Friday, May 7, 2010

Markets sell-off continues in choppy trading

Dow is trying to recover after yesterday's sell-off. From down 200, Dow has rallied to only a 103 loss, but decliners are over advancers 2-1 & NAZ is still down a big 40. Banks are coming back, bringing the Financial Index back into the black.


% Change

After yesterday's excitement, markets are settling down, but are also generally settling back. The Alerian MLP Index is up a tad in the 282s, but almost 40 below its recent highs! Total annual distributions for the index are under 22, divided by 4 is less than 6 per qtr. That explains only small part of the sell-off. Dissatisfaction with rates offered for all high yield securities has hit them hard. The REIT Index is down 3 to 199, a 10% decline off its highs in less than 2 weeks. Junk bond funds are down again after falling 10+% in the last week. That money has bought Treasuries. The yield on the 10-year Treasury bond fell another 4 basis points to 3.36%. The Treasury will say thank you at next week's auctions! The VIX, volatility index, has shot up to levels not seen since the days when risk averse was in vogue.

Alerian MLP Index --- 1 week

Chart forAlerian MLP Index (^AMZ)

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index - YLD

VIX --- 1 month

Oil has taken another nasty fall bringing it to the low region of its year+ trading range. Gold is doing well & traders are keeping the record highs in their minds.

CLM10.NYM...Crude Oil Jun 10...75.40 ...Down 1.71

GCK10.CMX...Gold May 10...1,194.60 ...Down 2.30

OIL (ETF) --- 6 months

The Apr jobs report, as expected, gave inconclusive data. More confident employers created jobs in Apr, expanding payrolls by 290K, the most in 4 years. But the jobless rate rose to 9.9% as people streamed back into the market looking for work. Hiring 66K temp gov workers to conduct the census helped overall payroll growth but private employers also were hiring by adding a surprisingly strong 231K (the most in 4 years). The unemployment rate rose from 9.7% in Mar to 9.9% in Apr, mainly because 805K jobseekers, perhaps feeling better about their prospects, resumed searching for work. This report sketches a picture of a healing jobs market from an economy picking up momentum in early spring. All told, 15.3M were out of work in Apr. Counting those who have given up looking for work & part-timers who would prefer to be working full time, the so-called underemployment rate rose to 17.1%, close to the record high of 17.4% in Oct, showing just how difficult it is for jobseekers to find work. In addition, the number who are out of work 6 months or longer reached 6.7M, a new high. These people made up 45.9% of all unemployed people, also a record high. The graph below failed to pick up the Apr uptick.

U.S. Economy: Payrolls Jump Most in Four Years on Private Jobs

Jobless rate -- 1 year

German Chancellor, Angela Merkel, & other euro region leaders will meet in Brussels for a summit (called 5 days ago) to draw “conclusions” from the Greek crisis. Huh?? So far, their limited response to Greece’s escalating fiscal crisis has rattled world markets. Adding to the atmosphere of uncertainty, are election results from UK yesterday which will result in a coalition gov. European markets sold off again. This is the first major crisis for the €, today it inched up a tiny fraction still just above $1.26. The Greek drama (maybe tragedy is a better word) plays on.

EU Leaders Under Pressure to Broaden Greek Crisis Fight as G-7 Start Talks

The computer glitch causing markets to plunge in the PM exaggerated what already was a market decline that had been absorbing significant selling. While the Alerian MLP Index maximum decline was difficult to imagine, it still ended with a record 1 day fall. High yield securities have led the way up with the greatest rallies & are now leading the way down. Risk averse is coming back into favor as shown by the dramatic recent spike up for the VIX. Until the Greek debt debacle is resolved (which looks a long way off), &, to a lessor extent, the oil spill in the Gulf is taken care of, markets will suffer from selling pressure.

Dow Jones Industrials --- 2 weeks

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