Markets advance to new 2009 highs

Stocks had another outstanding day, reaching new highs again for 2009. Dow rose 155, advancers over decliners 4-1 & NAZ shot up 31 breaking thru 2K again. After a decline on Mon, Dow gained 184 this week (back to where it was in Oct). Banks led the way higher, the Financial Index hit another high for 2009.

S&P 500 FINANCIALS INDEX

Value 195.77

Change 4.07

% Change 2.1%

The Alerian MLP Index rose 2+ to the 241s (still 10 below its recent high) & the REIT Index was up 4. Junk bonds were higher (bringing lower yields) while the yield on the 10-year Treasury bond soared 12 basis points to 3.56%. Oil gained 1 bringing it near 74, record territory for 2009

Alerian MLP Index --- 6 months




I went to an annual meeting for a junk bond fund. They said the ugly days of Q4 last year were driven by fear, not higher defaults. At that time, junk bonds were extremely oversold with yields around 25%. The very brave bought to lock up those extraordinary yields. Since then high yield securities have roared back bringing their yields closer to where they traditionally have been. Their projection is for the economy to grow 3½% next year (more optimistic than my view) which implies the present yields going forward may prove to be attractive. They are not forecasting default rates on junk bonds to rise from present levels. Their analysis could also be applied to other high yield securities, such as MLPs.


Bulls have complete command of the markets. The S&P 500 is up 50% (pretty much non stop) from its lows in early Mar. That track record would be excellent for 3-4 years, only they accomplished it in 5 months. Let's see how long the bulls can keep control as the one year anniversary of the financial meltdown in Sep approaches.

S&P 500 --- 6 months