Monday, November 30, 2009

Stocks rise as Dubai debt concerns ease

Stocks spent much of the day under water. Buying returned late in the day bringing markets back into the black on what could have been a very rough day. Dow gained 34 (120 below the high for 2009 reached last Wed), advancers ahead of decliners 4-3 & NAZ was up 6. Banks had a very good day, the thinking was that banks (especially regional banks) will not be affected by any problems with Dubai debt (this also helped REITs). But the Financial Index can't get away from the 200 line. It has spent much of the last 3 months under it while the Dow gained 10%.


% Change

The Alerian MLP Index was down pennies still in the 267s but the REITs index rose a big 6½. Junk bond funds were mixed to higher. The 10-year Treasury bond inched up, reducing its yield by 1 basis point to 3.20%.

Alerian MLP Index --- 2 months

Dow Jones REIT Index --- 2 months

Oil bounced off its 75 floor while gold eked out a gain near its record highs.

CLF10.NYMCrude Oil Jan 1077.28 Up 1.23

GCZ09.CMX..Gold Dec 09..1,176.00 ..Up 1.80

The Federal Reserve Bank of New York said it will sell securities from its portfolio, with an agreement to buy them back later (reverse repos). Reverse repos are a tool the FED uses to drain money to ease financial troubles. They said the operations will be "extremely small" & won't affect the FED's key interest rate. This move should be viewed as testing the waters to get ready for unwinding (selling) massive amounts of Treasury debt (over $2T) which it owns.

The drab reading on BlackFriday sales along with questions raised about Dubai debt were very dark clouds overhanging the markets. But they adjusted well & ended with gains. The jobs report with the important unemployment rate for Nov is coming on Fri.

Dow Jones Industrials --- 2 months

Markets slip on Dubai debt uncertainty

Dow dropped 30 after a positive start, decliners ahead of advancers by 15% & NAZ was down 14. Banks were a little higher, but off their highs.


% Change

The Alerian MLP Index is down pennies in the 267s, just off its yearly highs, but the Dow Jones REIT Index gained 1½ after its recent sell-off. Junk bond funds were mixed after a slightly up week. Treasuries slipped, the yield on the 10-year Treasury bond rose 2 basis points to 3.23%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

In the worldwide confusion about Dubai, oil & gold found a few buyers.

CLF10.NYM...Crude Oil Jan 10...76.71 ...Up 0.66

GCZ09.CMX...Gold Dec 09...1,175.70 ...Up 1.50

Heavily indebted Dubai World is not guaranteed by their gov, offering little direction to anxious investors. On the first day of trading since news of Dubai World's debt crunch became public, Dubai's main stock exchange dropped 7+% while the Abu Dhabi exchange fell 8+% -- the steepest falls in at least a year. Driving the financial avalanche was the announcement last Wed that conglomerate Dubai World would seek at least a 6 month reprieve on its $60B in debts. The obligations were amassed during years of a building spree that turned the desert emirate into the Middle Eastern version of Las Vegas & Wall Street. Uncertainty about what step the emirate would take next had cast a pall on world markets. However, Asian markets rebounded Monday after taking a tumble late last week while European markets were down slightly.

Dubai Shares Sink, Abu Dhabi Index Drops Most in Eight Years on Debt Delay
Dubai World's Debt Isn't Guaranteed by Government, Finance Official Says

Dubai Financial Market Index - 1 year

Abu Dhabi ADX Index - 1 year

The good news is that holiday shopping held steady through the Thanksgiving weekend. But economic worries about jobs were still apparent as shoppers mostly stuck to their lists & focused on practical items. The big worry is that consumers may not return until the final hours before Dec 25. According to preliminary figures released by ShopperTrak, a research firm that tracks more than 50K outlets, sales rose 0.5% over last year to $10.66B on Fri. That represented a 3% increase above last year. Online sales Thurs & Fri, however, rose 11% to $913M, according to Score, an Internet research firm. The National Retail Federation trade group said it's sticking to its forecast for holiday sales to decline 1% from last year.

