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.