Markets end the month & quarter on a whimper

Dow gained more than 200 in "terrible" Sep, but seems to have lost its head of steam in the last 2 weeks including today. Dow fell 30 (after being off more than 100 in the AM), decliners ahead of advancers by 20% but NAZ was off only 1. Buyers returned to banks in the last hour, limiting losses for the day. The Financial Index closed within 6 of its yearly high reached last week.


S&P 500 FINANCIALS INDEX

Value 201.18

Change -1.02

% Change -0.5%

MLPs finished the month & qtr in a strong fashion. The index shows they are still banging on the ceiling which has held for 2 months. Today the index fell .77 in the 249s, close but not high enough for a new yearly high. REITs had a very large rebound off their low in Mar, the index is about double the low in the 80s. But the recent high at 180 may prove to be a formidable barrier, today it fell 1+ to the 168s. Others are noticing "for rent" signs which are becoming more common, tougher times lie ahead for property owners. Junk bond funds continue to hold at or near their recovery highs. Yields of 13% are high for the group. As the yields fall, the risk premium (yield on junk bonds less the yield on the 10-year Treasury) narrows to levels approaching where they were in better times. CIT group (CIT) is one more reminder that high yields yields are still bringing a lot of worries (CIT fell 99¢ to 1.21 today). The yield on the 10-year Treasury bond was up 2 basis points to 3.31%, near its low since the end of May.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Commodities came roaring back in the PM. The weekly report on oil was favorable for the bulls. US gas stockpiles were 211.5M barrels last week, a drop of 0.8% from the prior week. In addition, demand for gasoline over the 4 weeks ended Sept. 25 was 5.4% above 2008. There are the usual uncertainties related to end off month trading, but gas supplies are considered well above normal & 11% above last year. Gold buyers also returned bringing its price well above $1K again.

CLX09.NYM

..Crude Oil Nov 09

..70.31

.. 3.60 ......(5.4%)

GCV09.CMX

..Gold Oct 09

..1,006.90

.. 13.80 ......(1.4%)

Alan Greenspan, former Chairman of the Federal Reserve, sees the U.S. economy slowing next year as the surge in stocks comes to an end. “The odds are we flatten out,” Greenspan said today on Bloomberg TV, referring to the equity market. “That flattening out will put some sort of dull face on 2010.” He expects the economy to grow at a 3-4% annual rate in the next 6 months before slowing down. As a result, unemployment isn’t likely to decline much from last month’s 9.7% rate. But he doesn’t expect the economy to relapse into recession next year.

•Greenspan Sees U.S. Economy Slowing in 2010 as Stock Prices `Flatten Out'


Stocks closed the qtr in a mild fashion. There is a growing consensus that the Q3 & especially Q4 will show growth. If that turns out to be the case, be careful about what it suggests. Growth in the next few months may relate to rebuilding inventory levels which have become very low at the macro economic level. However much of that activity may not flow thru to final sales. The follow thru into next year could be anemic, making for a very sluggish year in 2010, not favorable for a stock market which is assuming a great deal more. Dow advanced in Sep (worst month for markets) but it lost steam in the last ½ of Sep. The stock market is extremely overbought (Dow is up over 3K in 6+ months). That makes me very nervous.

Dow Jones Industrials --- YTD




Dow Jones Industrials --- 2 weeks

Markets tumble on negative business data

Q3 is closing on a down note. Dow is off 92, decliners over advancers 3-1 & NAZ was off 19. Banks are leading the way down bringing the Financial Index below the important 200 level.

S&P 500 FINANCIALS INDEX

Value 199.87

Change -2.33

% Change -1.2%

The Alerian MLP Index can't break thru the 250 barrier. Today it's down 1+ to the 248s, the chart below shows its 2 month struggle trying to break thru 250. Following a slower start this year, REITs had an excellent qtr in Q3 but may be maxxing out, the index fell back after reaching 180. Junk bond funds continue to trade sideways (for 2 weeks) at yearly high levels. But the yield on the 10-year Treasury bond fell 1 basis points to 3.28%, risk averse is attracting more interest (with negative implications for overbought junk bonds). Oil is sloshing in the 66s (its interim lows) while gold at 995 is back below the important 1K level.

Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months




10-Year Treasury Yld Index - 3 months





In Q2, GDP shrank at a 0.7% annualized rate, less than expected. Businesses & consumers trimmed their spending at a slower pace, adding to beliefs that the economy is growing in Q3. The modest dip in Q2 follows a 6.4% annualized drop in the first 3 months in 2009 (the worst slide in nearly 3 decades). In the prior qtr, the economy sank at a rate of 5.4%. A main reason for the Q2 upgrade is businesses didn't cut back spending on equipment & software nearly as deeply as originally thought. Consumers also didn't trim their spending as much.

• Economy dips at 0.7 percent pace in 2Q- AP

The business barometer decreased to 46.1 in Sep, a much bigger decline than expected (readings below 50 signal contraction). Near-record excess capacity & gains in spending induced largely by gov stimulus programs are likely to limit companies from ramping up assembly lines & hiring more workers. These condition were describers as “very sobering.”

•Chicago Purchasing Managers' Index Unexpectedly Fell to 46.1 in September


CIT Group (CIT) is still struggling to remain alive, seeking capital from Citigroup (C) & Barclays Capital, This business is seen as being extremely important to any recovery because it provides financing to more than 1M small & medium size businesses. Today the stock is down 69¢ to 1.51. This is an interesting speculation for those who like playing with fire.

•CIT Said to Consider Financing From Citigroup, Barclays as Deadline Nears

CIT --- 3 months





Yesterday was the anniversary of the record 777 point drop by the Dow last year. This time the decline was ordinary but it's continuing today. At yesterday's close the Dow was down more than 6% in the last year even after the recent recovery. Markets are reflecting the economy is in a recovery phase but is not recognizing the pace of recovery could be slow & painful.

Dow Jones Industrials --- 3 months

Dow ending another winner quarter

Markets finally took time to rest. We've had 6 months of almost straight up stock markets, but they fell back a little in the last 2 days. Dow touched 9.9K in the last week & was breathing on the 10K ceiling. Now it settled back to 9665, it may finally take time to rest. The Iran wild card lurking in the background will not be helpful.

Sep has the reputation for being the worst month of the year. And at this stage, it's not clear whether it will be an up or down month. Speaking of rest, I'll be taking a couple of days off but will return to close out Sep/Q3. When I return, it will be clearer whether Dow can turn in another up month in what is its 2nd consecutive qtr with big gains.

DJI
Sep 25..9665
Aug 31..9496

Another down day for stocks

Dow slipped 16,decliners over advancers by 20% & NAZ was down 16 (70 from its peak a couple of days ago). Banks were down & the Financial Index is off 12 from its peak this week.

S&P 500 FINANCIALS INDEX

Value 196.58

Change -2.15

% Change -1.1%

MLPs keep trying to break thru to new highs, but can't. The chart below how well the 250 line has held for the Alerian MLP Index over the last 2 weeks. Today the Index is up change, still in the 247s. The Dow Jones REIT Index peaked just over 180 & that has held. The Index is up change but off 15 from that peak. MLPs have been a market leader in the rally until early Aug & REITs have been leaders in Q3. Both have been turned back from additional advances, maybe that's a signal for the rest of the market which is so EXTREMELY overbought.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





In way of contrast, junk bonds have held onto their enormous gains. Barclays High Yield Bond ETF hit new yearly highs but has not had to pull back in recent days. If MLPs & REITs get more selling pressure, it may spread to junk bond funds. Meanwhile, risk averse has returned, even only to a mild degree. The Yield on the 10-year Treasury bond fell 4 basis points to 3.35%


Barclays Capital High Yield Bond ETF - 2 weeks




10-Year Treasury Yield Index - 2 weeks




Oil was little changed, up pennies to 66, while gold was off 7 to 990.


Group of 20 leaders said they will crack down on risk-taking by banks and better align economic policies as they turned from crisis management to delivering a new set of rules for the world economy. This is a quote from Bloomberg's website, summarizing the meetings in Pittsburgh. The key words highlighted don't really mean what they say. It's always difficult to get 20 different countries with different agendas to coordinate anything, let alone economic policies. But it sounds good!

G-20 to Curb Banker Pay, Coordinate Policy

Shanda Games (SNDA) sold stock, its U.S. initial public offering. The IPO was priced at 12½ the top of its estimate range in the first $B new stock offering in the US since Apr 2008. It closed at a dismal 10.90, down 1.60 & sinking fast.

