Overbought stock markets take time to rest

Even exuberant stock markets need time to take a breather. Dow is up 29, advancers are ahead of decliners 3-2 & NAZ is up 3 (restrained by a so-so earnings report from Oracle (ORCL)). Banks, as usual, are leading the way up (to another 2009 high).

S&P 500 FINANCIALS INDEX

Value 206.52

Change 1.69

% Change 0.8%

The 12 month chart below shows the Alerian MLP Index is up ¾ at a 12 month high because higher prices in early Sep were dropped. Very impressive, looks like MLPs don't have a care in the world. REITs have a similar story, but not quite as extreme. Their index, up 2 today, is back to levels from last Oct (they do have a few cares to worry about). Junk bond funds keep charging ahead, bringing lower yields & yield spreads over the 10-year Treasury. Yields for junk bonds are around 11-12% (or even less) & the spread over the 10-year Treasury is about 800 basis points, high by traditional standards but down more than 50% from the recent highs when yields were astronomical. The yield on the 10-year Treasury bond is down 4 basis points to 3.43%, roughly where it has been over the last few months.

Alerian MLP Index --- 1 year




Dow Jones REIT Index --- 1 year






Oil is climbing again getting near the 75 high. Gold is pausing to rest after yesterday's record. Gold is not supposed to be flying like this in a bull market, but it is. The very weak dollar is driving interest in gold.

• Gold hits all-time high- CNNMoney.com

CLV09.NYM...

Crude Oil Oct 09

...72.94

... 0.43 .......(0.6%)

GCU09.CMX

...Gold Sep 09

...1,015.60

... 3.30 .......(0.3%)

Last night Oracle, a big software company, reported lower sales in its traditionally weak Q1, but had half way decent earnings thanks to cost cutting programs. ORCL dropped 75¢ & has a chart which shows a more mild recovery compared with other tech stocks. FedEx (FDX) reported Q1 earnings down 53% (in line with guidance) but added it sees signs of improvement in the global economy. Revenue fell 20% to $8B. FDX reiterated its profit prediction of 65-90¢ per share for Q2 ending Nov 30, down from $1.23 last year. FDX fell 1.08.

•Oracle dips after disappointing sales results

FedEx 1Q profit falls, sees improving economy


Oracle --- 1 year



FedEx --- 1 year




Dow has had an enormous run from its lows a few months ago, trying to get back to 10K which it first reached 12 years ago. Those who bought index funds tied to the Dow then have only about a 2% annual yield from divs after all that time.

Dow Jones Industrials --- 1 year




Dow Jones Industrials --- 38 years