Markets hold gains

Markets started strong & held that advance all day. Dow was flattish at roughly plus 200 & closed up 196, advancers over decliners 4-1 & NAZ rose 58 (3½%) for a very strong day. In the financials, Bank of America (BAC) slipped pennies but most of the others were up 3-5%. The Financial Index remains more than double the lows of early Mar, but continues to bob around sideways at 150+ in May.

S&P 500 FINANCIALS INDEX

Value 162.35

Change 6.45

% Change 4.1%

The Alerian MLP Index gained 2+ bringing it 219. REITs had a very impressive gain, up 8 (over 6%), junk bonds were up modestly although the Barclay's Capital High Yield slipped bringing its yield to 14.4%. The VIX fell 1½ taking it below 31.


Dow Jones REIT Index -- 2 months




Oil had a good day taking it into the 62s, what is viewed as a key resistance level.

CLN09.NYM

..Crude Oil Jul 09

..62.45

... 0.78 .......(1.3%)

The Treasury had a very successful 2 year auction, important at a time when there will be many more big auctions for their growing needs to sell notes/bonds. Today they sold a record (really tying a previous record) $40B of 2 year notes at a 0.94% (annualized) interest rate, below the expected rate of 0.969%. The favorable rate was due to a bid-to-cover ratio of 2.94X vs 2.43X average at the last 10 auctions. In other words, they could have sold triple the number of bonds at this interest rate. 54% of the notes were bought by indirect bidders (foreign banks) vs an average of 35% at the previous 10 auctions for this note. Meanwhile the 10-year Treasury bond yield rose 4½ basis points to over 3.49%. A key difference between the 2 issues is the 2 year notes have very little inflation risk attached versus the 10 year bond where it is a major concern.

•Treasury's Record Tying Two-Year Note Auction Eases Foreign Demand Concern


10-Year Treasury Yield Index -- YTD




General Motors will have to really sweat out getting cooperation from the bondholders. They needed 90% approval, early indications are they are only are getting "single digits." Another way to describe the acceptance is, a little above zero. Meanwhile they have gotten some cooperation from the unions. Just 5 days left for them.

GM Bondholders Nix Tender Offer; Bankruptcy Nears- Reuters
•GM Cuts Stock Due to UAW Health-Care Trust by 55%, Boosting Equity Reserve


Dow keeps plodding along. After cracking 8K, it has stalled out 500 points above. The dark cloud of massive gov deficits is holding back the advance.

Dow Jones Industrials --- YTD