Wednesday, March 10, 2010

Dow struggles for a 4th day in a row

Since Fri, Dow has been treading water while hugging the 10.5K line. Dow rose only 2, advancers over decliners 2-1 & NAZ had another impressive gain of 18 to another 18 month high. Financials took command today helped with a 3½ advance by AIG (up 11+ in a week).


% Change

The Alerian MLP Index gained 2½ to the 303s, as it extends its streak off the 270 Feb low. The Dow Jones REIT Index was up 1 to another interim high. Junk bonds rose to the highest levels in a couple years. Treasuries were weak, the yield on the 10-year Treasury bond went up 2 basis points to 3.72%, taking it into the high end of its recent range.

Alerian MLP Index -=-- 1 year

Dow Jones REIT Index --- 1 year

Oil managed a modest gain while gold is still in a base building mode.

CLJ10.NYM..Crude Oil Apr 10..81.98..Up 0.49


The gov ran up the largest monthly deficit in history in Feb, on its way to top last year's FY record. These numbers are mind numbing. The Treasury said that the Feb deficit totaled $220.9B, 14% higher than the previous record set in Feb of last year. The deficit through the first 5 months of this FY totals $651.6B, 10½% higher than last year's record. The deficit for FY2010 will hit another all-time high of $1.56T, surpassing last year's $1.4T total. The deficit will remain above $1T in 2011, giving the country 3 straight years of $1T+ deficits. The Feb deficit reflected outlays of $328.4B & revenues of only $107.5B. These numbers are troubling, to say the last!

U.S. Budget Gap Rises to Record $221 Billion on Spending to Revive Economy

Monthly gov spending - 1 year

Monthly revenue - 1 year

The gov wants to spend even more money. The Senate just approved a $138B bill to extend unemployment benefits & provide additional aid to the states. The bill, partially financed by offsetting savings (what are savings?) would add $97B to the deficit. Now it goes to the House. An earlier $18B plan to give companies a tax break for hiring people who have been unemployed for at least 60 days, is STILL awaiting final approval in the Senate.

Senate Approves $138 Billion Bill Extending Unemployment Aid

On a sort of lighter tone, the stock market rally in the last year has been superb. Here's a look at a few leading companies. Caterpillar (CAT) & Wal-Mart (WMT) are 2 Dow stocks. CAT rebounded sharply from the depths. WMT was the best Dow performer in the awful 2008 followed by a so-so year in 2009. Citigroup (C), former Dow stock, roared back sharply from $1 when its just a call option. Actually, it's still pretty much just a call that will not expire (hopefully). Enbridge (EEP), one of my favorite MLPs with a substantial pipeline expansion coming on stream next month, like CAT soared off its lows. Risk was rewarded as more established stocks saw less buying interest.

Caterpillar --- 1 year

Wal-Mart --- 1 year

Citigroup --- 1 year

Enbridge Energy --- 1 year

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Markets continue to look for direction. The leaders are NAZ & the more speculative issues like AIG. That's not a good sign for a bull market at this stage. MLPs, junk bonds are hot & REITs are doing well. Plus fears of bank stocks are evaporating. The seeming less endless $1T deficits should cause even ardent bulls to pause & reflect. Dow is clearly lagging behind the NAZ. The bulls keep trying & trying to take out the 10.7K high, but haven't been able to. It's difficult to make sense of the rally.

Dow Jones Industrials --- 1 year

Nasdaq --- 1 year

1 comment:

Daddy Paul said...

"It's difficult to make sense of the rally."
I'll say. I am not at this point going to add any money long at this point. That said i am going to wait a week or so to hedge my long positions. If we have a pullback at this point I suspect it will be minor. I think in the next month we could have 7 to 12 percent pullback.