Holiday Sales Will Drop 1% in U.S. as Forecasters See `Disciplined' Buying

Holiday sales were mushy & the Dubai situation is cloudy. Stocks are back on defense. At least they held up pretty well all considered.

Dow Jones Industrials --- 2 weeks

Friday, November 27, 2009

Dubai woes ease

Dow fell 154, decliners over advancers 5-1 & NAZ was off 37. The popular averages remain within striking distance of their 2009 highs set in the last week (or so). Banks however are not so fortunate. The Financial Index is waffling around the low end of its 190-210 range (shown in the chart below), a disturbing indicator for market bulls.


% Change

The Alerian MLP Index held up well, down only fractionally. The Dow Jones REIT fell a very big 5 taking it 10% below its high reached 2 months ago. Junk bond funds recovered ending with minor losses.Treasuries, amongst all the uncertainty, were very strong. The yield on the 10-year Treasury bond dropped 6 basis points to 3.21%. There is a feeling that more money may be going into Treasuries which has the potential to put a crimp in the stock market's rally.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Oil recovered a little of its earlier loss, the same with gold. The 75 floor held for oil, a good technical indicator for its bulls.

CLF10.NYM..Crude Oil Jan 10..76.05 ..Down 1.91

GCZ09.CMX..Gold Dec 09..1,177.80 ..Down 9.20

For this week, Dow was only down 10. One headline at Yahoo shows "shoppers packed stores as holiday season revs up." I helped by going to Staples. Over the weekend they may sort out more about Dubai & who holds what debt.

Dow Jones REIT Index --- YTD

Stocks tumble on Dubai debt crisis

Dow recovered to a loss of 130 after a plunge of 200 at the opening, decliners ahead of advancers 5-1 & NAZ dropped 26. Dubai worries dominate thinking. Banks slumped taking the Financial Index to the low end of its current trading range.


% Change

Like the general market high yielders plunged on the opening, but buying reduced losses. The Alerian MLP Index was down 5, then the loss was cut to only pennies. The REIT index has recovered more than half of its original 4 point drop. Junk bond funds sold off in sympathy with the stock markets fall. The VIX jumped more than 5 on the opening, but that has been reduced to less than 3. Treasuries were in demand. The yield on the 10-year Treasury bond dropped 5 basis points to 3.23%, near its lowest levels in more than 6 months.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index - 6 months

Oil sank to the low end of its recent trading range, but at least that floor held. Gold is down, but starting from almost 1200 gold bugs aren't complaining.

CLF10.NYM...Crude Oil Jan 10...75.13 ...Down 2.83

GCZ09.CMX...Gold Dec 09...1,172.50 ...Down 14.50

BlackFriday sales result should be dominating stock market worries, but not today. There is plenty of confusion about Dubai & its debts. Stocks sold off badly based on gut reactions. Buyers are returning, narrowing the early AM losses. No point discussing Dubai debt problems since few have any idea what's going on. The articles below give some thoughts.

Dubai Woes May Escalate to `Major Sovereign Default,' Bank of America Says
Mobius Sees a `Correction' From Dubai Crisis as Das Predicts Risk Aversion
Dubai Debt May Exceed $80 Billion on Off-Balance-Sheet Liability, UBS Says

This was supposed to be a quite day of trading with markets closing at 1PM EST. Not today. The worry is that perhaps $80B in Dubai debt could default creating another Lehman kind of disaster. Fears subsided allowing stocks to recover (great opportunity for day traders to buy on the opening & take profits before starting the weekend). If Dubai doesn't blow up, attention will switch back to BlackFrdiay sales & implications for retail sales. By the middle of next week, Nov auto sales will be reported giving a clue about consumer buying habits.

Dow Jones Industrials --- 2 weeks

Wednesday, November 25, 2009

Dow edges up to a new high for 2009

Markets just lumbered along on a very quiet day as many successful players already started their long holiday weekend. Dow gained 30 to 9464, good enough for another new high for 2009. Advancers were ahead of decliners 2-1 & NAZ gained 6 (but short of a new yearly high). Banks lost ground remaining in the low end of their 3 month trading range, disturbing for those who want banks to lead a rally.


