1K under-preforming dealers to close.

•Chrysler's Banks, U.S. Government Said to Reach Agreement on Reducing Debt

• GM to force more than 1,000 dealers to close- AP

Pfizer (PFE), Dow stock & former div aristocrat, reported EPS was down a penny on 8% lower sales in Q1. Their numbers were a little under analysts’ expectations. Pfizer CEO Jeffrey Kindler said he is trying to boost earnings by agreeing to buy Wyeth in a deal valued at $62B. Pfizer has been losing sales of Lipitor, the world’s best-selling drug, since cheaper copies of a similarly acting cholesterol pill, Merck & Co.’s Zocor, came on the market in 2006.They were also hurt by the impact of foreign exchange.

In the last 5 trading days, Dow hasn't been able to get very far away from 8K at a time there is growing anxiety about the outcome of the stress tests for the 19 big banks. The S&P 500 FINANCIALS INDEX has been trading sideways in the 140s for 2 weeks. For the rest of the week, stocks also have to contend with survival of the 2 autos & the spreading Swine Flu.

Dow Jones Industrials --- 1 week

Stocks waffle on swine flu & auto worries

Dow tumbled more than 100 on the opening but has recovered, back to near break even. General Motors (GM) & Chrysler worries give the markets plenty to be nervous about, but Swine Flu is proving to be an even bigger headache. Dow was up 4, advancers are 30% ahead of decliners & NAZ was up 4. Banks were off a little as initial leaks about the stress tests are worrisome:

S&P 500 FINANCIALS INDEX

Value 141.14

Change -1.30

% Change -1.0%

MLPs pulled back pennies & the other hig yield sectors only have small changes mirroring the small changes for the major averages.


Governments have toughened precautions & the World Health Organization (WHO) raised its alert level from 3 to 4, just 2 steps short of declaring a full pandemic. They said it was too late to contain the virus & suspected that U.S. patients may have transmitted the virus to others in the United States. Investors around the world are running for cover, abandoning riskier assets such as stocks in favor of safe haven assets like the dollar & the especially the Japanese ¥.

.•Swine-Flu Alert Is Raised as Virus Can't Be Contained, Crosses Continents

The Consumer Confidence Index shot up more than 12 points in Apr to 39.2, from a revised 26.9 in Mar. This is the highest level since 44.7 in Nov & is far above economists' expectations of 29.5. Encouraging economic news in retail sales & housing helped fuel the recent stock market rally, allowing consumers to feel better. The huge jump in Apr follows a small increase in Mar, preceded by a free-fall in Feb. However, the index remains well below year-ago levels of 62.8.

•Consumer Confidence in U.S. Jumps Most Since 2005 Following Stock Recovery

Bank of America (BAC) & Citigroup (C), 2 Dow stocks, have been told by regulators that "stress test" results show they may need to raise additional capital (according to the The Wall Street Journal). Each bank has already received $45B in gov loans. The stress tests are proving to be very stressful. The chart below shows that the appetite for risk has fallen drastically in the last 2 weeks.

• WSJ: Regulators urge BofA, Citi to boost capital- AP

Citigroup (C) --- 1 month

Yesterday one of those bright guys in DC (where they don't have a clue what pay cuts or unemployment mean) came up with the bright idea to rent a 747 to take pictures of NYC. Can you spell, "Duh?" This is what happens when money is no object, at least for them. In Q2, the gov will borrow $360B, a staggering sum for a FULL year. Then, in Jul, (it's only 31 days), the gov will borrow over $½T. that number is:

$500,000,000,000.

Improving consumer confidence & a bottoming out of the economy are welcome news. But out of control gov spending is extremely troubling. In addition, buyers have to worry about Swine Flu. 8000 for the Dow is proving to be a barrier that does not want to give way.

Swine flu & auto worries drag markets down

Dow stayed above 8000, but just barely. It couldn't break away from the break even line. Dow fell 51, decliners over advancers 2-1 & NAZ slipped 14. Banks have been leading the 2 month rally & continue to lead, only to the downside. Big name banks dropped 2-5% today.

S&P 500 FINANCIALS INDEX

Value 142.53

Change -4.68

% Change -3.2%

In the high yield sector, MLPs have risen far above the rest. The Index shot up 3.23 to 209.82, a YTD high & nearing the 6 month highs. REITs have also bounced back but still have a lot more ground to cover before reaching recent high territory especially after dropping 9 today. The high yield index chart looks better, although down .15 today (with a 17% yield).


Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months




Barclays Cap Hi Yld Bond ETF - 6 months





Swine flu has the potential of disrupting a fragile worldwide economic economy & its recovery. Export restrictions are being put into effect & that could put a major dent in global trade. The trade between the US & Mexico is large, above the drugs & guns business. Right now there is a lot of talk about contingencies, but shock waves are scaring investors. Oil was down on fears of slowing intl trade.

CLM09.NYM

Crude Oil Jun 09

..50.16

.. 1.39 ......(2.7%)

• Analysts: Swine flu could derail fragile global economy- CNNMoney.com

Filene’s Basement may seek bankruptcy protection this week. This would be its 2nd Chapter 11, the first was in 1999. This retail failure will hurt mall & shopping center owners (REITs). There is a conference going on in LA discussing commercial real estate. Participants include top businessmen in the field. They said that REITs are getting thru the financial crisis fairly well (even after the Chapter 11 filing by Gen Growth). Lenders feel more comfortable about the property & building assets backing loans compared with factories & offices which may have dubious value in troubled times.

•Filene's Basement Retail Chain Said to Ready Second U.S. Bankruptcy Filing


Swine flu problems & GM-Chrysler worries are plenty for the markets to digest. Once again, the Dow failed to significantly break above 8K.

Mixed markets on auto company worries

Stocks initially fell & have been hugging the break even line since then. Dow is up 25, decliners over advancers 3-2, & NAZ is even. Banks are soft on growing worries about the fate of the the 2 big auto companies.

S&P 500 FINANCIALS INDEX

Value 145.29

Change -1.92

% Change -1.3%

MLPs continue strong while Dow (reflecting ordinary stocks) has been flat in Apr. The index is up 2 to 209 & up sharply from 191 where it ended Mar. REITs are weak while junk bond funds are mixed at best.


Alerian MLP Index --- 1 month




Demand for oil is off, taking it back below 50:

CLM09.NYM

...Crude Oil Jun 09

...49.73

... 1.82 .......(3.5%)

General Motors (GM), is fighting hard to stay alive. It's shedding the Pontiac car, dealers, laying off more workers & hoping that 90% (to avoid bankruptcy) of the bondholders will swap a $1000 bond for 225 common shares. Existing shareholders will own 1% of the new GM. If the gov swaps its debt for common, it will own about half the company although they claim they have no interest in running the company. OK! Meanwhile, Chrysler worked out agreements with its unions in the US & Canada. Now it has to hope their stock for debt swap is successful & complete a partnership deal with Fiat. This has to be accomplished by the Apr 30 deadline. The 2 clocks keep ticking.

•GM to Increase Job, Dealer Cuts, Offer Swap to Reduce Debt by $44 Billion
•Chrysler Reaches Labor Agreement With U.S. Union, Ratification in Canada


The swine flu has gotten big very quickly. There are growing worries about it spreading in North America. It's also taken very seriously in Asia, they have memories of Severe Acute Respiratory Syndrome (SARS) 6 years ago which heavily damaged many of their economies. Generally drug related stocks are up on this news.

•Novavax, BioCryst, Gilead Rise on Products That May Fight Swine Flu Spread


Earnings season is winding down. But fate of the 2 autos & the potential for swine flu spreading will be driving forces for the markets.

First decline for stocks in 7 weeks

The markets tried to overcome the big drop on Mon, but couldn't muster enough strength to finish the week in the black. Dow dropped 55. Bigger picture, in Apr stocks have been stuck in the mud. Dow after starting Apr with 2 good days, has been pretty much clinging to 8K.


Dow Jones Industrials --- 1 month





Meanwhile risky investments with very high yields have done well. The Alerian MLP Index not only went up, but reached a new high for 2009. MLPs have been getting thru earnings season in good shape with only one eliminating its distribution. REITs & junk bond funds rose, investors are willing to accept lower levels of high yields from them. Fears are easing as the VIX, volatility index, dropped 8 points to the 36s.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




Barclays Capital Hi Yld Bond ETF - YTD




Rallies are always welcome, but they may be getting ahead of themselves. Larry Summers, director of the White House National Economic Council, said he expects the US economy to keep declining for much of this year. The International Monetary Fund (IMF) predicted last week that the US economy will decline 2.8% in 2009 with no growth next year. They expect unemployment to peak at 10.1%. The worst part of unemployment is that when it recovers, the recovery is very slow. Chrysler is on the edge of going under & General Motors (GM) is still an iffy situation. Stocks may go on defense again.

