Dow rises after Federal Reserve keeps rates low

Dow gained 53, advancers over decliners 4-3 but NAZ was flat. The 3 big gainers in the Dow with gains of about 1 were Exxon Mobil (XOM), IBM (IBM) & JPMorgan (JPM). Banks remained in the black after the important rate decision, but the Financial Index was off its highs earlier in the day.

S&P 500 FINANCIALS INDEX

Value 217.64

Change 2.77

% Change 1.3%

Buying in the PM limited losses for the Alerian MLP Index to only 1¾ at 311 (8 below the highs on Mon). The REIT Index was up a fraction, still in the 209s. Junk bond funds were mixed as nervousness about European debts might be bleeding thru to the junk bond market. Treasuries sold off big time. The yield on the 10-year Treasury bond rose 8 basis points to 3.77%, recovering much of yesterday's plunge.


Alerian MLP Index --- YTD




Dow Jones REIT Index -- YTD




10-Year Treasury Yield Index - 1 week






Bulls are buying again oil but it remains in the 80-85 sideways trading band. Gold is a higher & has done very well in the last 10 weeks. If more frightened money flows out of Europe, it will have a good chance of taking out last year's record high.

CLM10.NYM

..Crude Oil Jun 10

..83.21

.. 0.77 ......(0.9%)

GCJ10.CMX

..Gold Apr 10

..1,171.80

.. 10.10 ......(0.9%)

Gold Super Cycle!!!
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GLD (ETF) --- YTD






Europe's debt crisis spread to another country when S&P downgraded Spain's credit rating, even as Germany grudgingly moved closer to bailing out Greece from imminent collapse.The agency said it was cutting Spain's rating to AA from AA+ amid concerns about the country's growth prospects following the collapse of a construction bubble. "We now believe that the Spanish economy's shift away from credit-fuelled economic growth is likely to result in a more protracted period of sluggish activity than we previously assumed," according to Standard & Poor's. Spain still has an investment grade rating but could pay more to borrow & may find itself under pressure to take tougher steps to cut spending. Meanwhile the extra yield investors demand to hold Portuguese 10-year bonds rose 59 basis points to 277 points, the most since 1997, before slipping slightly. Spreads for other European countries facing financial difficulties also widened. The € is at a 12 month low, below $1.32.

•Greece Turning Viral Sparks Search for EU Solutions as Aid Estimates Surge

Photo: Bloomberg


The Federal Reserve sounded more confident that the economy is strengthening but pledged to hold rates at record lows to make sure it gains traction. The FED in a 9-1 decision retained its pledge to hold rates at historic lows for an "extended period." Doing so will help energize the recovery. The FED offered a more upbeat view of the economy even as it noted that risks remain. It said the job market is "beginning to improve," an upgrade from its last meeting in mid-March. The FED observed then that the unemployment situation was merely "stabilizing." It also noted that consumer spending has "picked up," an improvement from its last observation that spending was expanding at a "moderate pace." However, even with the improvements, the FED said there was reason to be cautious. High unemployment, sluggish income gains & tight credit are still dampening consumer spending, a major contributor to economic activity. And commercial real estate remains fragile as housing activity is still at depressed levels. Bank lending continues to shrink.

•Fed Repeats Pledge to Maintain Low Rates, Sees Improvement in Labor Market

Extending low interest rates by the FED was expected, making markets happy. However earlier this year the FED said their intention was to start raising rates by year end & it's approaching. The Senate bill for increased banking regulation may get another test vote later today, its fate is still uncertain. The Greek debt drama plays on, sort of a Greek tragedy. Germany is the power player in any bailout & is playing hardball, demanding fiscal discipline which Greece really does not want. While not directly connected, the Spain credit downgrade did not help. The big worry is a 2nd country asking for a bailout (Spain, Portugal & Ireland are in the wings) could be too much for the markets to bear. But US markets are absorbing the news with a sense of calm. I wonder how long that will last! Dow is back over 11K, that recurring statement is getting boring.


Dow Jones Industrials -- YTD

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