Wednesday, June 23, 2010

Stocks undecided after Federal Reserve renews low interest rates

Markets vacillated following very weak home sales & the FED leaving low interest rates in place. Dow gained 4, advancers & decliners were pretty much even while NAZ fell 6. Banks also pulled back but nothing major.


Value 195.70 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -0.59 (-0.3%)

The MLP Index fell 1½ to 302 & the REIT index rose 1 to 199. Junk bond funds were generally a little lower. The VIX lost a fraction in the 26s. The yield on the 10-year Treasury bond fell 5 basis points to 3.12%. Not a lot going on in these sectors.

Alerian MLP Index -- YTD

Dow Jones REIT Index =-- YTD

Oil continued lower but the bulls are happy it's holding above the 75 floor. Gold was up modestly from its lows in early trading.

CLQ10.NYM..Crude Oil Aug 10..76.24 ..Down 1.61

GCM10.CMX..Gold Jun 10..1,234.10 ..Down 5.80

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Fed Keeps Rate Pledge

Photo: Bloomberg

The Federal Reserve (FED) renewed its vow to hold benchmark interest rates exceptionally low for an extended period. It scaled back its assessment of the pace of recovery, taking note of pockets of weakness & also issued a cautionary note about volatile financial markets in light of Europe's debt woes. But it stuck to its expectation that the economy will continue to gradually emerge from the worst recession in decades. "Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad," was its offiicial statement. Kansas City Federal Reserve Bank President Thomas Hoenig dissented for the 4th meeting in a row, arguing the Fed's promise to hold rates ultra low for a long time risks perpetuating a boom-and-bust cycle. The FED said the economic recovery was "proceeding," a downgrade from its assessment in Apr when it said the economy had continued to strengthen. No great surprise here & it looks like the first rate hike will come after the Nov elections.

Fed Keeps Rate Pledge, Markets `Less Supportive' of Growth

General Motors is preparing for a public offering to sell 20% of the Treasury’s shares in GM. The aim is to sell a fifth of the gov’s 304M shares, reducing the Treasury Department’s stake to less than 50% from 61% presently. A registration statement may be filed in Aug, aiming for a Nov stock sale & the sale is expected to raise $10-$15B. The US will probably sell the rest of its GM stock over "a few years."

GM Said to Prepare IPO Plan With Treasury Selling 20%

Volume was light as some started holiday vacations early to enjoy the hot weather. The € was a little higher, going above $1.23. Getting little attention is the financial regulation bill which is being fine tuned & should have a major impact on the markets when it's announced. The low yields on Treasuries are important because the implications for stock markets are disturbing. The Dow is down about 3% YTD, still digesting the large gains from last year.

Dow Jones Industrials --- YTD

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