•Summers Says U.S. Economy, Employment Will Keep Declining for `Some Time'

Stocks rose but down for the week

After 6 straight weekly gains, Dow tried hard to add a 7th week to its winning streak. But selling at the close limited today's gain to 119 (down 55 for the week). Advancers led decliners 4-1 & NAZ was up 42.

FED said, “most U.S. banking organizations currently have capital levels well in excess of the amounts required to be well capitalized.” That brought buyers into bank stocks. Citi, essentially even, was the only one dragging its heals.

S&P 500 FINANCIALS INDEX

Value 147.16

Change 3.47

% Change 2.4%

The high yield sector has been strong, especially in April which has been a flattish market for mainstream stocks. The Alerian MLP Index pushed thru to new highs (206) for 2009. It also has a 16% gain YTD, hard for any group to match. REITs & junk bond funds, while generally below their YTD highs, have had 2 months of sharp gains. The Dow Jones REIT Index is up 35% in Apr. During the 2 months, VIX dropped from 50 (near its yearly high) to mid 30s as fears eased. Enthusiasm is always fun, but there will be a day of reckoning, especially for REITs & junk bond funds. All yields remain very high. The Alerian MLP Index yield is 10% & the Barclays Capital High Yield Bond ETF yields 17%.

Alerian MLP Index ---- YTD




Oil broke thru 50 & got above 51. Eventually higher prices will be working there way into inflation numbers.

CLM09.NYM

..Crude Oil Jun 09

..51.61

.. 2.00 ......(4.0%)

The Treasury lent General Motors (GM), still a Dow stock, another $2B bringing the total loans to $15.4B. The Treasury is prepared to lend an additional $5B. But GM is facing the Jun 1 deadline, the clock keeps ticking.

• Treasury lends $2 billion more to GM- AP

The Federal Reserve said that the recession has hurt reserves at some of the banks. The 19 big banks are sweating results of the stress tests. Next week analysts will over analyze what the tests might say & prove. For those who like playing with fire, I think Citi (C) might be fun to play with. If they just halfway pull thru the stress test, the stock might take off to 4, maybe even 5. After getting into the 4s in the prior week, this week it's been pretty much sitting at 3.20.

•Fed Says Capital at Some Major Banks `Substantially Reduced' on Recession

Citigroup ---- 2 weeks




The S&P 500 FINANCIALS INDEX is up almost 25% in Apr with today's strong finish by banks. Next week will be dominated by stress test worries.

Stocks up on downbeat reports

Dow rose 113, advancers 3-1 ahead of decliners while NAZ gained 36. NAZ was helped by Microsoft (MSFT), up 1.40 after the earnings report last night.

Below are the first 5 stories from Yahoo. All talk about lower results & worries about the stress tests with the sentiment that down was not as bad as expected, sending stocks higher. Yahoo points to Ford (F) & home sales. Dow is back over 8K.

• March new home sales down 0.6 pct, beat expectations- AP
• Ford posts $1.4 billion loss, burns less cash- AP
• Bank industry to hear results of 'stress tests'- AP
• 3M 1st-quarter profit slips 48 pct- AP
• Durable goods fall less than expected in March- AP

Banks are participating.

S&P 500 FINANCIALS INDEX

Value 145.72

Change 2.03

% Change 1.4%

The Alerian MLP Index was up .30. Distributions were increased by Holly Energy Partners (HEP) & Suburban Propane Partners (SPH). Constellation Energy Partners (CEP) continued their 13¢ payment (52¢ annualized) from Q1. That was slashed from $2.25 annualized rate they had been paying. Their units are up 20¢ to 2.60, still yielding an impressed 20% based on the slashed rate. If they get their act together & reinstate the former rate, the yield would be about 80%. Overall MLPs have been getting thru their earnings season in good shape with little distribution destruction. April has been a time when Dow has been trading sideways near 8K. But AMZ has been quietly edging up to 205, above the 190-200 trading range it has lived in for most of 2009.

