Stock markets advance on increased economic confidence

Late day buying carried stocks to new 18 month highs. Dow rose 102 to almost 10.9K, advancers over decliners 5-2 while NAZ was up 19. Dow is back to levels not seen since the start of the plunge in Oct 2008 & NAZ last saw its levels in the early days of Sep 2008. Banks also had a good day, bringing the Financial Index to its best levels in 1½ years.

S&P 500 FINANCIALS INDEX

Value 214.04

Change 1.63

% Change 0.8%

The Alerian MLP Index was up pocket change still in the 299s following major swings in the last few days. The Dow Jones REIT Index slipped a fraction but held 200. Junk bond funds were firmer (higher). Higher stock markets generally bring more demand for junk bonds & their funds. The yield on the 10-year Treasury bond rose 2 basis points to 3.68%, stuck in its sideways range.


Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months





Oil & gold were up a fraction. Charts below show they have been trading sideways for months. 26 on the OIL graph corresponds to a price of about $80.

CLK10.NYM

..Crude Oil May 10

..81.90

.. 0.30 ......(0.4%)

GCH10.CMX

..Gold Mar 10

..1,103.50

.. 4.20 ......(0.4%)

OIL (ETF) --- 6 months




GLD (ETF) --- 6 months






A German Finance Ministry official said that Germany & France have agreed that the International Monetary Fund (IMF) should be involved in an aid package for Greek debt. Such an agreement could lead to progress on a European Union agreement to help Greece finance the region’s biggest budget deficit. This situation remains fluid, perhaps there will be an agreement later this week. This announcement helped US stock markets, but the € was little changed at $1.35.

•Germany, France Agree on IMF Role in Greece's Budget Crisis, Official Says



The 2009-10 record rally for junk bonds is reviving interest in a buyout market that has been frozen since 2007 when $1.7T of new borrowings decimated the credit ratings of acquisition targets. Private-equity firms are sitting on an estimated $.5T in unspent money. Deals are expected to accelerate after the industry announced $88B in transactions over the past 12 months. Private-equity firms historically borrowed two-thirds or more of the acquisition prices in these deals. The extra yield investors demand for owning corp bonds (rather than government debt) is only 154 basis points, the narrowest since Nov 2007.

•LBO Revival Seen for First Time Since '07 in Default Swaps: Credit Markets




Bloomberg had a successful money manager who recommended Citigroup (C) & General Electric (GE & still a Dow stock), 2 oversold favorites of his, which should comeback. He sees Citi back around 8-10 in a couple of years & is encouraged by GE following thru on their announcement to increase the div next year. He also likes Apple (AAPL) although he said there may be a better buying opportunity when the IPAD goes on sale. This is an interesting comparison with the first 2 at depressed levels while AAPL is soaring to the heavens.


Citigroup --- 2 years




General Electric --- 2 years




Apple --- 2 years









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Stock markets decided to extend the health care rally & I'm nervous. Dow managed a decent advance taking it well above the 10.8K ceiling it has been under for months. With its momentum, it's only a matter of time (measured in days) before reaching 11K. Meanwhile economic fundamentals (persistent high employment, depressed housing, etc.) continue.

Dow Jones Industrials --- 6 months

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