Monday, June 28, 2010

Markets wander again

Stocks, once again, hugged the break even line all day. The G-20 meeting over the weekend only pointed out the differences between Europe's approach of fiscal conservatism vs the US attitude of more stimulus. Markets are confused, not a good sign going forward. Dow lost 5, decliners about 5-4 ahead of advancers & NAZ was down 2. Banks fell on the confusion over the proposed financial reform bill (with modest selling at the close).


Value195.27One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change-1.76 (-0.9%)

MLPs are still on fire. Their index rose 2½ to the 311s, not far from 319 (high before the sell-off in May). The REIT index dropped almost 3 to 197, a more typical response given the kind of day this was. Junk bonds were up a fraction. The VIX was up a fraction in the 28s, still high relative to where it's been. The yield on the 10-year Treasury bond fell a very big 8 basis points to 3.03%, another new low since it climbed off the record low yields in early 2009!

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


10-Year Treasury Yld Index - YTD

Oil was weak on this quiet day but remains in the upper end of its recent trading range (nearer 80 than 75). Despite its fall today, gold is still very strong, not far from its record levels!

CLQ10.NYM..Crude Oil Aug 10..78.25 ..Down 0.61

GCM10.CMX..Gold Jun 10..1,239.20 ..Down 16.60

Gold Super Cycle!!

Global bonds have been hot in 2010, having their best year since 2005. That’s a switch from last year, when investors resorted to paying interest to borrowers while lending cash just to obtain Treasuries after the worst finance crisis since the Great Depression. Forecasters predict the Treasury 10-year note yields, the benchmark for everything from mortgages to corp bonds, will climb to a 3.74% by year-end from 3.03% presently. I'm not so sure. If the economy muddles along, Treasuries could remain hot with low yields, maybe even lower.

Bonds Gain in Best Year Since `05 as Rally May End

The Senate is scrambling for votes to get the financial reform package signed off. With the death of Senator Byrd, the Dems have more work to get it done. The € dipped below $1.23. It's looking for support & not finding much. But the low yields on Treasuries are very disturbing. The 2 year note is down to 66 basis points. That's $6.60 of annual interest for the 2 years of the note. 10 year money only is earning 3%. That's very scary for the stock markets while Dow is waffling around its low for this year!

Dow Jones Industrials -- YTD

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