Wednesday, May 26, 2010

Stocks extend late day gains from yesterday

Dow is feeling better when it shot out of the gate with almost a 100 point advance. It's up 134 & rising, advancers ahead of decliner 8-1 & NAZ rose 45. Bank stocks are leading the way. The Financial Index is doing well after it bounced off the Feb lows (in the mid 180s) yesterday. That's called support & makes the bulls feel better.


% Change

MLPs are hot again as the index shot up 7+ to the 286s (& even YTD). The REIT index gained 4 to 196. Junk bond funds advanced about 2% as what had been frightened money is returning to riskier investments. Reasons are easy to see, the VIX, volatility index, plunged 5 to the 25s. Fears have eased considerably in the last 2 days. That means Treasuries have sold off. The yield on the 10-year Treasury bond rose 7 basis points to 3.22% (but still far below where it was in Apr when it was pushing 4%).

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

Commodities are benefiting from higher stock markets. Oil is back above 70, although longer term it has been trading sideways for months. Gold is back near its record levels first reached last Dec.


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Orders at US factories for durable goods surged in Apr, propelled by a rebound in demand for commercial aircraft. The Commerce Dept said that orders increased 2.9% last month, the best showing in 3 months & more than double the 1.3% gain expected. However, excluding transportation, orders fell 1% after posting a sizable 4.8% rise in Mar. There are concerns that a debt crisis in Europe could derail the global recovery. The rise in orders for Apr was led by a 228% surge in demand for commercial aircraft, i.e. Boeing (BA & a Dow stock). Orders for motor vehicles were up 1.6%, but below a 4.5% gain in Mar.

Durable-Goods Orders in U.S. Last Month Rose More Than Economists Forecast

Orders for durable goods - 1 year

Germany will push forward its efforts to curb speculation in the financial markets, even it it has to go alone. Yesterday it proposed legislation to expand a partial ban on naked short-selling to all German stocks & certain euro-currency derivatives in a move that would replace a temporary ruling by the BaFin regulator. But other EU states have not followed Germany’s lead. Regulators from the 27-nation EU are meeting to decide what their next move will be.

Germany Ready to Go It Alone to Curb Financial Speculation, Ministry Says

Toll Brothers (TOL), luxury homebuilder, took a smaller loss in its Q2 as writedowns of assets decreased and contracts & the value of the company's backlog increased for the first time in years. TOL is seeing increased confidence among buyers. "It appears our business has finally emerged from the tunnel and into a bit of daylight," said Chairman Robert Toll. He also indicated sales have held up in May even though a federal tax credit has expired. Toll believes customers are more confident in their job security, their ability to sell their previous homes & home price trends than they had been. TOL signed contracts for 820 units with a total value of $464.6M during Q2, far more than a year ago & much more than in its Q1. The company lost 24¢ per share, down 52¢ last year & almost matched expectations of a 23¢ loss. Revenue dropped 22%, to $311.3M. The stock rose 93¢ (5%).

Toll Brothers --- 2 years

Worries about the European debt crisis are evaporating & oversold markets can bring out buyers. But fundamental problems remain. The € is a shade below $1.23½, not encouraging. A potential split between Germany & the rest of Europe is an ominous sign. The oil spill in the gulf only gets worse. However rising markets feel good, enjoy them.

Dow Jones Industrials --- 2 weeks

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