Banks & energy leads markets higher

Stocks had a good day, but not good enough to bring the Dow into the black for 2009. Dow came ever so close with a gain of 75, advancers over decliners almost 3-1 & NAZ was up 24.

The Financials Index is at the high end (with 2 exceptions) of its trading range for the last months. Buyers want to take it higher.

S&P 500 FINANCIALS INDEX

Value 167.26

Change 6.38

% Change 4.0%

MLPs recouped most of yesterday's decline as they are buffeted by changes in oil prices. Today the index was up 3 to the 231s. REITs & junk bond funds also had a good day. The REIT Index was up 4½ to the 141s (not seen since the start of this year) & junk bond funds are at or near their highs for 2009. As securities climb, their yields fall, narrowing the spread over the 10 year Treasury (its yield keeps rising). The yield spread is compensation for added risk, investors are increasingly willing to accept a smaller premium. The 10 year Treasury yield jumped 16½ basis points to 3.72%, near last week's interim high. Today's decline in Treasury bond prices is very disturbing since the Federal Reserve is supposed to be in the market buying, giving Treasury bonds a real & psychological boost.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 3 months





Oil had a good day, taking it to a 7 month high. Buyers were encouraged by Goldman Sachs talking about $85 oil by year end. Offsetting the bullish sentiment is all that oil purchased when it was in the 40s that is sitting in tankers. That overhanging supply will be sold when owners decide to take profits.

CLN09.NYM

..Crude Oil Jul 09

..68.80

.. 2.68 ......(4.1%)

GMAC (GM's finance arm, now a bank) sold $4.5B of 3.5- year notes guaranteed by the FDIC in the first gov backed bond offering by a speculative-grade company. The auto & home lender has already received $13.5B. GMAC’s non-guaranteed debt is rated C by Moody’s Investors Service and CCC by Standard & Poor’s, one and four levels, respectively, above default. Because of the gov guarantee, the shorter term notes are rated AAA with a yield of only 2.2% (vs similar debt due in 2011 but rated as junk notes with a yield exceeding 12%). This is how the gov is helping (& also interfering) with the markets, for the sake of helping the auto & building industries.

GMAC Is First Junk-Rated Borrower to Sell FDIC-Backed Notes


Markets had a very good day, but Dow still was not able to crack 8776 starting point for this year. The narrowing premiums of yield for high risk securities over the Treasury bond keeps bothering me, especially when the REITs & junk bond funds are still awaiting their ugly periods.

Dow Jones Industrials --- YTD