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