Stocks surge on continued easy money expectations

Favorable announcements by the G-20 brought out stock buyers in droves. Dow rose 203 to 10,226, another 2009 high, advancers ahead of decliners 5-1 & NAZ was up 41. Banks benefited from the enthusiasm as the Financial Index jumped 7 (up more than 5 is a very good day). However, this index remains below 212 which is needed for a new 2009 high.


S&P 500 FINANCIALS INDEX

Value 199.43

Change 6.98

% Change 3.6%

High yields had another outstanding day. The Alerian MLP Index was up 3¼ to the 261s while the Dow Jones REIT Index jumped 7¾ bringing it to the upper end of its trading range (shown in the chart). Junk bond funds had good gains, taking them within a few percent of the recent highs for 2009. The VIX keeps pulling back from its recent spike on increased fears. The yield on the 10-year Treasury bond slipped 2 basis points to 3.49%.

Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




VIX --- 2 months





Oil stayed at its higher levels & is shooting to get back into the 80s. Gold sold off slightly from the AM, but remains well above the 1100 level in new record territory.

CLZ09.NYM

..Crude Oil Dec 09

..79.37

.. 1.94 ......(2.5%)

GCX09.CMX

..Gold Nov 09

..1,103.90

.. 8.80 ......(0.8%)

The Treasury sold $40B of 3 year notes & it was very successful. Indirect bidders (many are for foreign central banks) accounted for 68% of today's auction with a record 3.3X bid-to-cover ratio (as shown in charts below). Demand was very strong demand. The 3-year notes drew a yield of 1.404%, below the forecast of 1.419%. The attraction of these notes is their yield is substantially above the sub 1% rate on the 2 year notes. The weak dollar is another factor in foreign interest for US Treasury notes. Japan has been the strongest buyer of Treasuries this year, as they have memories of their economic & financial problems in the 1990s.

Treasuries Rise as Dollar Weakness Spurs 3-Year Note Demand


Indirect bidders - 1 year




Bid-Cover Ratio - 1 year





Bloomberg TV mentioned 2 stocks which they consider candidates for raising divs. One was Automatic Data Processing (ADP), a Dividend Aristocrat, I just included in an article for SeekingAlpha. They have a track record of raising divs & want to continue in this elite group. The stock was up 63¢ to 42.95 with a yield of 3%.

Automatic Data Processing --- 1 year

The Federal Reserve said GMAC (now a bank) will get more taxpayer money from the $700B TARP bailout funds. Nine of the 10 banks which needed assistance in May have raised money from private investors, by selling assets or by converting preferred equity into common shares. GMAC is the only laggard.

Fed: GMAC to receive more bailout money- AP



The Dow & gold each reached new highs for this year. The difference is gold is at a record high versus Dow needs another 4K to make that statement. Treasury auctions will continue this week. For the time being demand is strong for those notes, partially because of the weak dollar. But the run up in gold is a worry.

Dow Jones Industrials --- 2 months




Gold (ETF) --- 2 months