Markets little changed on light volume

Dow dropped all of 1 because of modest selling at the close, advancers & decliners were even while NAZ dropped 2. As a result, markets ended a 6 day streak of up days. Banks also fell, discussed below.

S&P 500 FINANCIALS INDEX

Value 194.35

Change -0.82

% Change -0.4%

High yielders have been feeling selling pressure from profit taking. This was to be expected after the runs they've had in the last 9 months. The Alerian MLP Index was off 1 to the 285s (still up 109 YTD) while the Dow Jones REIT Index fell 2½. Junk bond funds were off fractionally.


Alerian MLP Index --- 3 months




Dow Jones REIT Index --- 3 months




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Oil & gold were little changed as should be the case for the balance of the week. Selling pressure on gold comes from the stronger dollar & expectations of a strong global economic recovery. When the dollar is strong, frightened money buys dollars rather than gold.

CLG10.NYM

..Crude Oil Feb 10

..78.81

.. 0.04 ......(0.1%)

GCZ09.CMX

..Gold Dec 09

..1,097.00

.. 10.20 ......(0.9%)

There was an auction for $42B in 5 year Treasury notes which only went so-so. This auction tied the record amount of 5 year notes but the yield of 2.61% was near the highest for the year. Indirect bidders purchased only 35%, the lowest since July. Tomorrow there will be a $32B auction for 7-year notes. The spread, known as the yield curve, the difference between 2-year & 10-year yields, narrowed to 2.72% from a record 2.88% on Dec 22. A wide spread is cause for worry especially when the Treasury has to keep borrowing vast sums to finance budget deficits.

Treasury 5-Year Note Yields Highest Since August Before Auction

2-Year

1.000

12/31/2011

99-26+ / 1.09

5-Year

2.125

11/30/2014

97-30 / 2.57

10-Year

3.375

11/15/2019

96-15+ / 3.81

5-Year Treasury Yields - 1 year





I wanted to highlight the Financial Index. Below are graphs for 3 of the biggest banks, sort of the good, the bad & the ugly. They are Bank of America (BAC), Citigroup (C) & JPMorgan (JPM) in alphabetical order (BAC & JPM are in the Dow). They have all had very tough going after a 5 month stretch when the Financial Index (led by them) more than doubled. The chart for the Dow at the bottom shows Dow has added another 10% in the last 3 months while they have been sliding. Tradition says banks should lead markets. This disparity will be troubling if it continues.


Bank of America --- 1 year




Citigroup --- 1 year




JP Morgan --- 1 year





Volume was very light, .6B on NYSE floor, making it difficult to read too much into trading especially when prices changes are minimal. If anything, the next 2 days should generate even lighter volume.


Dow Jones Industrials --- 3 months




Nasdaq --- 3 months