Mixed markets but Dow posts new 2009 high

Stocks continue to look for direction, with an upward bias. They hovered near break even all day. Dow rose 17 to another 2009 high, advancers over decliners 3-2 & NAZ was down 5 (failing to crack thru the 2K ceiling). Banks had a good day, the Financial Index is getting closer to its 175 high.

S&P 500 FINANCIALS INDEX

Value 174.78

Change 1.42

% Change 0.8%

S5FINL:IND




July has been an outstanding month for stocks, especially the riskier ones. Graphs below for 3 high yield groups show how well they performed. When they rise, their corresponding yield falls which reduces the premium of their yield over the 10- year Treasury bond. That yield is pretty much where it started the month, near 3½%.

Today MLPs are back in favor, bringing their Index up 2.94 to 248.32, not too far from the 250 high. REITs were flat but junk bond funds continue strong.

Alerian MLP Index --- 1 month




Dow Jones REIT Index --- 1 month




Barclays Hi Yld Bonds ETF - 1 month




Oil has had a spectacular 2 day rise of $7 after the plunge on Wed. Oil may try to take out its recent high of 73.

CLU09.NYM

..Crude Oil Sep 09

..69.56

.. 2.62 ......(3.91%)

The IMF expects the economic recovery in the US to be “gradual” & may need more monetary & fiscal stimulus if the rebound stumbles. They expect a “gradual” recovery, with risks “tilted to the downside” & warned that potential growth “could remain well below past trends for a considerable period.” Note, the word "gradual" is used twice. On Bloomberg TV, IMF predicted the US economy will start “recovering decisively” by the middle of next year & the unemployment rate will peak above 10% in 2010. The IMF said the US economy will contract 2.6% in 2009 before expanding 0.8% next year. A “key priority” will be to craft “comprehensive exit strategies to unwind the extraordinary crisis-driven interventions, once a sustainable recovery is under way.”

IMF Says US Economic Recovery Will Be ‘Gradual’


Oils have sold off lately in response to negative earnings reports. That was to be expected after oil prices have fallen more than 50% from their peaks. However the big buys have attractive yields. Chevron (CVX), Dow stock, is the 2nd largest US oil company. They have a 7 P/E with a well covered 4% yield. Profit plunged in Q2, as expected but the stock is up 1.77 today. Worth looking at for those who are interested in fallen angels.

• Chevron profit tumbles, misses Wall Street view- Reuters

Chevron --- 2 years





The president tried to put a favorable spin on the GDP data. The economy is coming back from the lows, but the many looking for work are hurting. Congress heard the news reports about the Cash-for Clunkers program maxing out. The House just voted approval for a $2B expansion of the program. Next week will bring reports on Jul auto sales which could be good coming off a low base last year & the sudden surge in buying this week. But Jul retail sales featuring the early portion of back-to-school season could be glum.

• House approves $2B for clunkers program- AP

Dow Jones Industrials --- 1 month

Markets little moved by favorable a GDP report

Dow only managed a small gain on a smaller than expected decline in GDP for Q2. Dow was up 27, advancers ahead of decliners 3-2 & NAZ added 5 (but is still under the important 2K line). The Financial Index remains near the 175 peak seen in May.

S&P 500 FINANCIALS INDEX

Value 173.01

Change -0.35

% Change -0.2

The Alerian MLP index has been hobbling along this week after a 40 point gain in the prior month. Today it's up fractionally to the 246s. REITs & junk bonds only had minor changes but Treasuries rallied. The yield on the 10-year Treasury bond dropped 9 basis points to 3.56%.

Alerian MLP Index --- 2 weeks




With the gain, oil is back to where it started Wed AM (prior to its big tumble). 73 is the interim high it may be going after.

CLU09.NYM

...Crude Oil Sep 09

...67.62

... 0.68 .......(1.02%)

The economy shrank at a 1% annualized rate in Q2, a better-than-expected showing. The dip follows an economy in free fall, tumbling at an annual rate of 6.4% in Q1 (the sharpest slide in nearly 3 decades). The economy has contracted for a record 4 straight quarters, underscoring the grim toll on consumers & companies. Higher spending by gov & less drastic spending cuts by businesses along with an improved trade picture were behind the better performance. Consumers, though, pulled back as rising unemployment, shrunken nest eggs & lower home values weighed down spending.