• Holly Energy Partners Declares DistributionPR Newswire(Thu 12:19pm)
• Suburban Propane Partners, L.P. Declares Increase in Annualized Distribution Rate to $3.26 per Common UnitPR Newswire(Thu 7:30am)
• Constellation Energy Partners Declares Cash DistributionBusiness Wire(Fri 7:30am)

Alerian MLP Index --- 1 month




REITs have also been having a good month (up 2.70 today):

Dow Jones REIT Index --- 1 month




Junk bonds are also having a good month while VIX, volatility index, has been dropping to the mid 30s. Investors have calmed down, willing to accept more risk for higher yields. In all fairness, junk bond funds in particular, have not been thru the rough patch which is coming.

Oil is up, back over 50, on the enthusiasm for stocks.

CLM09.NYM

...Crude Oil Jun 09

...51.19

... 1.58 .......(3.2%)

High yield securities are finding new friends in Apr but traditional stocks (including banks) haven't been able to get a head of steam going.


Dow Jones Industrials --- 1 month

Stocks vacillate, then rise in last hour

Dow continued to hover around break even, dismal earnings reports & a decline in housing hurt. But late day buying brought markets into the green. Dow was up 70, advancers over decliners 3-2 & NAZ rose 6 ahead of Microsoft (MSFT), Dow stock, earnings released after the close. After the close MSFT reported Q3 sales slipped 6% but earnings were higher, stock up pennies after hours following a gain in regular trading.

Microsoft Reports Third-Quarter Results


Banks led a rally in the last hour as has been the case in the last month:

S&P 500 FINANCIALS INDEX

Value 143.69

Change 6.18

% Change 4.5%

MLPs & REITs were a little higher. The Alerian MLP Index was up 2 & the REIT Index popped 5.66. Oil rose to 49.67, trying to get back to 50.

Mortgage rates for the 30 year mortgage fell 2 basis point to 4.80% last week, an inch above the record low of 4.78% set 3 weeks early. However, ARM rates are relatively high compared with the fixed rate. Lower rates are welcome news to a battered industry.

• U.S. mortgage rates nudge closer to record low- Reuters

U.S. Treasuries help determine the rates on mortgages & they continue low. The 90 day T-bill is only 9 basis points (annualized). That means a $1000 T-bill will earn only 90¢ assuming it's rolled over 4 times in a year at the same measly rate. The 10 year Treasury bond yields an relatively high 2.93% even though the FED keeps buying bonds.

U.S. Treasuries

	COUPON	MATURITY DATE	CURRENT PRICE/YIELD	PRICE/YIELD CHANGE	TIME
3-Month	0.000	07/23/2009	0.09 / .09	-0.039 / -.040	16:00
6-Month	0.000	10/22/2009	0.29 / .29	-0.023 / -.023	16:00
12-Month	0.000	04/08/2010	0.45 / .46	-0.024 / -.024	16:00
2-Year	0.875	03/31/2011	99-28½ / .93	0-01½ / -.024	16:00
3-Year	1.375	04/15/2012	100-04 / 1.33	0-00+ / -.005	16:06
5-Year	1.750	03/31/2014	99-12½ / 1.88	0-02 / -.013	16:04
10-Year	2.750	02/15/2019	98-16½ / 2.92	0-04 / -.015	16:03
30-Year	3.500	02/15/2039	94-22+ / 3.80	0-03 / -.005	16:08

Angry shareholders are taking out their disappointment on management at annual meetings. These are typically quiet meetings disrupted by perhaps a gadfly. This year, many shareholders are poring out frustration. Excessive compensation is one key issue. However, a much bigger issue is the falling stock price. When many companies are selling near multi year lows, frustration will be in the air. This can be taken out by a reluctance to buy more stock in the future (limiting market advances).

• Shareholder meetings turning ugly, but change remains elusive- CNBC

Bank stress test fears are more powerful than dismal earnings in controlling the markets. If the May 4 date can be believed, markets have another week to sweat out the findings. For the adventurous, Citigroup, the call that is still a Dow stock, might be interesting. It will fly. The only problem is figuring out whether it's going up or down. I have a hunch it may take off again on a whim.


Citigroup --- 2 months

Markets keep drifting

Indecision & confusion are keeping the lid on stock advances. Dow was off 50, advancers & decliners are even & NAZ dropped 13. Dreary earnings & uncertainty about bank stress tests are tough for bulls to overcome. Banks started out higher but are slipping back.

S&P 500 FINANCIALS INDEX

Value 138.80

Change 1.29

% Change 0.9%

Alerian MLP Index, up 1, has been sitting on the 200 floor all month as they are caught up in the sideways trading pattern of the markets. REITs have also been trading sideways but in a very choppy pattern. Junk bond funds have been edging up while the VIX has been bouncing around the high 30s.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil is trying to get back over 50.

