Wednesday, October 21, 2009

Stocks tumble in the last hour

Markets started the day strong but faded. The Dow shot up to 10,100 out of the gate but then its was all downhill especially in the last hour. Dow fell 92, going back under 10K, decliners ahead of advancers by 3-2 (it had been 3-1 in favor of the advancers earlier in the day) & NAZ dropped 12. Banks led the decline, the Financial Index plunged 6 in the last hour after an influential analyst recommended selling Wells Fargo (WFC):


% Change

The Alerian MLP Index gained .93 to the 265s (but off earlier highs) & the REIT index was down 2 after a nice gain in the AM. Junk bond funds keep climbing. The VIX rose 1.32 to 22.22 after touching a new 14 month low of 20 in the AM. Treasuries were weak today, the yield on the 10-year Treasury went up 7 basis points to 3.41%.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Kinder Morgan (KMP), the largest MLP, declared their regular $1.05 quarterly distribution for Q4, in line with their guidance at the beginning of the year that their intention was to pay $4.20 in 2009. KMP was up 74¢ ahead of the announcement, but this was a good day for MLPs.

KMP Third Quarter Distribution $1.05 Per Unit

Oil surged to a 1 year high, going over 81. Higher oil prices came after a gov report showed crude supplies in the US are growing & refiners are producing very little gasoline because consumers aren't using as much. Below is a graph of an ETF tracking oil. Off its lows, oil has soared about 20%. Some think the US economy can handle higher priced oil at these levels. Considering how fragile the recovery is, I don't know. Gold is at new record highs, this is not supposed to happen in bull markets.

The weak dollar is helping all commodities. The Japanese ¥ weaken a little in the last week, it now takes 91 to buy a dollar but the € is at a new high, above $1.50. The weak dollar is not good for those who worry about the longer term.

CLZ09.NYM..Crude Oil Dec 09..81.39 ..Up 2.27

..Gold Oct 09..1,063.10 ..Up 5.30

OIL (ETF) --- 1 month

Word was leaked late in the day that firms receiving bailout money (Bank of America, Citi, AIG, GM, etc.) will be asked for big pay cuts for the highest paid execs. This is the kind of announcement that does not warm the hearts of traders, more gov interference, especially when bulls want to take stocks to new heights.

Pay Cuts of 90% at Firms Getting Most Aid Are Said to Be Ordered by U.S.

Dow Jones Industrials --- 1 week

Dow Jones Industrials --- YTD

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