% Change

MLPs continue their winning ways. The Alerian MLP Index was up 2.73 to the 268.38, another 2009 high. At the start of Sep 2008, just before the markets began plunging, the index was at 270. It has almost returned with many of the stronger MLPs at or near their record highs from 2007. The Dow Jones REIT Index had a ½ gain, still 11 below the interim high set 2 months ago. Treasuries having been quietly sneaking up as of late. The yield on the 10-year Treasury bond was off 4 more basis points to 3.29%, taking it near its recent low. The yield is close to its lowest in the last 6 months. Demand for stocks & Treasuries is strong simultaneously.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

10-Year Treasury Yld Index - 3 months

Oil took off in the PM, the 75 floor held. Gold continues to soar, next stop is 1200 (maybe next week).

CLF10.NYM..Crude Oil Jan 10..78.01 ..Up 1.99

GCX09.CMX..Gold Nov 09..1,186.90 ..Up 21.40


Gold video that redirects to the Course landing url! Click Here

Last week, the number filing first-time jobless claims fell 35K to 466K, the fewest since Sep 2008. However, weekly jobless claims would have to drop below 400K for several weeks to signal actual growth in employment. This drop may be part of the regular bobbing around from one week to the next.

Jobless claims dip, spending up in sign of rebound - AP

Volume was slooow & on Fri exchanges will close at 1PM. NYSE floor volume was only 0.8B. The exciting news is gold soaring to another record. This is difficult to fathom, stocks reaching yearly highs while gold is setting fresh records almost daily. When there is optimism that the recovery is strengthening, gold is not supposed to lead the way!

Dow Jones Industrials --- YTD

Happy Thanksgiving to all!!

Higher stock markets on sales of new homes

Dow is up 47, advancers ahead of decliners 5-2 & NAZ rose 9 on a quiet, but encouraging day (less encouraging for banks) on light volume.


% Change

The Alerian MLP Index is up 1+ to the 267s, another 2009 high. MLPs responded to Kinder Morgan's (KMP) announcement last night about an increase in their 2010 distribution. The Dow Jones REIT Index is also up 1+. Junk bond funds are higher & the yield on the 10-year Treasury is up 2 basis points to 3.34%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil is slipping again, getting near the 75 floor which has held for more than a month. No posting for gold.

CLF10.NYM...Crude Oil Jan 10...75.79 ...Down 0.23

Sales of new homes rose in Oct 6.2% to an annual rate of 430K from an upwardly revised 405K in Sep, the highest level in more than a year as strong activity in the South offset weakness in the rest of the country. There were 239K new homes for sale at the end of Oct, the lowest inventory level in nearly 4 decades. At the current sales pace, that's a 6.7 months of supply, down from last winter's peak of more than a year. The surge in sales was driven entirely by a 23% increase in the South. Despite the lack of certainty about the tax credit that buyers faced in Oct, sales were up 5.1% from a year ago, the first yearly increase in 4 years. The median sales price of $212K was essentially even with $213K a year earlier & up almost 1% from the prior month.

Sales of New Houses in U.S. Rise to Highest Level Since 2008 on Tax Credit

Purchases of new homes - 1 year

Not a lot to be decided today but Dow is shooting for another 2009 high.

Dow Jones Industrials --- 2 weeks

Tuesday, November 24, 2009

Stocks drift lower

Markets started weaker, then sellers gave up. Averages rose during the day but lacked enough oomph to break into the black. Dow fell 17 (& failed to record another 2009 high), decliners ahead of advancers 4-3 & NAZ dropped 6. Banks were weak all day on news about more bank failures & problem loans.


% Change

MLPs found buyers in the PM pushing the Alerian MLP Index up 2+ to the 265s, (on its yearly high). However REITs were soft, their index pulled back 2½. It needs 13 to reach a new high for 2009. Junk bond funds were a little higher, they have been flat near their yearly highs (with correspondingly lower yields) for the last 2 months.