The Commerce Dept also reported that the recession inflicted even more damage on the economy last year than previously thought. It now estimates that the economy grew just 0.4% in 2008, much weaker than the 1.1% growth originally reported.

•U.S. Economy Shrinks at 1% Annual Rate; Spending Falls More Than Estimated


The Cash-for-clunkers program by the gov is one of their rare successful ones, in fact too successful. The idea is that a consumer can trade a car in for a more fuel efficient one. In just the first week of the program (it has 3 more months to run) the $1B budget has been depleted. Congress is trying to add a $2B extension, prompted by auto producing states.

• Cash for clunkers may go on hold- CNNMoney

Following 2 sluggish months, Dow had an excellent Jul, gaining over 800 (10%) to a new 2009 high. Earnings reports were the drivers, mediocre earnings that beat expectations were considered excellent. The high yield sectors, especially MLPs & junk bonds, have benefited greatly from this rally.

Dow Jones Industrials --- 3 months

Stock gains pared in last hour

Stocks couldn't hold their AM gains. Dow had been up over 200, but had to settle for plus 83 which took it to a new 2009 high, advancers ahead of decliners 4-1 & NAZ gained 16 (failing to hold 2K). The massive amount of new gov debt is starting to be felt in the stock & bond markets.

Banks did well with the Financial Index closing just 2 below the peak reached in May.

S&P 500 FINANCIALS INDEX

Value 173.36

Change 4.48

% Change 2.7%

The Alerian MLP Index rose 2 to the 245s, keeping it close its recent 250 high. The Dow Jones REIT Index was up an impressive 5 to 141, but remains down 10 YTD. Junk bond funds continue strong at new 2009 highs. The yield on the 10 year Treasury bond dropped 2 basis points to 3.64%. Bond traders are worried about the huge supply of debt being marketed. Tomorrow, the Treasury will borrow another $28B of 7 year notes. There are early indications that interest by foreign central banks for this debt may be waning.

Alerian MLP Index --- YTD





Oil recovered most of the prior day's losses on a more favorable assessment about the economy following the unemployment report & an up stock market. At 67, it's only it's 6 below its recent high.

CLU09.NYM

..Crude Oil Sep 09

..66.61

.. 3.26 ......(5.15%)

• Oil jumps to near $67 a barrel- Reuters

While stocks gained, they pulled back in the last hour. On balance, buyers like the earnings reports. Stocks are up an dazzling 13% since Goldman Sachs (GS) started the season with an excellent report. Sorry, this report is a little shorter because of a personal a problem diverting some of my attention.

Dow Jones Industrials --- YTD

Dow charges ahead to new 2009 high

Stocks had strong gains. Buyers were encouraged by relatively good earnings reports & a favorable unemployment report for last week. Dow shot up 154, advancers over decliners better than 5-1 & NAZ rose 34 taking it over 2K (not bad after starting 2009 at 1577). Banks are also having a great day. The Financial Index is trying to take out the previous high of 175 reached in May.

S&P 500 FINANCIALS INDEX

Value 174.38

Change 5.50

% Change 3.3%

MLPs are not sharing today's gains, the Alerian MLP Index is up only 1. But at 244, it's just 6 below its high on Mon. REITs are having a great day, the Dow Jones REIT Index is up 6 (one of its best days this year). Junk bonds continue strong. Risk investments are being bought up. The yield on the 10-year Treasury bond is up 4 basis points to 3.71% (Treasuries are being sold on balance).


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




The gains on Wall Street are being shared by oil futures which recovered half of yesterday's big drop.

