The January effect lifts stocks

Markets started with strong gains in the first ½ hour & remained on the plateau for the rest of the day. Dow rose 155, advancers ahead of decliners 4-1 & NAZ gained 39. Popular averages reached new highs not seen in at least 15 months. Banks had a decent rally, helped by the speech of the new Bank of America president (see below).

S&P 500 FINANCIALS INDEX

Value 197.79

Change 4.01

% Change 2.1%

MLPs exploded out of the gate. The index gained 6+ to the 291s (not seen in 18 months). However, the Dow Jones REIT Index slipped 1 on worries about real estate. Junk bond funds had good advances. Treasuries inched up, the yield on the 10-year Treasury bond dropped 2 basis points but remains in high territory at 3.84%.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks







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Commodities benefited from enthusiasm about improving economies around the world. Oil jumped thru the 80 ceiling & gold had a good day.

CLG10.NYM

...Crude Oil Feb 10

...81.54

... 2.18 .......(2.8%)

GCF10.CMX

Gold Jan 10

...1,117.70

... 22.50 .......(2.1%)

Photo: Bloomberg


The new CEO of Bank of America (BAC), Dow stock, Brian Moynihan, gave a speech on his first day at work saying the recession’s impact is fading & the bank’s biggest acquisitions are over, allowing him to focus on rebuilding relationships with customers. He feels that, "The worst is behind us in the sense of credit." & added, "As an industry, we over-lent and customers over-borrowed, and that led to a fairly significant bubble. If you could rewind the clock, you wouldn’t do those things again." BAC is expected to report its 3rd loss (for Q4) in the past 5 qtrs, amounting to 50¢ a share. Credit card defaults are “still very high." An analyst on Bloomberg was optimistic about BAC in 2010. He said losses will play out this year enabling them to report favorable results, probably beginning late in 2010. As long as they stay away from acquisitions (current events dictate that), they should do well.

•BofA's Moynihan Says Worst of Recession Over, Bank Industry Learned Lesson


Bank of America --- 2 years





I get nervous when the markets keep surging ahead in the face of great levels of uncertainty. In today's speech from BAC, there was a reminder that the recovery is fragile & is expected to proceed at a modest pace which will not enable substantially more hirings. On the margin, the rally in junk bonds taking their yields down to around 10% is disturbing. That level is only about 100 basis points above the levels in the best of times. With housing still in the dumps, retail sales so-so at best & high unemployment (17% if the underemployed are counted), it's premature to consider these as the best of times.

The beginning of a new month means sales reports are coming followed by the Dec unemployment report at week's end. Tomorrow, initial reports on auto & retail holiday sales ought to be released & should be weak. But buyers may be encouraged in a market where beating lowered expectation is good enough. The basset picture at the end summarizes my feelings about the markets.


Dow Jones Industrials --- 2 weeks




Nasdaq --- 2 weeks