Markets strong after Federal Reserve meeting

Dow rose out of the gate & continued higher after hearing what the Federal Reserve had to say. However, it fell back in the last ½ hour preventing it from setting another 2009 high. Dow gained 120, advancers ahead of decliners 3-1 & NAZ added 29 but failed to hold the 2K level. Banks liked the news from the Federal Reserve meeting. The Financial Index is heading for its 193 high reached last week.

S&P 500 FINANCIALS INDEX

Value 188.83

Change 3.73

% Change 2.0%

S5FINL:IND





The MLP Index was up 2 to the 241 & the REIT index added another 1½. MLPs have been flat over the last 4 weeks, but in a stellar year they are entitled to pause & rest. Junk bond funds were mixed. The yield on the 10 year Treasury bond was flattish after today's auction of more bonds.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




After slipping , oil held above $70.

CLU09.NYM

..Crude Oil Sep 09

..70.25

.. 0.80 ......(1.2%)

The Federal Reserve said it would slow the pace of an emergency rescue program as the recession appears to be ending. Its key lending rate was kept at a record low near zero & they pledged to keep it there for "an extended period." The FED said economic barometers since late Jun suggest that "economic activity is leveling out" & conditions in financial markets also "have improved further." They will gradually slow the pace of its program to buy $300B of Treasury securities which will end in Oct (it has bought $253B of the securities so far). Today's auction for$23B in 10-year notes was weak, investors were waiting to see what the FED had to say before making big moves. The 10-year auction's bid-to-cover ratio was 2.49X, down sharply from 3.28X at a similar auction in Jul. Indirect bids, an indication of foreign buying, were lower than at recent auctions.

•Fed Says Treasury Buying Will End in October, Economy Is `Leveling Out'

What worries the FED is while consumer spending has stabilized, job losses, sluggish income growth, hits to wealth from tanking home values & still hard to get credit could make Americans cautious in the months ahead. Dreary news on the housing front continues. Home prices fell 15% in Q2 (biggest decline since record keeping began 30 years ago). More than 1½M properties, one in every 84, received a foreclosure filing in the first 6 months of 2009. Markets are trying to charge ahead. However, Dow has pretty much flattened over 9¼K in Aug.

Dow Jones Industrials --- 1 month