President's speech across from NYSE does little for markets

Out of the gate, the Dow plunged 80 (almost 1%) but recovered quickly & spent the rest of the day near break even. Dow rose 21, advancers ahead of decliners almost 2-1 & NAZ was up 10. Bank stocks also started weak, but picked up steam. The Financial Index closed inches from 198+ (the 2009 high reached in late Aug):

S&P 500 FINANCIALS INDEX

Value 197.93

Change 2.83

% Change 1.5%

The Alerian MLP Index gained another 1¼ to 247 (252 is the yearly high). The Dow Jones REIT Index shot up 5 to a new 2009 high at 167. Junk bond funds were up, again generally to new 2009 highs. Meanwhile Treasuries were off, the yield on the 10-year Treasury bond rose 6 basis points to 3.41%. Risk is welcome, not being avoided as it was late last year.

Money continues to be lent to & invested in MLPs. Plains All American Partners (PAA) just completed selling 5.3M units, proceeds $246M. Their units closed down a penny to 47.64.

Plains All American Pipeline, L.P. Completes Public Offering of Common Units


Alerian MLP Index --- 6 YTD




Dow Jones REIT Index --- 2 months





Oil was down about 40¢ taking it below $69 & gold slipped 5 to essentially 1K.


There is talk about that the US recovery may be the slowest in the post World War II era. The 3½% average quarterly growth rate in 2010 won’t be enough to bring GDP back to its pre-crisis peak (compared with the last 10 recoveries when GDP returned to previous levels within 12 months). Unemployment may remain close to 9.7% (a 26 year high) through 2010, forcing interest rates to be kept near zero & the budget deficit around the record $1.6T. There is fear the US might not recover the 6.9M jobs & the $14T in wealth lost during the recession until the middle of the decade. Such a scenario would be a damper on stock prices going forward.

•Recovery for U.S. Slowest Since World War II Even When Optimists Are Right


Citigroup (C), a troubled mega financial institution, intends to repay funds from TARP & taxpayers will make a profit according to Chairman Richard Parson. He can't put a time frame on it (repaying funds), but "I’m very confident we’ll get there." Citi received a $45B injection from the bailout program & $25B of those funds were converted into a 34% ownership stake. Although it's recovered from its $1 low earlier in this year, it still has a lot of very unhappy stockholders (shown in the chart below). Citi dropped 9¢ to 4.52 today.

•Citigroup's Parsons Says Bank to Repay TARP Funds, Provide `Decent Return'


Citigroup --- 2 years





The pres gave a speech today in front of Federal Hall (across the street from the NYSE) remembering the last 12 months after the Lehman collapse which has been as brutal a period as they come. Obama warned against complacency as the financial crisis ebbs & said Wall Street firms must accept a new regime of “common-sense” regulations to avoid another market meltdown. Sounds good, but more regulations, while needed, will not go over well with financial institutions.

Dow Jones Industrials --- YTD