Stocks waffle on trade worries

Markets around the world sold off on concerns about international trade problems (i.e. US-China which are the first & 3rd largest economies in the world). Dow & NAZ were near break even while advancers were barely ahead of decliners. Bank stocks hardly moved. The Financial Index has been trading sideways around 190 in Aug & Sep after more than doubling from its lows in Mar.


S&P 500 FINANCIALS INDEX

Value 194.91

Change -0.18

% Change -0.1%

The high yield sector didn't move much. The MLP Index & REIT Index were each flattish. Junk bond funds were quiet at their yearly highs. But the yield on the 10-year Treasury bond kicked up 4 basis points to 3.38% (near the low end of its recent range at 3.3%).

Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




Commodities were little changed. Oil was down pennies near 69 while gold slipped 3 to 1002. The bullish trajectory for gold remains in place.


China filed a World Trade Organization (WTO) complaint over new U.S. tariffs on Chinese tires. The conflict is a potential irritant as US-China prepare for a summit next week to discuss efforts to end the worst global downturn since the 1930s. China's unusually prompt response to the tariff decision shows the urgency China attaches to maintaining exports amid slumping global demand. Pres Obama approved the higher duties to slow the rapid growth of U.S. imports of Chinese-made tires blamed for the loss of thousands of American jobs.

Obama’s China Tariffs May Be Prelude to Opening Trade


Eli Lilly (LLY), a Dividend Aritsocrat, will reduce its work force to 35K (from 40½K) by the end of 2011 However, the new total excludes hirings in high-growth emerging markets & Japan. This measure is to cut costs by $1B annually. LLY will organize itself into 5 units: cancer, diabetes, established markets, emerging markets & Elanco (its animal health business). LLY also backed its annual guidance for profits of $4.14-4.24 per share ($4.20-4.30 per share excluding one-time costs) in 2009. Analysts expect $4.28 per share. The stock was up 24¢ & yields 6%.

•Lilly to Eliminate 5,500 Jobs by 2011 as Drugmaker Aims to Save $1 Billion

Lilly --- 1 year

This is turning out to be a quiet kind of day, giving time to reflect on the 1 year anniversary of the Lehman collapse. Following one of the worst sell-offs in market history, stocks have had a very impressive rally in 2009 (although it has not been shared by all securities as shown in the LLY chart). The greatest rewards have gone to stocks with the highest risks, Citigroup (C) which sank to $1 is one of the many examples. High yield securities have shot up which reduced their yields & narrowed the premium over yields on Treasury bonds. Even half way thru terrible Sep, optimism remains at high levels as the volatility index is in the 24s, its lowest levels in over a year. Bulls remain in charge!

Dow Jones Industrials --- 2 months