Friday, July 23, 2010

Markets rise after GE raises the dividend

Stocks were muddling along but rose after General Electric (GE) announced a div increase. Dow gained 102, advancers over decliners 3-1 & NAZ added 23. Volume was on the light side as is typical on Fri. Bank stocks rose as traders try to understand the European bank stress report.


Value195.94One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change1.38 (0.7%)

The Alerian MLP Index gained 1 to 333, another post 2007 high, while the REIT index was up 2+ to the 202s. Junk bond funds were generally about 1% higher. The VIX dropped 1 to the 23s, a low since early May. Strong stock markets meant Treasuries sold off. The yield on the 10-year Treasury bond rose 6 basis points to 2.99%.

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


10-Year Treasury Yield Index -- YTD

Not much happening with these commodities. Chances are many traders left early.

CLU10.NYM..Crude Oil Sep 10..79.11 ..Down 0.19

GCN10.CMX..Gold Jul 10..1,191.90 ..Down 3.60

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The Hypo Real Estate Holding AG

Hypo Real Estate Holding
Photo: Bloomberg

All but 7 of 91 European banks (the photo of the Hypo shows one bank that failed) passed the much-anticipated "stress tests" aimed at showing Europe's banking system is sound enough to weather the continent's debt crisis -- an outcome that officials hoped would forestall further market turmoil. But the report was released after 5PM local time for obvious reasons! Some argue that the results showed the tests weren't rigorous enough, the € was trading flat on the day after the release (just below $1.29) but there are many skeptics out there. The European Union said the results "confirm the overall resilience" of the continent's banking system. I don't think so. European markets will give their reaction in Mon trading.

Seven EU Banks Fail Tests With $4.5 Billion Shortfall

General Electric, a Dow stock, raised its quarterly div from 10¢ to 12¢ , indicating it has put the worst of the financial crisis behind it. While expected, the move came sooner than many had expected. The quarterly div had been 31¢ before it was cut last year & this means it will take GE 25 years to become a Dividend Aristocrat again. GE also said it will resume buying shares, halted 2 years ago. These announcements follow last week's report of a better-than-expected 16% rise in Q2 profits. They are releasing the good news slowly to get the most mileage out of the news. The stock gained 45¢ (3%).

GE Raises Dividend 20%, Extends Share Buyback to 2013

General Electric -- 2 years

Markets showed little reaction the the stress report from Europe. Even the € was little changed. The S&P 500, flirting with 1100, closed up 9 to 1102, a bullish signal for the tech guys. Have a good weekend, then we'll see what next week brings.

Dow Jones Industrials -- YTD

S&P 500 --- YTD

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