Wednesday, January 13, 2010

Encouragement from the Federal Reserve lifts stocks

Stocks rallied after the Federal Reserve released its Beige Book report with modestly favorable thoughts about the economic recovery. Dow rose 53, advancers ahead of decliners 5-2 & NAZ had a very good day gaining 25. Banks were higher, the Financial Index is putting more distance between it & the magic 200 line.


% Change

Buyers returned to the MLP market. The Alerian MLP Index pared losses, down only 1+ to the 291s. There were fears that the tax advantage for MLPs would be harmed. So far that's just talk but with an eager to tax Dem congress, it can not be dismissed. The Dow Jones REIT Index snapped back nicely from yesterday's loss, up 3½. Getting above the 181 former high is important but concerns remain about growing real estate problems. Junk bond funds were higher, many at levels not seen in 18 months. The yield on the 10-year Treasury bond inched up 1 basis point to 3.73%.

Alerian MLP Index --- 1 year

Dow Jones REIT Index --- 1 year

Oil was off today, the bulls hope that the 80 floor holds & should get some encouragement from the FED's report today. In the last year, oil is up significantly & that is showing up at the pump. Gold rebounded a little. Its chart shows the rocky time it's had in the last 2 months after reaching its record.

CLG10.NYM...Crude Oil Feb 10...97.77 ...Down 1.02

GCF10.CMX...Gold Jan 10...1,136.10 ...Up 7.20

Gold, Silver, Platinum...W.T.F.?! Click Here

OIL (ETF) --- 1 year

GLD (ETF) --- 2 months

A new Federal Reserve survey underscores the duality of the economic turnaround: even as the economy grows & the recovery extends its reach geographically, more than 15M remain unemployed. Although "economic activity remains at a low level, conditions have improved modestly." They added, "However, labor market conditions remained soft" in most of the Fed's 12 regions. The FED's survey painted a picture of an economy that is growing at a modest, not explosive, pace. To drive down the unemployment rate, the economy will need to grow robustly.

Economy Improved in 10 of 12 Fed Districts, Signaling Recovery Broadening

This beige book (FED report) reaffirms what the markets already know, but was good enough to bring buyers back to the markets. After testifying before a federal commission, Jamie Dimon, CEO of JP Morgan (JPM), said tax policy shouldn’t be used to "punish" companies. The administration is considering charging financial firms as much as $120B to recoup costs of the taxpayer bailout. Its plans will be announced tomorrow. This spells problems for the markets, especially financials.

Dow Jones Industrials --- 1 year

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