CLM09.NYM

...Crude Oil Jun 09

...49.47

... 0.62 .......(1.3%)

Claims for unemployment last week increased to 640K, up from a revised 613K in the prior week. Analysts' expectations were for a number of 635K. Job losses remain high, the four-week average of claims dropped slightly to 647K, 12K below the peak in early April. The number of workers continuing to claim benefits rose to 6.1M, setting a record for the 12th straight week. Another measure, as a proportion of the work force, the total jobless benefit rolls are the highest since Jan 1983. Many laid-off workers are having difficulty finding new jobs.

• New jobless claims rise more than expected- AP

Sales of homes sank by an unexpectedly large amount in Mar, dashing hopes of a spring housing recovery. Home sales dropped 3% to an annual rate of 4.6M in Mar from a downwardly revised pace of 4.7M in Feb. The median sales price plunged to $175K, down 12.4% from $200K a year earlier, but up from $168K in Feb. The 4% monthly increase was larger than expected. These numbers signal the housing market will be depressed for the balance of the year.

•Existing Home Sales in U.S. Fall More Than Estimated to 4.57 Million Rate


United Parcel Service (UPS) reported dismal numbers for Q1, stock down 3. EPS plunged 55% to 13¢ on 13% lower revenue. Even adjusted EPS was 52¢, 4¢ below analyst expectations. UPS said economic indicators suggest recovery in the U.S. might begin late this year, but more likely not until 2010. UPS cut 10,000 domestic jobs in Q1. They're results are significant because they, along with FedEx, feel the pulse of economies (US & also worldwide).

• UPS delivers disappointing earnings- AP

United Parcel Service --- YTD




Markets are waiting for bank stress test results. Tomorrow we will be told how they are being graded. Banks should be given a grade of A, C or F (my metaphor). Lower grades will mean the banks have more work to clean up their balance sheets. Banks' results might be released next week. With banks leading markets, more sideways trading can be expected.

Banks lead stocks lower into the close

Dow sank 83, advancers were over decliners by only 20% (the advantage had been over 2-1 for much of the day) & NAZ rose 2. Selling in the last ½ hour took Dow down to 7886, closing at the lows. Banks have been leaders on the way up & were leaders in PM selling.


S&P 500 FINANCIALS INDEX

Value 137.51

Change 5.46

% Change 3.8%

Indecision left high yield securities little changed. The Alerian MLP Index was down fractionally while Dow Jones Index fell 5.

The benchmark Treasury 10 year bond yield reached the highest level, 2.96%, since the FED said it would buy Treasuries. That means Treasury bond prices are at the lowest prices over the period. Bond holders are selling more than the Treasury is buying. China is the biggest holder of Treasury debt. We learned they have been selling longer term maturities in favor of short term debt. The 90 day Treasury bill yields only 11 basis points (annualized).

•Treasury 10-Year Yield Reaches Highest Level Since Fed Announced Buybacks


General Motors (GM) won't make their critical interest payment on June 1. Instead they hope that a successful bond exchange next month (prior to the deadline) will be an essential element for their out-of-court restructuring efforts. The clock keeps ticking.

•GM Plans Debt Exchange Prior to June 1 Bond Payment as Carmaker Seeks Aid


Stocks are drifting. At least the Dow is drifting sideways, not down. The talk about the first contraction in the global economy since WW II is not sitting well with investors. The 8K ceiling has been holding even after the breach last week.


Dow Jones Industrials --- 2 weeks

Markets muddle along

Markets rose on varied earnings reports. Dow was up 39, advancers ahead of decliners 2-1 & NAZ gained 18. Banks continue to lead the way, today they have giving up early gains:

S&P 500 FINANCIALS INDEX

Value 143.71

Change 0.74

% Change 0.5%

High yield sectors were little changed while oil slipped 70¢.


International Monetary Fund (IMF) made a gloomier assessment for the global economy. They forecast that the worldwide economy will shrink by 1.3% in 2009, far worse than the 0.5% estimate in Jan. Reviving the banking & financial sectors will be key to recovery & the recovery will be difficult with growth rates below what economies have become accustomed to.

•IMF Says Worldwide Recession Will Be Deeper, Recovery Slower Than Forecast


McDonald's (MCD), a Dow stock & Dividend Aristocrat, posted a 3½% increase in quarterly profits as global same store sales grew 4.3%. The stock was up 53¢. Global sales fell $600M due the stronger dollar (they gave a warning in Mar).

