Stocks rise on encouraging manufacturing and housing data

Markets got off to a good start & continue with solid gains. Dow is up 108, advancers ahead of decliner 3-1 & NAZ rose 14. As expected, banks are having a good day, but the Financial Index is near the low end of its range for the last few months.

S&P 500 FINANCIALS INDEX

Value 192.05

Change 3.02

% Change 1.6%

High yield sectors do well in rising markets. The Alerian MLP Index was up 2 to the 256s & the Dow Jones REIT Index was up a more modest 1. Junk bonds funds recovered after the sell-off last week. Treasuries slipped slightly, the yield on the 10-year Treasury bond went up 2 basis points to 3.41%. After excitement on Fri, the VIX retreated 2 to the 28s but remains at very high levels.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 6 months





Commodities were also strong. Oil is up, heading back for the 80s, & gold had a very big pop, taking it near its record high in the last month.

CLZ09.NYM

...Crude Oil Dec 09

...78.20

... 1.20 ......(1.6%)

GCX09.CMX

...Gold Nov 09

...1,061.00

... 21.30 .......(2.1%)

GLD ETF --- 1 month





US manufacturing grew in Oct for the 3rd consecutive month & at a faster rate than expected. The index of national factory activity rose to 55.7 from 52.6 in Sep (the estimate was 53). This is the highest since 56.0 over 3 years. A reading above 50 indicates expansion, while a number below that means contraction. The employment index for the manufacturing industry jumped to 53.1 from 46.2 last month, again the strongest showing since Apr 2006.

•Manufacturing in U.S. Expands at Faster Pace as Factories Propel Growth


Pending home sales rose in Sep to their highest level in nearly 3 years (ahead of the expiration of the tax credit for first-time buyers). The Pending Home Sales Index, based on contracts signed in Sep, rose 6.1% to 110.1 -- the 8th straight monthly rise & the longest streak since the measurement started in 2001. The strength is timing related, it probably will slide back when Nov & especially Dec numbers are reported.

Pending Sales of Existing Homes in US Rise 6.1%

CIT (CIT) gave up its struggle to avoid collapse & filed for Chapter 11. They provide badly needed credit to thousands of small & mid-sized businesses, a critical part of the retail sector. Its lending operations will continue to operate as it hopes to shed $10b in debt coming out of bankruptcy by year end (if all goes well). But this will add to the instability in the retail sector. About 60% of the apparel industry depends on CIT for financing.

CIT Group Files Bankruptcy, Seeks to Reduce Debt

The manufacturing news was good. Home sales news is more mixed especially when measured against the good old days when home sales were more than double current levels. Risk averse has been creeping back into the markets, taking Dow below 10K. Markets are still on defense.

Dow Jones Industrials --- 2 weeks