Shanda Game --- 1 day





Dow finally had a week where it finished on a down not. Next week, Q3 ends followed by the infamous Oct.

Dow Jones Industrials --- 2 weeks

Markets hesitate on lackluster economic data

Stocks can't decide which way to go, so they are hanging around their 2009 high levels. Dow is down 12, decliners 20% ahead of advancers & NAZ is off 10. Banks slipped & the Financial Inderx is down 10 from its high a week ago.

S&P 500 FINANCIALS INDEX

Value 197.57

Change -1.16

% Change -0.6%

The charts below zero in on Q3 which is pretty much completed. MLPs ran into a siginicant ceiling around 250 two months ago. Today the index is up small change in the 247s, still trying to break thru 250. After a weaker start in the recovery period, REITs have performed well in Q3. In the last week, the index pulled back almost 10%, but rebounded about 2 today. Junk bond funds firmed a litte after pretty much trading sideways at their highs during the last 2 weeks. The yield on the 10-year Treasury bond was essentially unchanged at 3.38% following a modest rally for Treasuries (bringing lower yields) this week.,

Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months




Oil prices ticked up, but are still in the 66s (low end of the recent trading range). Gold slipped again, down 10 to 988.


The G-20 (upgraded from the G-8 a few years ago) will give greater voice for China, India, Brazil, etc. now that the group has been expanded from 8 to 20. They will try to clamp down on excessive pay for bankers' bonuses (easy for them to say something & follow thru with little action). The main attention at the meeting is demanding Iran come clean on its nuclear ambitions (which has significant implications for the price of oil).

• G-20 plans to approve greater role for Asia- AP

The Univ of Mich index of consumer sentiment increased to 73.5 in Sep, from 65.7 in August. The consumer-confidence index was forecasted to rise to only 70.5. Consumers clearly have a more upbeat assess of economic conditions despite growing unemployment. In a separate report from the Commerce Dept, orders for U.S. durable goods (meant to last several years) unexpectedly fell in Aug & new-home sales climbed to the highest level in almost a year as builders cut prices.

US Michigan Sentiment Index Rose to 73.5 This Month


On mixed economic data this should be a quiet Fri, with the more successful taking a long weekend.

Dow Jones Industrials --- 3 months

Markets fall from lower oil prices & home sales

After a higher start, Dow spent the rest of the day in the red with a modest loss. Dow was down 41 (but still within striking distance of a new 2009 high), decliners ahead of advancers 3-1 & NAZ fell 23 (down over 50 from its high reached yesterday). Banks sold off, the Financial Index slipped below the important 200 floor it went thru on its way up last week.

S&P 500 FINANCIALS INDEX

Value 198.73

Change -3.59

% Change -1.8%

MLPs were weak, the Alerian MLP Index fell 2¼ to the 247s. REITs dropped sharply, the Dow Jones REIT Index fell 6 (down 15 from the peak a week ago). Junk bond funds fell as investor interest has been migrating to gov bonds. However YTD charts for all high yield sectors still look great. The yield on the 10-year Treasury bond dropped 4 basis points to 3.38%, nearing the low of its range in the recent months.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil had another bad day bringing it near its interim lows. For the technical bulls, this fall is getting serious. For the rest of us, lower prices come from weaker demand by global economies. Gold also took a serious spill, bringing it below the magic 1K line.

CLX09.NYM

..Crude Oil Nov 09

..65.96

.. 3.01 ......(4.4%)

GCU09.CMX

..Gold Sep 09

..997.50

.. 15.50 ......(1.5%)

Jobless claims fell by 21K to 530K last week, from a revised 551K in the week before. The number collecting unemployment insurance fell in the prior week to 6.14M, a little under forecast. Economists had forecasted claims would rise to 550K from the previously reported 545K. The 4-week moving average fell to 554k (lowest since Jan) from 564k.

US Initial Jobless Claims Decreased to 530,000


The Treasury sold a record (it's amazing how many time that adjective is used to describe Treasury auctions) $29B of 7-year notes & it went well, completing another $112B of sales this week. The annualized yield was a shade over 3%. The bid-to-cover was 2.79X, above expectations & indirect bidders (including foreign central banks) bought 62%. Treasuries have risen in price for the last 3 days, these auctions benefited from strong demand for US securities.

