Dow extends its winning streak to 8

Stocks clawed their way back to gains after selling in the AM. Dow was up 37 (8th consecutive gain, reaching another 2009 high), but advancers were barely ahead of decliners & NAZ rose only 3. Dow was helped by a $4 gain for Boeing (BA) on expectations that they will finally bring out their troubled 787 airliner later this year. They took a $2½B charge, trying to put their troubles behind them.

History of the Boeing 787


Banks were off only mildly in the AM, so the PM rally was able to take the Financial Index to another 2009 high. Citigroup (C) is less troubled as the stock rose 42¢ to 5.05.

S&P 500 FINANCIALS INDEX

Value 197.83

Change 1.90

% Change 1.0%

S5FINL:IND




Despite the euphoria surrounding banks, all is not well. 416 banks with combined assets of $300B failed the FDIC’s grading system for asset quality, liquidity & earnings in Q2, the most since June 1994. The FDIC has already taken over 81 banks in 2009. Regulators were forced to charge banks an emergency fee to raise $5.6B for its insurance fund (which fell to $10B on Jun 30 from $13B in the prior qtr). FDIC Chairman, Sheila Bair, said, "The FDIC has ample resources to continue protecting insured depositors as we have for the last 75 years.” That's what she has to say, but I don't know.

•FDIC List of Problem U.S. Banks Rises to 416, Putting Reserve Fund at Risk


The Alerian MLP index recovered, along with the markets, bringing it back to a gain of pennies. They continue with an outstanding record YTD, despite a sluggish time in Aug. The Dow Jones REIT was up 1+ taking it just 5 points from its 2009 high set this month. However, junk bond funds sold off.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Demand for oil rose in the PM, the same sort of thinking that brought stock buyers back into the stock markets.

CLV09.NYM

..Crude Oil Oct 09

..72.79

.. 1.36 ......(1.9%)

The Treasury sold $39B in 5-year notes at a yield of 2.484% vs an expected rate of 2.509%. The bid-to-cover ratio was 2.51X, higher than the average of 2.2X at the last 10 auctions, indicating greater desire for the debt. Indirect bidders, including foreign central banks, bought 56.4 % of the notes vs 36.7% of the securities at the last sale in Jul & 62.8% in Jun. The average for the past 10 sales was 37.8%. This was viewed as a "healthy" auction (i.e. plenty of demand to buy record amounts of new debt). This is the 2nd auction this week, tomorrow the Treasury will auction off $28B of 7-year notes completing $109B for the week. A few years ago, that amount of money would represent the deficit for an entire year! The yield on the 10-year Treasury bond rose 2 basis points to 3.46%, indicating there was selling in Treasuries later in the day.

Treasuries Little Changed After Record Tying Note Auction Aug. 26


AIG (AIG) soared 10.15 to 47.84 (the biggest gainer in the S&P 500) on hopes that it can mend fences with Hank Greenberg, former Chairman, which would allow it to recapture some of its former glory. I put in a 2 year chart to show how far it has fallen from the "good old days." Its relatively high price today is after a 1-20 reverse split in Jul.

•AIG shares soar as Greenberg set to help new CEO

AIG --- 2 years




The bulls continue in charge of the markets. The winning streak for the Dow is getting to be one of its longest, following one of its greatest runs in history. That makes me nervous about how this will end, especially going into Sep which is statistically the worst month for the Dow.

Dow Jones Industrials --- YTD