Dow has third consecutive gain

Markets began the day higher following the lead of overseas markets & Kraft's (KFT) proposed $17B purchase of Cadbury. But then they had trouble extending those gains. Dow rose 56, advancers 3-1 over decliners & NAZ was up 19. Banks joined in with gains. AIG (AIG) & Citigroup (C), recent flyers for those seeking risk, were off 4.20 & 17¢ respectively.


500 FINANCIALS INDEX

Value 192.16

Change 1.19

% Change 0.6%

S5FINL:IND






The Alerian MLP index rose 2.29, taking it into the 240s while the REIT index was up 5¼. Junk bond funds were higher & the VIX, volatility index, was up slightly, still in the 25s, in its low range for 2009.

Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months




VIX --- 6 months






Commodities were strong along with stocks. Oil shot up back into the 71s, closing in on its yearly high of 75. But the big news was gold cracking 1K. It was not able to hold that level, but bulls are trying to take it to new highs. The weak dollar is driving some of the buying. The € is up to $1.45 & the Japanese ¥ rose to 92+ to the dollar. A weak dollar is generally not good for the stock market, reducing the value of stock holdings of foreigners. Low interest rates in the US can cause investors to seek higher rates in other currencies. Australia, Brazil & South Africa, among others, benefit from this flight to quality reversal.

CLV09.NYM

..Crude Oil Oct 09

..71.29

.. 3.27 ......(4.8%)

GCU09.CMX

..Gold Sep 09

..995.90

.. 1.00 ......(0.1%)

The Treasury auctioned off $38B in 3 notes today & the auction went well. The bids were strong & especially from the group which includes foreign interests. However the yields on Treasuries were mixed. The 3-year Treasury note was flat at 1.43% annualized rate while the 10-year bond fell bringing its yield up 3 basis points to 3.47%


There is growing attention to the fact that low priced, risky stocks have been leading the markets in 2009. The brave who bought earlier this year have enormous gains but some are questioning the concept of coming too far, too fast & the implications about the underlying pinning for the market gains. The chart below shows the Dow is up 3K in 6 months. That 46% gain would be a tremendous rally over 3 years. So far, so good. In the early part of terrible Sep, Dow is up 1.

Dow Jones Industrials --- 6 months