Markets take a rest

Stocks are having a quiet day. Dow slipped 1, advancers ahead of decliners 3-2 & NAZ dropped 1. Banks are down just a tick:

S&P 500 FINANCIALS INDEX

Value 165.06

Change -0.66

% Change -0.4%

The gov received warrants from the banks last fall at the height of the financial crisis, giving the gov the right to buy stock at a set price over a period of time. With banks wanting to pay back bailout money, the issue about owning warrants gets complicated. Big banks, i.e. JPMorgan (JPM), Goldman Sachs (GS) & Morgan Stanley (MS), notified regulators that they want to pay back their loans. However, by holding warrants, the gov has leverage over banks. In addition, these warrants could be worth $Bs following the large run up in bank shares since Mar. We'll see if the gov is serious about not getting involved in running banks.

When banks ask to pay back loans, there are problems. Repayments can be sending signals about which banks are strong & which are weak. This additional uncertainty is hurting bank stocks today (in addition to profit taking).

• Efforts to repay bailouts may undercut taxpayer benefit- NYT
• Goldman Sachs, Morgan Stanley apply to repay TARP- AP

MLPs hang there, near their yearly highs. REITs are down a little while junk bond funds are higher & the VIX dropped to the 29s, another low for 2009.


Alerian MLP Index --- 2 weeks






A modest rebound in single-family home construction in Apr sounded good. But the supply of unsold homes is growing, foreclosures rising & falling prices, indicates no recovery is expected until early 2010 at best. Construction of new homes & apartments fell 12.8% last month to an annual rate of 458K units, the lowest on record going back over half a century. Applications for new building permits dropped 3.3% to an annual rate of 494K, another record low. But construction of single-family homes rose 2.8% to an annual rate of 368K, following a 0.3% gain in Mar & no change in Feb. A rebound for single-family construction remains distant with heavy job layoffs & record levels of foreclosures. The number of unsold homes is 3.7M (a 10 month supply up from 6.5 months in 2006).

•U.S. Housing Starts Unexpectedly Fall to Record-Low Pace; Permits Decline


The cash account at Berkshire Hathaway (BRK.A) slipped below $20B. It's approaching the $10B minimum level Warren Buffet has set. As a result, their stock purchases are being cut back.

•Buffett Scales Back Stock Purchases as Berkshire's Cash Holdings Dwindle


Dow is trying to get a head of steam going.

Dow Jones Industrials --- 2 weeks