S&P 500 FINANCIALS INDEX
| Value 195.64 | Change 4.08 | % Change 2.1% |
The high yield sectors are settling down after going through a brutal week. The MLP index is up 2½ to the 277s (still down 9 YTD). The REIT index has a 1½ rebound. Junk bond funds are flattish to down in what has been a very bad month. Treasuries are strong again! The yield on the 10 year Treasury bond fell 10 basis points to 3.16% (last month it was pushing 4%). Investors are selling higher yielding instruments to lock up 3.1% for 10 years issued by the Treasury which is virtually promising years of $1+T deficits (even more borrowings). Hard to believe & ominous for high yielding securities (like MLPs). The VIX pulled back 2.75 to 43, still astronomical.
Alerian MLP Index --- 2 weeks
Dow Jones REIT Index -- 2 weeks
10-Year Treasury Yld Index - 5 years
The oil markets had an unusually wild ride yesterday, dropping to 65. But markets rebounded & calm has returned. However, oil is still barely hanging in above the important 70 support level. Gold is down again which provides better entry points for brave investors. With all the turmoil in European financial markets & greater demand for Treasuries, it should be attracting more buying interest.
| CLN10.NYM | ...Crude Oil Jul 10 | ...70.50 | ... 0.30 .......(0.4%) |
| GCK10.CMX | ...Gold May 10 | ...1,180.00 | ... 7.80 .......(0.7%) |
European Union finance ministers started laying out new & tougher rules for their public finances in the hopes of winning back market confidence & preventing a repeat of the debt crisis that is threatening the €. However, Europe's stock markets remained cautious despite the approval by Germany's lower house of a €750B (US$937B) "shock and awe" package of cash & state guarantees to protect eurozone countries from bankruptcy. The € was up fractionally around $1.25½ coming off a 4-year low against the dollar (down 18% since Dec). Big problems remain. Germany is pushing hard for aid to debt-laden European countries to be coupled with requirements to bring down deficits to compensate for fears that the financial backstop effectively removes the pressure on indebted euro nations to cut debt fast. The Greek (Euro) drama plays on & stock markets are confused!
German Lawmakers Approve Share of $1 Trillion Bailout
The Senate approved a sweeping reform bill for financial firms & must now be merged with a measure approved by the House. A final package will be signed by the president, possibly within a few weeks. Changes proposed threaten to constrain the banking industry & reduce profits.
Exxon Mobil, #1 company in market cap & a Dividend Aristocrat, is selling barley above its prices 5 years ago. 2 years ago profits exploded on record high oil prices followed by a more than 50% decline last year. Their yield is approaching 3% & they have a P/E of 10X for 2010 & under 9X for next year. The stock is down a couple pennies today at just over $60. Value investors might become interested if the prices fall further pushing the yield over 3%. With the oil spill in the Gulf droning on, there is no need to rush into buying the stock. But this is a quality company to keep on a "to buy" list.
Exxon Mobil --- 5 years
Markets are very oversold which means a buying reaction is coming & probably will be violent. But that can bring sharp reversals giving frustrated stockholders an opportunity bail out at higher levels. Dow is barely above 10K & hoping that support will hold. We'll see.
Dow Jones Industrials -- 2 weeks
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