Markets sell off on dreary housing data

Stocks began under water & remain lower. Dow fell 32, decliners over advancers 2-1 & NAZ dropped 15. The housing slump remains in the doldrums which is keeping buyers away. Banks were weak, but the Financial Index only has a modest decline.


S&P 500 FINANCIALS INDEX

Value	195.25
Change	-1.04 (-0.5%)

The Alerian MLP Index dropped 2 to the 301s. In Feb is was trying to break thru 300 & is still stalling at that level. The Dow Jones REIT Index fell 1 to 197, again not advancing since Mar. Junk bond funds were pretty much flat following recent gains (see below). The VIX, volatility index, rose 1 to the 28s. Treasuries are in demand as the yield on the 10-year Treasury bond fell 5 basis points to 3.11% (a 13 month low). This decline is becoming ominous.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks




10-Year Treasury Yld Index - 2 weeks





Oil prices fell to the 75s as downbeat economic data from Europe & a drop in US crude supplies suggest a recovery in demand is likely to remain uneven. Oil's 4 week rally was halted by gloomy economic data. While gold was weak, it's still only 30 off record highs reached last week. Increased demand for Treasuries is bullish for gold.

CLQ10.NYM

...Crude Oil Aug 10

...75.55

... 2.30 .......(3.0%)

GCM10.CMX

...Gold Jun 10

...1,227.60

... 10.70 .......(0.9%)

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Sales of new homes tumbled in May, down 33%. New-home sales fell from Apr to an annual sales pace of 300K, the slowest sales pace on records dating back to 1963. And it's the largest monthly drop on record. Sales have now sunk 78% from their peak in Jul 2005. Expectations were for the May sales pace to be 410K after Apr sales pace was revised downward to 446K. The bleak report from the Commerce Dept is the first sign of how the expiration of federal tax credits could affect the nation's housing market as potential buyers stopped shopping for homes once they could no longer receive tax credits which expired on Apr 30. Unemployment remains high, job security is low & credit conditions remain tight. The drop in new-home sales means fewer jobs in the construction industry, which normally powers economic recoveries but has remained lackluster this time.

New Home Sales Plunge to Record Low as Tax Credits Expire- AP

New home sales - 1 year






Junk bonds have rebounded after their worst month since 2008 on speculation the economy is growing fast enough to avoid corp defaults without sparking inflation. That's the idea at least. High-risk debt returned 1.76% in Jun, almost double the gain of investment-grade corp bonds. The rally is paring a 3.52% loss in May as credit-ratings companies upgrade borrowers at the fastest pace in a decade amid rising corp profits. Federal Reserve (FED) policy makers are expected to keep interest rates at record lows today as US unemployment holds near a 26-year high. Junk bond fans say default rates will be well below most estimates made at the beginning of the year.

Junk Bonds Revive on Bernanke `Sub-par' Economy: Credit Markets

Grim reminders about a recovery which is sputtering brought on selling. The € is soft at $1.22¼. The Atlantic storm headed for the Gulf is strengthening, not good news for relief efforts. But sinking rates on Treasuries is sending very bearish signals for the stock markets, today's big story!


Dow Jones Industrials --- 2 weeks

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