•Treasuries Extend Gains After Record $29 Billion Seven-Year Note Auction


The jobless report was fairly good but housing data was sluggish. Treasuries have been strong this week while the Dow has been a little weak (another word is tired). Treasuries have picked up a modest following wind, but bull market sentimentality for stocks remains in command.


Dow Jones Industrials --- YTD

Weak markets after Federal Reserve meeting

Stocks continued soft after late day selling was followed by down markets overseas. The Dow is down 44, decliners over advancers almost 4-1 & NAZ fell 25. Banks continue weak after their big drop following the Federal Reserve meeting yesterday.


S&P 500 FINANCIALS INDEX

Value 200.59

Change -1.73

% Change -0.9%

MLPs have had tough sledding, especially after a stellar 5 month run. The 250 ceiling held for the Alerian MLP index 2 months ago & remains formidable despite major advances for other averages (i.e. the REIT Index & the Dow Jones charts shown below). Today, the MLP index dropped almost 3 to 247. The REIT index is off 4½ (probably from being so overbought). Junk bond funds slipped off their yearly highs. Treasuries rallied, the yield on the 10-year Treasury bond fell 5 basis points to 3.37%, the low end off its range in recent months.


Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months




10-Year Treasury Yld Index - 3 months





Oil is down sharply again although gold is only off a few dollars (still above the important 1K floor). The chart shows the trend for oil prices over the last 6 months & oil has fallen to the low end of its 4 month range.

CLX09.NYM

...Crude Oil Nov 09

...66.12

... 2.85 .......(4.1%)

OIL (ETF) --- 6 months





There is more data showing housing is still sloshing around in the dumps, no great surprise. The FED said that the return to growth in the US is not sufficient for it to abandon its stimulus efforts. Those thoughts are good & bad. They will continue to buy Treasuries, mortgages & supply cheap financing for banks. But the problem is the reason for a lack of change is US economic growth will be weak, something for optimistic markets to think about. The chart below shows terrible Sep has been a pretty good month for the Dow, giving the Dow its 2nd outstanding qtr. But Oct comes next week.

Dow Jones Industrials --- 3 months

Markets tumble after the Federal Reserve meeting

Flattish markets rose on the Federal Reserve's announcement but fell back in the last hour (a mild version of buy on the rumor & sell on the news). Dow plunged 81 (in the last hour), decliners over advancers almost 2-1 & NAZ was off 14. Banks rallied after the FED announcement but the Financial Index dropped 5 points in the last hour.

S&P 500 FINANCIALS INDEX

Value 202.32

Change -4.30

% Change -2.1%

MLPs were lower after the big MLP offering yesterday. The Alerian MLP Index was off 0.47 taking the index below 250. The Dow Jones REIT Index was down a big 7 , but that's off their yearly high. Junk bond funds firmed, bringing their yields down to the 11% area (not far above levels in ordinary times).

The yield on the 10-year Treasury bond fell 4 basis points to 3.42% (the bond price rose) remaining in its sideways trading range under 3½%. A record $40B in 5-year notes sold today drew a yield of 2.47%, just above the forecasted rate. The bid-to-cover ratio, was 2.40X, compared with an average of 2.23X at the last 10 auctions. The auction was rated as only mixed. Tomorrow, $29B in 7-year debt will be sold.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil is back downto the low end of its multi month trading range (around 67-8) while gold was flat. The dollar continues weak, the € is $1.48 & it takes 91+ ¥ to buy a dollar.

CLX09.NYM

..Crude Oil Nov 09

..68.97

.. 2.79 ......(3.9%)

GCU09.CMX

..Gold Sep 09

..1,013.00

.. 1.20 ......(0.1%)

The Federal Reserve will stretch out its goal of buying $1.45T (that's T as in trillion) in mortgage-backed securities & debt issued by Fannie Mae, Freddie Mac & Ginnie Mae for another 18 months. Originally, the intention was to complete the program by the end of 2009. This is the 2nd time the FED has opted to slow some of its extraordinary support to revive the economy. The FED said: "Economic activity has picked up following its severe downturn." In August, the FED declared that economic activity was "leveling out." The FED also "expects that inflation will remain subdued for some time."