• McDonald's profit rises nearly 4 percentAP(Wed 8:52am)

Morgan Stanley (MS), now a bailout bank, reported a worse loss ($578M or 57¢ per share) than predicted in Q1. The loss is after paying preferred divs (to the gov). The common quarterly div was reduced to a nickel. The company lost $1B in real estate & $1½B from the rising value of its own debt as investors grew more confident about the bank's creditworthiness. The stock was down only 26¢.

•Morgan Stanley Posts Wider-Than-Forecast $177 Million Loss, Cuts Dividend


Dow continues hugging the 8K level. Mushy earnings are leaving investors confused. Results from the stress test at the 19 big banks may be released in the next few days. These are numbers they are really making up as we go along. Chances are they will give generally favorable conclusions which everybody wants to see. However if the the recession drags on & on, these results will be viewed down the road in retrospect as only preliminary.


Dow Jones Industrials --- 1 month

Turnaround Tuesday

After starting lower, stocks got a second wind taking them higher with a late day rally adding to the gains. Encouraging words from the Treasury Sec overcame lackluster earnings (especially from regional banks). Dow was up 127, advancers ahead of decliners 3-1 & NAZ was up 35. Banks had a stellar day as S&P 500 FINANCIALS INDEX recovered much of the prior day's losses.

Value 142.97

Change 10.82

% Change 8.2%

Treasury Sec Timothy Geithner said that the vast majority of banks will be able to pass the stress tests & gov financial policies were showing signs of progress. But he acknowledged continued weaknesses in the financial system. This includes declines in consumer lending & higher costs for credit despite $B thrown at financial institutions by the gov. He also said that about $110B of the $700B in TARP money remains but paybacks of $25B will bring the remaining funds up to $135B. The IMF projects the global financial system will lose over $4T (spelled out, that's 4,000,000,000,000) with US banks accounting for 60% of the total.

•Geithner Says `Vast Majority' of U.S. Banks Have More Capital Than Needed

• Treasury says about $110B left in bailout fund- AP

Citigroup (C) had its annual meeting, it got ugly at times. Long time shareholders are stunned to see a $3 stock, a price they never could have imagined when investing. 5 directors left, many shareholders wanted to see all go.

• At Citi's annual meeting, shareholders get angry- Reuters

The Alerian MLP Index bounced back 2 to the 202s. MLPs are hanging in there after BreitBurn Energy (BBEP) eliminated the distribution to focus on paying down debt in 2009.

• BreitBurn Energy Partners Announces Results of Borrowing Base Redetermination, Temporary Suspension of Distributions and Full Year 2009 GuidanceBusiness Wire(Fri, Apr 17)

Other high yielding groups were up. The Dow Jones REIT Index rebounded 11 & junk bond funds are finding buyers while the VIX pulled back 2. Oil also regained some of yesterday's losses.

CLK09.NYM

..Crude Oil May 09

..47.20

.. 1.32 ......(2.9%)

Caterpillar (CAT) CEO Jim Owens, a member of the president’s Economic Recovery Advisory Board, was critical of the stimulus plan, largely because it's not reaching CAT. He says EPS will be $1.25 (not enough to cover the div) before special charges. Their bulldozers are heavily involved in rebuilding but stimulus money will not be enough to cover lost business in the private sector. Worldwide sales are projected to fall to $38B in 2009 after reaching $51B last year

•Caterpillar Says Obama `Missed an Opportunity' to Fix U.S. Infrastructure


These continue to be exceptionally confusing times. Banks are going thru stress tests. Nobody is sure what is really going on, but a lot of experts (assuming they know that they are talking about) suggest that the banks should pass the tests. A number of regional banks reported today & their stories were dreary. Most have eliminated divs or are only paying a nominal amount to satisfy holders who only invest in div paying stocks. Now Nancy Peolosi will start a "comprehensive inquiry" to learn more about the bankruptcy at Lehman & collapse of Bear Stearns, not to mention anything else that interests her. This will be all political theater, playing well to the public but not so well on Wall Street. Dow was up today, but can't get enough steam to take off. Turnaround means little when we're back to a sideways trading zone, Dow is still under 8K. Confusion hurts.

•Pelosi Sets Wall Street Probe Modeled on Pecora in 1933 After Market Crash