Tuesday, June 1, 2010

Stocks wobble while looking for direction

Dow is up 40 (but off its highs), decliners slightly ahead of advancers & NAZ is up 4. There is little happening in markets today. Bank stocks slipped bringing the Financial Index down a fraction.


% Change

The Alerian MLP Index dropped 1+ taking it below 291. The REIT index fell 2 to the 196s. Junk bond funds were a tad higher. The yield on the 10-year Treasury bond was down 1 basis point to 3.29%. The VIX, volatility index, has been flattish in the 32s. Fears are steady as she goes reflected in little change in high yielders.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

Oil is doing better, traders could be encouraged by the potential for smaller oil shipments resulting from the mess in the Gulf. Gold is shooting up, flirting with its record highs. May was a very bad month for stocks while gold has been charging forward (shown in its chart). It continues to be an excellent defensive play & also has good growth potential for the long term.

CLN10.NYM...Crude Oil Jul 10...74.68 ...Up 0.71
GCM10.CMX...Gold Jun 10...1,225.10 ...Up 12.90

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GLD (ETF) --- 6 months

BP (BP) is turning to yet another unproven technology to try & contain the gusher, while it's stock plunged to one its lowest prices in the last 10 years. BP has lost more than a 1/3 of its value since the explosion at the Deepwater Horizon oil rig 6 weeks ago. So far BP has spent almost $1B on fighting & cleaning the spill, with multiple lawsuits for damages yet to be filed. After the ambitious "top kill" failed over the weekend, a relief well being drilled is at least 2 months away. BP is turning to another temp fix, an effort to saw through the pipe leaking the oil & cap it that could be tried as soon as tomorrow. In the meantime, more than 125 miles of coastline already have been hit with oil, including the resort of Grand Isle near Port Fourchon. Adding to the problems in the Gulf is this is the start of hurricane season. With the stock falling 5 to the 38s, the yield is up to 9% (& probably headed much higher). In the midst of chaos, there can be opportunity - but only for the very brave.

BP Needs Equivalent of Lottery Win in August to Seal Leak at First Attempt

BP --- 10 years

Canada became the first Group of 7 nation to raise interest rates since the global financial crisis & said further hikes would depend on global economic conditions. The Bank of Canada increased its key interest rate by 25 basis points to 0.50% from a record-low rate 0.25%. The bank said thus far the impact of Europe's sovereign debt crisis in Canada has largely been limited to a modest fall in commodity prices. The decision to raise rates still leaves considerable monetary stimulus in place. Canada withstood the global economic crisis better than most developed countries. It has not experienced the failure of any major financial institution & there has been no crippling mortgage meltdown or banking crisis due to greater regulation.

Canada Becomes First G-7 Member to Raise Key Interest Rate Since Recession

Prudential's, Britain's largest insurer, bid for rival AIG's Asian unit was close to collapse after it failed to secure a price cut, raising questions over the insurer's own future. Once again, can you spell "uh, oh?" They faced rising shareholder pressure about the hefty $36B price for American International Assurance (AIA), forcing last-minute talks to lower price by $5B. But AIG's sticking to the original terms! European financial markets already have a lot of commotion, more is not needed.

Prudential Fails in Bid to Reduce Price of AIA Takeover, Jeopardizing Deal

Markets, after its wost months in a year & a half, started Jun groping around, looking for direction. High yielders are doing so-so. Dow is above 10K but the S&P 500 is below 1100, considered an important support level. The € is below $1.23, not a good sign for the markets, at 4 year lows.

Dow Jones Industrials --- 2 weeks

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