Tough Tuesday for markets

Dow began the day down & was never able to break into the black. Dow fell 96 near its lows for the day, decliners over advancers 5-2 & NAZ was off 22. The S&P 500 dropped below the important 1K level, down 12 to 994. Banks led the way down, although all indices remain near their 2009 highs reached last week.

S&P 500 FINANCIALS INDEX

Value 185.10

Change -6.78

% Change- 3.5%

S5FINL:IND






The AlerianMLP Index dropped another 5 to the 238s, off 13 from its recent highs. Given the run for MLPs this year, the drop does worry the bulls. The Dow Jones REIT Index fell almost 5 to the 255s, but again still near their 2009 highs reached a few days ago. Junk bonds funds were mixed, also just off the 2009 highs.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil broke thru the important $70 barrier. Nervousness about what the Federal Reserve has to say on the economy & its future is affecting oil prices.

CLU09.NYM

..Crude Oil Sep 09

..69.39

.. 1.21 ......(1.7%)

The Treasury's auction of 3-year notes today went well. They sold a record (everything is a record these days!) $37B of these notes at a better than expected (i.e. lower interest cost than expected) rate of 1.78%. The important bid to cover ratio (which gauges demand) was an impressive 2.89X compared with an average of 2.52X at the last 7 auctions. Indirect bidders, i.e. foreign central banks, bought a record 62.5% of the notes versus 54% in July. The average for the past 7 auctions was 41%. $23B of 10-year notes will be sold tomorrow & $15B of 30-year bonds on Thurs to help fund the record budget deficit. The yield on the 10-year Treasury bond slipped 8 basis points to 3.69% today ahead of tomorrow's auction.

Treasuries Gain Amid Record Indirect Bids at U.S. Three-Year Note Auction


CIT (CIT) remains very shaky. They are facing an Aug 17 deadline when it must pay off $1B in notes. As of the present it is not a done deal. CIT obtained $3B in emergency financing last month but the stock is down 50¢ in 2 days to 1.21. They finance a lot of small business, especially in retail, making their survival especially important.

• CIT delays report, could seek bankruptcy- Reuters

Stocks are resting after an outstanding month in July. The FED can't do much with interest rates, it's widely expected they will continue at very low levels for some time to come. However, eventually they will have to unwind positions & raise their rates to traditional levels. That thought has been weighing down markets.

Dow Jones Industrials --- 2 weeks