The rates for home loans should remain low "in the 5% range" at least for the next 18 months. To foster recovery, the key bank lending rate was left at a record low near zero, and again they pledged to keep rates there "for an extended period." By one estimate, the FED is buying about 85% of the mortgages issued (basically bankrolling mortgage lending).

Fed Says Mortgage-Backed Purchases Will Slow, Sees Economy Strengthening

As expected there were no dramatic changes or announcements made by the FED. Low interest rates will continue for some time to come. But they are setting the stage for ending their subsidizing mortgage markets. Selling in the last hour (highlighted by banks) may set a negative tone for tomorrow.

Dow Jones Industrials --- YTD

Markets doing little ahead of Federal Reserve meeting

Dow is down 6, decliners ahead of advancers 3-2 & NAZ is even ahead of the Federal Reserve meeting & its announcement this PM. Banks sold off.

S&P 500 FINANCIALS INDEX

Value 205.74

Change -0.88

% Change -0.4%

250 is becoming an important overhead barrier for the Alerian MLP Index. The index is down 1+ to the 249s, but considering the run in just this qtr it's more than entitled. The Dow Jones REIT Index is off 3+, but again it's had one of its best quarters in history. Junk bond funds are a little higher. The yield on the 10-year Treasury bond is down 2 basis points to 3.44%.


Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months





Oil is down to the low end of its trading range over the last 4 months. Gold is hanging in just above 1K.

CLX09.NYM

...Crude Oil Nov 09

...68.99

... 2.77 .......(3.9%)

GCU09.CMX

...Gold Sep 09

...1,011.50

... 2.70 .......(0.3%)

Below are 3 S&P 500 Dividend Aristocrats, Exxon Mobil (XOM), McDonald's (MCD & Ely Lilly (LLY), which have been left behind in this year's willingness to welcome risk. They, along with other remaining in the group, might be considered of interest for those seeking good values.

Exxon Mobil --- 1 year




McDonald's --- 1 year




Eli Lilly --- 1 year




Not much to do but wait for the announcement the FED this PM. It is widely assumed they are not going to make any unusual announcements. The chart below illustrates how well the Dow has performed (after starting from an overbought position at the start of the qtr).

Dow Jones Industrials --- 3 months

Markets advance to new 2009 highs

Stocks started strong & remained higher all day. Dow is shooting for 10K first reached almost 11 years ago. Today Dow rose 51 to 9829 closing near the highs. However it has been flat near 9800 for 4 days. Advancers were over decliners 5-2 & NAZ was up 8. Banks soared again, the Financial Index made another yearly high. The index is up more than 150% from its low earlier this year. When troubled financial giant Citigroup (C) doubles in 2 months, all financials are "golden." Speaking of risky financials being rewarded, AIG (AIG) has had an even better run over the 2 months.

S&P 500 FINANCIALS INDEX

Value 206.62

Change 4.54

% Change 2.2%

Citigroup --- 2 months




AIG --- 2 months





MLPs were little changed, the index was virtually even & hurt by a large offering of new units. Enterprises Products Partners (EPD) was down 73¢. The Dow Jones REIT Index was up 5+ to a new closing high for 2009. Junk bond funds were sideways at their high levels for 2009. The yield on the 10-year Treasury bond fell 3 basis points to 3.46%.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





The dollar continues very weak thanks to the heavy gov borrowing. The € is at $1.48 & it only takes 91+ Japanese ¥ to buy a dollar. With the dollar weak, money flows into commodities & stocks. Oil has been kicking around 70+ since its run up in late May. In roughly the same time frame gold has taken off, from the mid 800s to 1K+ & it wants to go higher.

CLV09.NYM

..Crude Oil Oct 09

..71.55

.. 1.84 ......(2.6%)

GCU09.CMX

..Gold Sep 09

..1,014.00

.. 10.30 ......(1.0%)

The Treasury sold a record $43B in 2-year notes at an annualized yield of just over 1%, in line with expectations. Demand was good including from foreign interests (indirect bidders). Buyers were motivated by the outlook for low inflation & a low growth rate for the US economy.

Treasuries Gain on Growth Outlook Before $43 Billion Note Sale


The Federal Reserve is not expected to change interest rates at their meeting & should continue with accommodating language for the markets. We all know the economy is mending, not a lot for them to say.

Dow Jones Industrials --- YTD