CLU09.NYM

...Crude Oil Sep 09

...65.34

... 1.99 .......(3.1%)

The number of claims for jobless benefits rose last week due to seasonal distortions. However, the number remaining on the jobless rolls fell to 6.2M from 6.25M in the prior week, the lowest level since mid-April. New claims for unemployment increased 25K to 584K (above analysts' estimates of 570K). The increase comes after claims were artificially depressed earlier this month by the timing of temporary auto factory shutdowns. This week's total is below the 617K claims reported in late Jun before seasonal distortions began reflecting a trend that indicates a slowing pace of layoffs. The 4-week average fell to 559K, the lowest level since Jan. Unfortunately, jobs remain scarce & the unemployment rate, which hit 9.5%, is expected to exceed 10% by year's end. And weekly claims remain far above the 300K - 350K that is consistent with a healthy economy.

•Initial Jobless Claims in U.S. Increase; Total Rolls Unexpectedly Decline

Exxon-Mobil (XOM), Dow stock & Dividend Aristocrat, reported Q2 net income of $3.95B (81¢ per share), down sharply from $11.7B ($2.22 per share) a year earlier. Excluding one-time items, earnings were $4B (84¢ per share). Analysts expected $1.02 per share. Revenue plunged 46% to $74.5B. XOM said, "Global economic conditions continue to impact the energy industry both in the volatility of commodity prices and reduced demand for products." Q2 production fell ONLY 3% from last year. XOM will reduce stock buybacks in Q3 to $4B from $5B in Q2. The stock was down 1. Royal Dutch Shell (RDS.A), the 2nd biggest oil producer, reported a similar decline in revenues & profits. Shell stock was up fractionally. Exxon & Shell produce 1/7 of the world's oil.

•Exxon Mobil, Shell Earnings Plummet After Recession Curbs Demand for Fuel

Exxon Mobil --- 1 year

Royal Dutch Shell --- 1 year

Risk is being rewarded.s Dow is setting another high for this year & NAZ wants to top 2K. The high yield sectors are benefiting from buyers' eagerness to accept more risk.


Dow Jones Industrials --- 2 weeks

Indecisive markets are looking for direction

Dow, after rising 1000 in 2 weeks, has been trading sideways (with a downward bias). Dow fell 26, decliners over advancers almost 2-1 & NAZ was down 7. After topping 9K 4 days ago, Dow is literally even over that period. Banks have also been trading sideways, remaining near the high levels of the 3 month trading range.


S&P 500 FINANCIALS INDEX

Value 168.88

Change -0.43

% Change -0.3%

MLPs recovered a bit in the PM, but still fell a very big 5.77 to the 243s. REITs slipped & junk bond funds were a little higher, reaching their best levels of 2009. The VIX, volatility or fear index, rose .60 to the 25.61 & up from the 23s last week.

Alerian MLP Index --- YTD




VIX ---- 2 months





Oil plunged over $4, one of its biggest losses this year. Driving in the US is down in response to higher prices & lower levels of consumer confidence. Inventories of crude oil & gasoline have been rising, not what the bulls like to see. More Q2 reports are coming from the major oil companies this week which should give their thoughts about future demand for oil in the recession.

• Energy prices slide as unused crude piles up- AP

CLU09.NYM

..Crude Oil Sep 09

..62.79

.. 4.44 ......(6.6%)

$39B in 5-year notes yielded 2.689% at auction today, above the 2.635% forecasted. Yesterday investors demanded higher yields on $42B of 2-year notes. The investor class including foreign central banks share declined at each auction from last month. Bond buyers are pulling back from the market signaling a shift in central bank buying.

The yield on existing 5-year notes rose 6 basis points to 2.66%. The 10-year note yield fell 3 basis points to 3.66% after earlier rising as much as 5 basis points. Indirect bidders (including foreign central banks) bought 36.7% of the 5-year notes, down from 62.8% at the Jun sale (the highest since Dec 2004). The bid-to-cover ratio was only 1.92X at today's auction. Demand for the notes is strong, but supply may be growing even stronger. The concept of saturation is becoming a worry to dealers. China has been a leading buyer of US debt & could be losing some enthusiasm for buying even more.

•Treasuries Fall as $39 Billion Five-Year Sale Yields Higher Than Expected


The one week chart for the Dow is about as flat as it has ever been coming after an enormous 2 week rally. Markets are looking for direction. Chinese have been meeting with US officials this week, so far no significant announcements. The sharp sell-off in the Chinese stocks markets may be dimming their interest in US equities.

