Monday, May 24, 2010

Markets drift lower after housing sales data

Stocks began the week under pressure & continue wandering down. Dow fell 50, advancers barely ahead of decliners & NAZ added 6 aided by a good showing at Apple ((AAPL), up 7. Banks stocks are a little lower but off their lows. The 200 level is very important for the Financial Index, now it has become a ceiling again.


% Change

The Alerian MLP Index is up a fraction in the 280s & the Dow Jones REIT Index is up pennies. Junk bond funds are also up fractionally. The yield on the 10-year Treasury bond gained 1 basis point to 3.21% while the VIX pulled back 1½ to the 38s. Little action in this area so far.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index -- 2 weeks

Oil is flat. Gold had a nice move (although the price is from overnight trading), maybe it's getting respect once again as the € is weakening. A link is provided below for more information on gold cycles.

CLN10.NYM...Crude Oil Jul 10...70.06 ...Up 0.02

GCK10.CMX...Gold May 10...1,184.20 ...Up 11.70

Gold Super Cycle!!
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Photo: Bloomberg

Home sales surpassed expectations for Apr as gov incentives provided a temporary boost to the housing market. The National Association of Realtors reported sales of previously owned homes rose 7.6% to an annual rate of 5.77M, the best showing in 5 months & better than the 5.63M units expected. Federal tax credits were a big boost to home sales this spring. The fate of the housing market for the rest of the year is uncertain. Without the tax credit, mortgage applications fell last week to the lowest level in 13 years.

Purchases of U.S. Existing Homes Increase More Than Forecast on Tax Credit

Home sales -- 1 year

IBM (IBM) is buying Sterling Commerce from AT&T (T), both Dow stocks, which makes software that helps businesses buy & sell to each other, for $1.4B. This is IBM's largest acquisition since in 2 years. Sterling runs "collaboration networks" where companies can interact with vendors. It has 18K clients worldwide & enables more than 1B deals per year. AT&T expects the deal to result in a one-time pretax gain of approximately $750M when it closes later this year. IBM said the deal complements its portfolio of business process integration & transaction software portfolio, which grew more than 20% in Q1. Each stock fell about 25¢.

IBM --- 2 years

AT&T --- 2 years

The € fell over 2¢ to under $1.24, but nothing dramatic is going on. The European financial mess is not getting better, just like the oil spill in the Gulf. But stocks are drifting & everybody watching the Dow has their eyes on the 10K floor, so close.

Dow Jones Industrials -- 2 weeks

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