Wednesday, December 30, 2009

Averages eke out gains on very light volume

Dow began the day lower, spending the rest of the day slightly underwater. Late day buying brought averages back into the black, barely. Dow was up 3, decliners over advancers 3-2 & NAZ inched up 2. The Financial Index was flat.


% Change

On this indecisive day, MLPs & REITs also inched back into the black on late day buying. Junk bond funds were mixed to lower, but remain near yearly highs. The yield on the 10 year Treasury bond held at 3.81%.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

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Oil & gas didn't do much as 2009 comes to a close. There is talk oil may go higher in the new year along with split views on gold (depending who is giving advice).

CLG10.NYM..Crude Oil Feb 10..79.36 ..Up 0.39

GCF10.CMX..Gold Jan 10..1,093.00 ..Down 4.40

The auction for $32B of 7-year Treasury notes with a yield of 3.35% went fairly well. The bid-to-cover ratio was 2.72X compared to an average of 2.74X in the last 4 sales. Indirect bidders, including foreign central banks, bought 44.7% compared to an average of 61.2% at the last 4 sales. In the after market, Treasuries were marginally lower pushing yields up. While demand was good enough, demand from the important indirect bidders fell off. Not a good signal going forward!

Markets continue adrift as expected with NYSE floor volume still at .6B shares. Considering how big the gains were in 2009, it will be tough to keep going at that rate. The story on interest rates has not been getting the attention it deserves. Bonds had one of their best years in 2008, bringing interest rates down to essentially record lows. In 2009, Treasury bonds had one of their worst years causing rates to shoot up substantially. Stocks will have tough going if interest rates continue their upward trend. The chart below shows Dow has been topping out around 10.5K suggesting it may need more than a pause in the new year. Interesting that NAZ still has a strong chart.

Dow Jones Industrials --- YTD

Nasdaq --- YTD

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