Dow Jones Industrials --- 1 week

Markets drift lower

Stocks can't decide what to do. With a lack of direction, they are selling off. Dow fell 61, decliners over advancers 3-2 & NAZ was off 14. Bank stocks are also slipping.


S&P 500 FINANCIALS INDEX

Value 168.91

Change -0.40

% Change -0.2%

MLPs ran into selling. The Alerian MLP Index dropped 8+ to the 240s (& off the 250 high on Mon). A daily point change greater than 5 is significant for MLPs, but after their run this type of reaction should be expected. REITs slipped while high yield (junk) bonds continue on a tear, up again today. The chart for the Barclay High Yield Capital Bond ETF understates results for many individual junk bond funds. High bond default rates are not being factored in when pursuing high yields. Ahead of today's note auction, the Treasury 10 year bond rose, bringing the yield down 5 basis points to 3.64%.

Alerian MLP Index --- 2 weeks




Barclays Capital Hi Yld Bond ETF - YTD





Oil slumped on worries about lower demand for oil & a 5.2M barrel surge in US oil supplies last week.

CLU09.NYM

...Crude Oil Sep 09

...65.12

... 2.11 .......(3.1%)

The Shanghai Composite Index suffered the biggest decline in 8 months on speculation the gov will curb inflows into the stock market. Their index dropped 5%after reaching the highest levels since Jan 2008. Their index dropped almost 75% from over 6K during the bear market & since then has more than doubled from 1½K to 3¼K. Driving stocks lower was speculation the central bank could rein in liquidity. The Hang Seng (Hong Kong) market tumbled 2.4% after a similar run up this year.

Other markets in the Asia region (& around the world) have had similar gains off depressed levels earlier this year. The Australia market had a 12 day winning streak broken last night. However European markets weren't bothered by the China news, they rose today.

China Stocks Plunge Most in Eight Months on Tightening Concern


BP Plc, Europe’s 2nd biggest oil company, reported profits fell 53% on lower energy prices & said there is little evidence of a recovery in demand. Royal Dutch Shell, its larger rival, as well as other major European oil companies will report this week. Analysts expect Shell to report earnings fell 69%. US majors, Exxon Mobil (XOM) & Chevron (CVX), Dow stocks, are expected to report similar significant profit declines from lower oil prices.

BP Says ‘Little Evidence’ of Oil Demand Recovery as Net Falls


Time Warner (TWC) reported lower Q2 profits but reaffirmed its guidance of roughly $2 EPS for 2009 (similar to last year). The stock dropped 1.05.

• Time Warner posts smaller 2Q net, affirms outlook- AP

Stocks are looking for direction. This week, Dow has barely budged after its 1K gain in 2 weeks.

Dow Jones Industrials --- 2 weeks

Stocks slosh around

Markets, once again, began treading under water & remained at sub break even levels for the rest of the day. Dow fell 11, decliners over advancers by 20% but NAZ was up 7. Only 9 Dow stocks advanced & Exxon Mobil (XOM) was the only 1+ loser in the Dow. Banks also took a breather after a 20 point advance which started on Jul 10.

S&P 500 FINANCIALS INDEX

Value 169.31

Change -0.63

% Change -0.4%

S5FINL:IND




The high yield sectors were also quietly lower. The Alerian MLP Index slipped 1¼ (off its 2009 high) to the 248s while REITs & junk bonds were mixed. MLPs need time to catch their breath.


Alerian MLP Index --- 2 weeks




The 3 week rally in oil futures has stalled out. Worries about less driving in the US & industries becoming more efficient using oil caused oil to pull back. However, it's still $10 above its recent low.