Kinder Morgan (KMP) announced they plan to pay a $4.40 distribution in 2010, up from $4.20 this year. The stock gained 57¢ to 57.20, $4 below its record high of 61 reached 18 months ago.

Kinder Morgan expects to pay $4.40 annual dividend

Alerian MLP Index --- 2 months

Dow Jones REIT Index --- 2 months

Oil continues range-bound & gold settled back for a nominal gain.

CLF10.NYM..Crude Oil Jan 10..76.09..Down 1.47

GCX09.CMX..Gold Nov 09..1,165.50 ..Up 1.20

The Treasury had another record auction of debt, this time $42B of 5-year notes with a yield of 2.175%. The bid-to-cover ratio was a very strong 2.81X (its strength is shown in the graph below). Indirect bidders (including foreign central banks) bought 61% of the issue. Again, the graph below shows how important this class of buyers has been while the Treasury has been selling over $1T in new debt.

Treasury Notes Rise After $42 Billion 5-Year Sale as Fed Looms

Bid to cover ratio - 1 year

Indirect bidders - 1 year

The report from the FDIC about bank failures was to be expected. When that hit the markets sellers took over, but not too badly this time. Volume continued low in this holiday week. Wed & Fri should be even slower than today (NYSE floor volume was just under 1B).

Dow Jones Industrials --- 2 months

Stocks struggle to advance

Popular averages rebounded a little after initial selling. Dow was off 33, decliners over advancers almost 2-1 & NAZ was down 10. Buying in the PM can still take the Dow to another yearly high. After getting a lot of attention, banks are selling off. The Financial Index can't get away from sideways pattern near 200 which has lasted for 3 months.


% Change

The Alerian MLP Index rose pennies in the 263s, still aiming for a 2009 high into the 266s. But the Dow Jones REIT Index dropped 2 & junk bond funds were mixed. The yield on the 10-year Treasury bond fell 2 basis points to 3.34%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil keeps waffling in the 75-80 range while gold charges higher to new records.

CLF10.NYM...Crude Oil Jan 10...76.15 Down 1.41

GCX09.CMX...Gold Nov 09...1,169.80 ...Up 5.50

Banks earned $2.8B in Q3, but loan balances plummeted & the fund that insures their deposits was $8.2B in the red. Souring loans continued to hurt bank balance sheets, but they were buoyed by higher operating revenues & a revived market for securities according to the FDIC. The number of banks on the FDIC's "problem list" rose to 552 in Q3 from 416 in Q2, the highest level in 16 years. 50 banks failed during the qtr, the largest number since 1990. Bank failures this year through 2013 are expected to cost the fund $100B, mostly in 2009 & 2010. This dreary assessment of bank results helps explains why the Financial Index has not risen in 3 months.

‘Problem’ Banks at 16-Year High in Third Quarter, FDIC Says

Confidence in the economy improved slightly in Nov but shoppers remain gloomy heading into the holiday shopping season amid a weak job market. The Conference Board said that its Consumer Confidence Index edged up to 49.5 from a revised reading of 48.7 in Oct. The index had hit a historic low of 25.3 in Feb. A reading above 90 means the economy is on solid footing, above 100 signals strong growth. Depressed spending is likely to persist for several years amid stubbornly high unemployment. Shoppers' assessment of the job market remains weak. Those claiming jobs are "hard to get" increased to 49.8% from 49.4%, while those claiming jobs are "plentiful" decreased to 3.2% from 3.5%.

Consumer Confidence in U.S. Unexpectedly Increased

Jobs are plentiful (%) - 1 year

Jobs are hard to get (%) - 1 year

This is another sleepy day on low volume during a holiday week. Retailers are getting ready for the all important holiday selling season in Q4 (when a large portion if not all yearly profits are earned at retailers). They are worried, but it's just another major worry for investors. Sluggishness in banking stocks is negatively impacting stock markets today.

Dow Jones Industrials --- 2 weeks