Dow keeps sputtering below 11,000

Stocks could not decide what to do for a 2nd straight day. Bulls must be frustrated by Dow's inability to crash thru the magical 11K ceiling. After getting into the black late in the day, Dow ended down 3, internals improved in the PM so that advancers beat decliners 4-3 & NAZ gained 7. Banks are reaching new highs for the last 18 months. The chart for the Financial Index below shows some of its dramatic run up, especially in the last 2 months.


S&P 500 FINANCIALS INDEX

Value 221.19

Change 2.29

% Change 1.0%

The Alerian MLP Index edged up a fraction still in the 311s, but good enough for another record high since the sell off in mid 2007. The Dow Jones REIT Index rose another 4+ to the 208s, up 10 this week (following my article last week at SeekingAlpha.com questioning the sustainability of the rally in REITs). I don't know, but at least my REITs are doing well. Junk bond funds were a little soft but following a record run for more than a year, they need a break to recuperate. Treasury bonds slipped back in the PM, bringing the yield to off only 2 basis points closing at 3.97%. The continuing threat of it going over 4% (maybe way over) has to be weighing on the stock markets.

Alerian MLP Index --- 1 year




Dow Jones REIT Ind- 1 year





Commodities have been in a broad rally in the last 2 months on the assumption that an economic recovery will bring higher demand for commodities. Well not quite all, gold has been left behind because it needs other forces to bring aggressive buying.

CLK10.NYM

..Crude Oil May 10

..86.87

.. 0.25 ......(0.3%)

GCJ10.CMX

..Gold Apr 10

..1,136.20

.. 3.00 ......(0.3%)

Greek bonds dropped raising borrowing costs, after a rumor that Greece was seeking to revise last month's deal to provide a European & IMF rescue for preventing a default. Markets appear unconvinced that the bailout plan would be sufficient. Greece vehemently denied a report that they were seeking to re-negotiate the rescue plan to avoid IMF participation. Greek borrowing costs shot up sending the interest rate gap (spread between Greek 10-year bonds & equivalent German issues) surging to 406 basis points, or 4.06%, during the day. The drama plays on, but this is not good for the European & global financial systems. Other countries, such as Portugal & Spain, are watching since they are next in line for bailouts.

• Greek bond yields soar above 7%- AP

Federal Reserve officials in Mar stressed the importance of making sure record-low interest rates don't feed new speculative bubbles in stocks or other assets. And some officials said the FED's pledge to keep rates low for an "extended period" doesn't mean a fix period of time. Instead, it depends on the strength of the economy. There is some worry that extended low interest rates can cause financial imbalances, so the FED will continue to monitor economic statistics. Minutes from last month's meeting provided no new insights & failed to move the markets. But markets were encouraged that was no indication of raising rates which brings up the next logical question of how markets will react they hear about raising rates. A general feeling is they will wait until after elections in the fall.

•Fed Officials Saw U.S. Recovery Curbed by Unemployment Rate, Minutes Show



This is a tough time for the bulls who don't have the strength to bring the all important Dow up to its next strata. 2 straight days of failure to even crack that ceiling is testing the bulls. Interest rates on the 10-year Treasury have cracked but were not able to hold above their 4% ceiling. But they also remained close. One of the 2 has to give way which could relieve upward pressure on the other.

Dow Jones Indust - 1 year

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