CLU09.NYM

..Crude Oil Sep 09

..67.17

.. 1.21 ......(1.8%)

The $42B sale of 2-year Treasury notes drew a higher-than-forecast yield. The yield was 1.08%, above the 1.058% forecast (viewed as a weak auction). The yield on the 10-year note fell three basis points to 3.69% after it touched 3.76% yesterday (the highest level since Jun 22). Today’s auction was the biggest offering of 2-year notes since monthly auctions for them began over 30 years ago. The bid-to-cover ratio was 2.75X, compared with an average of 2.58X at the last 10 auctions. Indirect bidders, including foreign central banks, bought 33% of the notes, compared with 68.7% at the Jun auction (the most in at least six years). This disappointing auction raises concerns about how well future auctions (for 10 & 30 year bonds) will be. If disappointment plays out, that will translate into higher yields.

Treasury Two-Year Notes Decline After Record Sale of Securities

Janet Yelleln, Federal Reserve Bank of San Francisco President, said the U.S. economy is showing the “first solid signs” of emerging from the recession & should resume growth later this year. But she continued with, “Recovery is likely to be painfully slow” and then added that “a gradual recovery means that things won’t feel very good for some time to come.” FED officials anticipate the economy will contract less this year than they had projected in Apr, even though unemployment is climbing towards 10%.

•Fed's Yellen Seeing `First Solid Signs' of Emergence From U.S. Recession


This was one of those days when little was decided in the markets. Most significant was the weak Treasury auction & resulting concerns about auctions going forward. Tomorrow. $39B of 5-year notes will be auctioned followed by $28B of 7-year notes on Thurs. And that's just for this week. Growing supply may take money from stock markets. Dow has been flat for 3 days straight.

Dow Jones Industrials --- 2 weeks

Markets fall from lower consumer confidence

Stocks are resting after their recent rally. Dow gained 1K in a couple of weeks, it needs time to rest. Dow fell 42, decliners over advancers 2-1 & NAZ was down 7. Banks are also resting after working their way up to the high end of their 3 month trading range:

S&P 500 FINANCIALS INDEX

Value 168.73

Change -1.21

% Change -o.7%

MLPs pulled back 2 to the 248s, they're entitled. REITs also fell but junk bonds were mixed with yields around a moderate 13%. The 10 year Treasury bond yield dropped 4 basis points to 3.67% ahead of today's Treasury auction.


Alerian MLP Index --- 1 month





Oil is also settling back with the stock markets.

CLU09.NYM

...Crude Oil Sep 09

...66.79

... 1.59 .......(2.3%)

Americans' confidence dropped again in Jul. Job security worries offset enthusiasm about the stock market rally helping bolster retirement accounts. The Conference Board said its Consumer Confidence Index fell to 46.6 in Jul from 49.3 in Jun (after a decline in Jun). Economists were expecting a reading of 49 (a reading above 90 signals the economy is on solid footing). Shoppers are looking past surging stock prices & a stabilizing housing market. Instead they remain nervous about their own financial security from mounting job losses (yesterday Verizon announced 8K job cuts). Consumers pessimism about income expectations does not bode well for spending in the coming months. Early indications for the important "back-to-school" season should be available next week.

•U.S. Consumer Confidence Falls More Than Forecast Amid Rising Joblessness


Home prices were up a little last month & sales were also higher last month. However, the problem is they're coming off low bases. Sales remain down 70% or so from the good old days, small ticks up aren't going to make a big difference.

• Home price index has first monthly rise since 2006- CNNMoney

US Steel (X), the largest US steel company, reported a 392M loss in Q2. The loss was less than in Q1, but it shows demand for steel is weak around the globe. They are forecasting a loss for Q3. The stock fell 1 to 40.

• US Steel reports 2Q loss as demand remains low- AP

US Steel --- 1 year





The markets are quiet again, but lower. They've lost their positive edge in recent weeks. The consumer confidence report signals more dreary days ahead for this recession. US Steel, a major supplier to economies around the world, tells us that the recession will not have a speedy recovery. Treasury auctions this week will be another negative influence for stocks.,

Dow Jones Industrials --- 1 month

Dow managed a gain at the close

Dow was under water for most day & went into the black at the close. Dow edged up 15, advancers ahead of decliners 3-2 & NAZ was up 2. Volume continues light, under 1B on the floor of NYSE. Banks did well, helped by regionals. With today's advance, the Financial Index is getting close to the 175 peak reached on May 10.


