Monday, January 4, 2010

Markets explode into the new year

Stocks began 2010 by surging out of the gate. Dow is up 160, advancers 4-1 ahead of decliners & NAZ gained 40. Even banks are having a good day. While the Financial Index is higher, its gain can be thought of as good but not great.


% Change

MLPs started the year like they were shot out of a canon. The Alerian MLP Index rose over 5, shooting for 291. Its 3 year chart is shown below to review how much it has recovered against its 342 all time high. The REIT index had a more tepid gain (up only 1) reflecting doubts about real estate. Junk bond funds are having another excellent day bringing many yields down to 10%. Even Treasuries are rallying, the yield on the 10-year Treasury bond fell 4 basis points to 3.82% (but remaining in high territory).

10-Year3.37511/15/201996-12 / 3.82

Alerian MLP Index --- 3 years

Dow Jones REIT Index --- 1 year

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Oil cracked the important 80 ceiling on the cold weather snap (remember global warming?) in the northeast. Commodities were strong, gold is trying to establish 1100 as a floor from which to rebound.

CLG10.NYM...Crude Oil Feb 10...81.46 ...Up 2.10

GCF10.CMX...Gold Jan 10...1,120.20 ...Up 25.00

The Institute for Supply Management said its manufacturing index was 55.9 in Dec vs 53.6 in Nov (a reading above 50 indicates growth) for the 5th straight month of expansion & the highest reading in 4 years. But a separate report on construction spending sounded a more cautionary note as construction activity fell in Nov for a 7th straight month, the 0.6% was bigger than the 0.4% decline predicted. Other measures of manufacturing around the world also showed growth. China's manufacturing sector expanded in Dec at its fastest rate in 20 months. In Europe, a similar survey in the 16 countries that use the Euro rose to a 21-month high & a manufacturing index for Britain rose to a 25-month high.

Manufacturing in U.S. Expanded More Than Forecast

Factory Index - 1 year

Photo: Bloomberg

Berkshire Hathaway (BRK.A) had its worst performance in a decade (pretty much flat) when compared to the big gains by the Dow. Generally "value stocks" performed only so-so at a time when risk was embraced & rewarded. BRK felt that effect.

Warren Buffett Delivers Worst Stock Performance Against S&P 500 in Decade

Berkshire Hathaway --- 1 year

The new year started with bulls taking charge. The January Effect (fresh money coming into markets in a new year) is taking hold. Last year, risk averse was the main theme but now risk is being rewarded. Risky investments are getting a lot of attention as demonstrated by the strength in high yield sectors.

Dow Jones Industrials --- 1 year

Nasdaq --- 1 year

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