Stocks lower on bank regulation confusion

Dow began this week at 8575 & closed at 8268, down 307 for its 2nd weekly decline in the last 10. Today Dow dropped 62 with selling in the PM, decliners over advancers almost 2-1 & NAZ was off 9. The big point losses in the Dow were in the oils, Chevron (CVX) down 2+ & Exxon Mobil (XOM) down 1+, on lower oil prices. Banks were also weak.

Below is a also quick chart for the index. It started the year at 169 & is down on the order of 50% in the last 12 months. It's high 2 years ago was over 500.

S&P 500 FINANCIALS INDEX

Value 154.60

Change -3.97

% Change -2.5%

The Alerian MLP Index fell .31 staying in the 209s, the Dow Jones REIT Index dropped 5 to the 121s & junk bonds were weak. Oil continues to sell off after topping 60 this week:

CLM09.NYM

..Crude Oil Jun 09

..56.65

.. 1.97 ......(3.4%)

There is confusion about whether the FDIC wants to have CEOs at certain banks replaced. The first report (see below) went with the story. The 2nd (they're listed in order) is from Reuters saying the original story got it wrong. "The FDIC said the Bloomberg News report, which cited a television interview to be broadcast this weekend, was 'misleading.'" Bloomberg is expected to air the interview this weekend. The FDIC says Chairman Bair also did not suggest the gov will remove bank CEOs. OK! In the last year, the government has already ousted CEOs at AIG, Fannie Mae & Freddie Mac after taking big ownership stakes.

I added 2 additional stories on FDIC, about how involved it will get managing banks. The FDIC wants to be more involved (uh, oh!) while the Federal Reserve has more of a hands off approach. The difference showed up after the stress tests were announced last week. Maybe Sheila Bair should have a talk with Nancy Pelosi about clearing up confusion.


•Bair Predicts Some Bank CEOs Will Be Replaced in Wake of U.S. Stress Tests

• FDIC disputes report on bank CEOs being replaced- Reuters

•Fed Clashes With FDIC on Scrutiny of Bank Chiefs, Creating `Special Class'
•FDIC Abandons Plan to Extend Bank-Debt Guarantees to 10 Years From Three


Kinder Morgan (KMR) is one of my favorite MLPs. The chart below show that they have not been participating in the rally off this year's lows (the Alerian MLP Index is represented by the upper line). KMR, down 20¢, is the stock equivalent, KMP is available for those who want to buy traditional partnerships via units. The company has raised about $2B successfully in recent months to finance expansion (more pipelines). They are the largest MLP with an excellent track record. Maybe the disparity is just one of those market things, but I keep wondering if there is more to the story.


Kinder Morgan (KMR) --- YTD





The confusion over how involved the FDIC will get in running banks is significant, it can affect valuing stocks in banks (not to mention ordinary companies). No wonder stocks sold off. Meanwhile GM's clock is ticking, just ½ month left for them. In the last 6 weeks, it looks like Dow has stalled out just over 8K.


Dow Jones Industrials --- 3 months