S&P 500 FINANCIALS INDEX

Value 169.94

Change 2.49

% Change 1.5%

S5FINL:IND





The Alerian MLP Index rose 3½ taking it just over 250, the first time since the massive sell-off after the Lehman collapse. The spread between the yield on the MLP Index & the 10 year Treasury bond has been reduced to 460 basis points, the lowest it has been since late last year. By way of comparison, the Dow Jones REIT Index is down almost 50% in the same time span. Today it was up 2.10 to the 138s (but it started the year at 151). Junk bond funds were up slightly. Treasuries fell as they completed the first auction for this week. The yield on the 10 year Treasury bond rose 4 basis points to 3.71%. Oil was up pennies in the 68s & not too far from its recent high of 73.


Alerian MLP Index --- YTD





The Treasury sold $6B in 20-year Treasury Inflation Protected Securities (TIPS) at a yield of 2.387%, higher than the forecast of 2.37%. The bid-to-cover ratio rose to a record 2.27X up from 1.92X at the previous auction. Indirect bidders, including foreign central banks, bought 47.8% of the offering. The average for the previous 5 sales had been 54.2%. The auction was rated as "fair."

Treasuries Fall as US Begins Auctions


Earnings continue to give a mixed picture. Dow stock Verizon (VZ) reported profits down 21% & will respond with job cuts for 8K employees. The stock fell 50¢. Aetna (AET), Honeywell (HON) & RadioShack (RSH) reported weak earnings. RSH earnings were up from cost cutting & beat forecast but the stock was little changed. The other 2 had lower earnings, although HON's stock managed a small gain.

Verizon Profit Drops; Carrier Plans 8,000 Job Cuts

Verizon --- YTD





When the Dow plunged thru 10K last fall, the 9K floor was strong & held for a few months as the chart shows. Then it gave way. After cracking thru it last week, it has held but without much testing. That could come this week, especially if the Treasury note auctions are weak.

Dow Jones Industrials --- 1 year

MLPs soar to another 2009 high

Markets are digesting recent gains with little change today. Dow fell 22, advancers barely ahead of decliners & NAZ is off 9. But banks are having a good day:

S&P 500 FINANCIALS INDEX

Value 169.20

Change 1.75

% Change 1.0%

MLPs are trading as if the the sky is the limit. The Alerian MLP Index gained 3+ pushing the magic 250 level, yet another 2009 high. In just the last 2months, the index is up almost 20%, probably the best run in its history. This is distribution time, some may be buying for distributions going out in Aug. Meanwhile, REITs are up only fractionally while junk bond funds are mixed. Treasuries sold off ahead of the 4 auctions this week. The yield on the 10 year Treasury bond rose 7 basis points to 3.74% & looks to be heading back to 4% reached last month. Oil is little changed today.

Alerian MLP index --- 3 months




10-Year Treasury Yield Index - 3 months





Analysts have become more bullish on earnings estimates, last month more raised earnings estimates than lowered estimates. Of the 204 companies in the S&P 500 reporting earnings for Q2, 75% beat estimates. While these signs are bullish, some point out that the best earnings are reported early, ones with problems tend to be reported later in the earnings season. Also, beating estimates refers to beating already lowered estimates. Higher earnings have more to do with cost cutting than higher revenues, another disturbing trend. But for the time being, optimism sounds good.

•Surging Earnings Estimates Signal 26% Advance for Shareholders of S&P 500


Treasuries are the cheapest they've been in 15 years based on the "real" yield. This yield is defined as the difference between rates on gov securities & inflation. This translates for the 10-year notes to 5.10% today, compared with an average rate of 2.74% over the past 20 years. This gap is used to explain demand for Treasuries after they have had the greatest drop in price (& corresponding rise in yields) in more than 30 years. Demand has been great especially from foreigners which is why Tim Geithner is reassuring Chinese today that the US will reduce deficits going forward. However, this week the Treasury is auctioning off a record $115B in debt.

