Thursday, July 1, 2010

Markets remain lower after bleak jobless report

After a steep decline early in the day, markets pared losses. But it was still a gloomy day with the Dow back at levels not seen since last Oct. Dow ended down 41, decliners over advancers 3-2 & NAZ fell 7. Not too bad all considered, but new lows are not enjoyable. Banks recovered, bringing the Financial Index to just under its old support level of 185 (after closing 4+ above its lows). Bulls would bend the rules to say that support held.


Value184.07One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change-1.57 (-0.8%)

MLPs took a thumping today as the index fell 4 to 304½ (& 4+ above the daily low) while the REIT index was down a ½ in the 187s. Junk bond funds were flat to up fractionally. The VIX settled back, dropping 1½ to the 32s but the chart shows it's in a high region. Treasuries are still in demand as the yield on the 10-year Treasury bond fell 2½ basis points to under 2.93%. The low yield is the biggest number out there!

Alerian MLP Index --- Q2

Dow Jones REIT Index --- Q2

VIX --- Q2

10-Year Treasury Yld Index - Q2

Commodities had a very rough day. Oil fell thru the 75 floor, now it's back to trading in the 70-75 zone where it's primarily been for more than a year. Gold plunged on the higher €. But it held above 1200 & still should do well longer term, especially with more difficulties in world financial markets.

CLQ10.NYM..Crude Oil Aug 10..72.70 ..Down 2.93

GCN10.CMX..Gold Jul 10..1,206.30 ..Down 39.20

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Sales of new vehicles for General Motors, Ford (F), Toyota (TM) & Chrysler fell 12-14% from May to Jun. Subaru & Honda were also down, but Hyundai bucked the trend with a slight gain. Car sales to individuals often slow in Jun, as deals during the Memorial Day weekend bring in customers who might have bought cars in the following month. Automakers are still predicting a gradual recovery in the 2nd half of 2010. Chrysler said, "While there is data that shows the economy is starting to recover, credit is not flowing as freely as it used to, unemployment figures are still a concern for many families in the United States, and consumers are being prudent with their purchases."

The number of buyers signing contracts to purchase homes tumbled in May, another sign that the housing recovery can't survive without tax incentives. The National Association of Realtors said its index of sales agreements for previously occupied homes dropped 30% in May from Apr. The index fell to 77.6 from 110.9. May's reading was the lowest dating back to 2001. The index also was down 15.9% from the same month last year.

Pending Sales of Existing U.S. Homes Decreased 30% in May

Index of pending home sales - 1 year

One-Year Chart for MoM % (USPHTMOM:IND)

The strength of the € is one of the big stories today. It's back at $1.25, up over 2½¢ today for an impressive gain but fundamental problems causing weakness in the first place have not gone away. Many countries are spending more than they can afford requiring them to borrow large amounts of money. Economic recovery in the US is soggy at best. A dismal jobs report tomorrow will bring back market bears when Dow is sloshing around interim lows.

Dow Jones Industrials --- Q2

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