Monday, May 17, 2010

Comeback day brought stock averages back into the black

After being down almost 200 at lunchtime, buyers returned (maybe they had been on a long holiday weekend) taking the Dow up into the black. Dow ended with a gain of 5, decliners 3-2 over advancers (had over 3-1 in favor of decliners earlier) & NAZ was up 7. Oils were weak with the Gulf oil spill getting so much attention & banks sold off (followed by a recovery). At midday the Financial Index was down almost 5 & it also bounced back to break even.


% Change

MLPs took a nasty tumble. While not directly involved in the oil spill in the Gulf, it looks like nervousness about everything in the energy sector is bringing on selling. The Alerian MLP Index dropped 4½ to the 293s. It's still up YTD with a starting point of 286. The REIT index was up a tad in the 205s. Junk bond funds saw selling, down 2% was common. Some of that thinking (a desire for higher yields) may have been behind MLP selling. Treasuries sold off, the yield on the 10-year Treasury bond rose 3 basis points to 3.47%. The VIX, was flattish at just under 31 after being up for most of the day.

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

VIX --- 1 month

Oil was able to hold above the 70 support line, watched closely by traders. Gold was essentially flat but still has bullish winds behind it.


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Exxon Mobil (XOM), Dow stock & Dividend Aristocrat, went down into the 62s before buyers came back to limit its loss to 33¢ in the 63s. Its chart shows it has not done well after the fall off from the days of peak oil prices 2 years ago. The oil spill mess in the Gulf is not their problem but they are feeling its effects. Some fans are bailing out. Its yield is heading towards 3%. Further declines in the stock prices could bring it over 3% which will be tempting for the bargain hunters.

Exxon Mobil --- 2 years

Speaking of oil, BP (BP & formerly known as British Petroleum) is having a very rough go of it. It may have a partial plug for the main well leaking oil. Even if that is the case, more repair work is needed for all 3 wells in the Gulf. The damage is so extensive, there is even talk about potential bankruptcy. In all fairness that is a long way off. One prominent analyst is guessing its damages could be between $2-20B, these numbers are mind boggling. Last year its cash flow was on the order of $20B. Nobody knows (including BP) how this will play out, but their stock is getting punished & will probably see a lot more selling. Its yield is more than 7%, making it a company worth watching from the sidelines. They should be able to survive & higher yields will be tempting for bargain hunters attracted by high yields. As a reminder, this is a British company which pays divs in British £s & would be subject to any British taxes. The stock dropped another 30¢ today to the 46s.

BP Capturing About One-Fifth of Oil Leaking in Gulf
BP’s McKay Says Transocean Responsible for Safe Rig Operation

BP --- 2 years

Today qualifies as a very confusing day. The € is still at an anemic sub $1.24 after all the confusion about the massive bailout package for Greece. There is limited good news on plugging oil leaks in the Gulf. But nothing else was going on. Congress will get involved with the Gulf oil spill which will create fireworks.

Dow Jones Industrials --- YTD

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