•Real Yields Highest Since 1994 as Treasury Sells Record $115 Billion Bonds


Stocks are having another stellar month as the Dow crashed thru the ceiling, making 9K its new floor. Buyers are forgetting that the recession drones on. Among other problems, lower tax revenues combined with massive gov spending are forcing record levels of borrowings.

Dow Jones Industrials --- 3 months

Dow blasts through the 9000 ceiling

The last year has been a time of record losses in the markets followed by record recoveries. Last week Dow finally broke thru the 9K ceiling, closing at 9093 on Fri. But gains in the recovery were not evenly spread around. NAZDAQ has risen an impressive 25 YTD while Dow is up less than 4%. Pursuit of risk has been a strong motivating factor for stock buyers in 2009. High yield securities were also discovered by those wanting to lock onto high yields.

Dow Jones Industrials --- 1 year




NASDAQ --- 1 year





Leading this year's gains in the high yield sectors have been the MLPs & junk bond funds. MLPs have risen an astounding 40% YTD (plus another 4% when distributions are included). Many junk bond funds are up 50+% YTD after reinvested divs are included. However, REIT's have lagged behind. Their recovery in recent months has still left them down 10% YTD as div cuts & a growing understanding about rising vacancy rates has not been lost in the markets.


AlerianMLP Index --- 1 year




Barclays Cap High Yld Bond ETF - 1 year




Dow Jones REIT Index --- 1 year




Enthusiasm may have gotten the better of the markets in their recovery. Dreary economic numbers keep coming. The yield on the 10 year Treasury bond has shot up from the low 2% area at the start of the year to 3¾%, & may go higher with record levels of borrowings next week. In addition, The S&P Financial Index which I track every day has not been able to take out its 175 high reached 10 weeks ago, needing another 9 points. Banks were the market leaders during the first leg up in the recovery but have not been in the last 2 months. Let market buyers beware!

10-Year Treasury Yield Index




S&P 500 FINANCIALS INDEX

Dow eaks out another gain, staying above 9000

Higher markets in the PM reduced morning losses. Dow managed a gain of 23 giving it a weekly advance of 350, advancers ahead of decliners 3-2 & NAZ partially recovered to down only 7 (after Microsoft disappointing earnings). Banks also had a modest loss, but up almost 3 for the week. The Financial Index is at the high end of its 3 month trading range.

S&P 500 FINANCIALS INDEX

Value 167.39

Change -0.63

% Change -0.3%

S5FINL:IND




One month ago, MLPs already had a very good year with a 20% gain YTD. In the last month, the index ran up another 16% bringing the YTD gain to a record breaking 39% (plus distributions). In the same time, REITs, after a good last month, are still down 10% YTD. Some junk bond funds have soared 50% from depressed levels at the start of the year while Treasuries have plunged. The yield on the 10 year Treasury soared from about 2¼% at the start of 2009 to nearly 3¾%. On the margin, Treasuries were sold with the money going into MLPs & junk bond funds while REITs only got modest investments.

These are all yield securities. The yield for the MLP Index is below 8½%, not too far from 7% (or so) which is a traditional yield in conventional times. Yields on junk bond funds are around 13%, not too far from 9-10% area which is ordinary kind of number. Analysis of REIT yields is more complex because of the many div reductions. Current yields are typically under 10% but stocks have not benefited that much because of lower divs. In the coming months, if the recession continues, the disparity between the haves & have nots should narrow.

Today the Alerian MLP index rose 3½ to the 246s, another 2009 high. REITs were fractionally higher & junk bonds were mixed. The yield on the 10 year Treasury bond fell 4 basis points to 3.67% ahead of 4 big auctions of debt next week.


Alerian MLP Index --- 1 month




Dow Jones REIT Index --- YTD




10-Year Treasury Yield Index - YTD





Oils keeps advancing to its highest level since the start of Jul.

CLU09.NYM

..Crude Oil Sep 09

..67.86..

0.70 ......(1.0%)

OIL (ETF) --- 1 month





Dow has advanced almost 1K in 2 weeks, nothing to sneeze at. It's behaving as if the recession is over. I don't think so.

Dow Jones Industrials --- YTD