Strong second quarter, sold off on last day

The 2nd quarter closed on a sour note. Some of the selling could be related to fund managers trying to make their results look better. But it was still a down day nevertheless, stock dropped on the opening & remained at low levels for the rest of the day. Dow slumped 82, decliners over advancers 3-2 & NAZ was off 9. Banks led the markets down.

S&P 500 FINANCIALS INDEX

Value 160.76

Change -1.82

% Change -1.1%

S5FINL:IND




The high yield sectors had a quiet day, inching up by the close, in a down market. But the qtr & first 6 months have been an exciting time. High yield sectors started from depressed levels last year, offering extraordinary yields at the same time Treasuries had soared offering minimal yields. In 2009 Treasuries were sold bringing their yields closer to traditional levels while yields in the high yield sector plunged from high double digits. The VIX chart shows the reasons. It began at astronomical levels, fears were high. Nerves calmed down, allowing buyers to return the to high yield sectors. The VIX is back to levels last seen prior to Lehman's collapse.


Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Barclays Capital Hi Yld Bond - YTD




10-Year Treasury Yield Index - YTD




VIX ---- YTD




Oil fell today but is still up 55% YTD, not good for future inflation.

CLQ09.NYM

..Crude Oil Aug 09

..70.12

.. 1.37 ......(2.0%)

Going forward may bring a much different scenario. The recession appears to have bottomed, with the help of money thrown at it by the stimulus package. But the next 6 months will be influenced by the recovery & that is being debated. A huge problem is unemployment which probably has not hit bottom. Jun numbers will be posted on Thurs & are expected to show the rate jumping again, this time to 9.6%. Housing is mired in a 3 year depression with no signs of recovery. Recovery for autos will be off very depressed levels as 2 major companies try to emerge from bankruptcy. And California is running out of time, their clock keeps ticking. The reversal of buying enthusiasm from Treasuries to high yield securities in 2009 was dramatic & can not be expected to continue. I feel a greater sense of reality about a slow recovery may dominate trading for the balance of the year.

Dow Jones Industrials --- YTD