Monday, July 19, 2010

Markets rise on earnings hopes

Stocks rallied in the PM, but lost some of that steam in the last hour. Dow rose 56, advancers over decliners better than 3-2 & NAZ was up 19. Banks bounced back from AM losses bringing the Financial Index to break even.


Value189.97One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change0.05 (0.0%)

MLPs remain hot. Their index was up 1¼ to the 325s & shooting for a new record at 343. This has to be the only industry in that position. Strength in the PM brought the REIT index up almost 3 to the 193s. Junk bond funds were mixed & the VIX fell only a ¼ to 26. The yield on the 10-year Treasury bond rose 2½ basis points to 2.96%, still in a very low region. The annual yield on the 2 year note is a measly 59 basis points & that's where money is going these days!

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD


10-Year Treasury Yld Index --- YTD

Oil traders were encouraged by higher stocks as oil has been kept above its 70-75 trading zone where it's been for most of the last year. There was buying in gold in the PM reducing its loss. But it still has work to do to get above the important 1200 level.

CLQ10.NYM..Crude Oil Aug 10..76.59 ..Up 0.58

GCN10.CMX..Gold Jul 10..1,182.20..Down 5.80

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The stress test report for European banks is due on Fri & there is plenty of stress now wondering about its results. Firms that fail to meet the standards will be required to raise additional capital. European Union regulators are examining the strength of 91 banks to determine if they can survive potential losses on sovereign-bond holdings, counting on the tests to reassure investors about the health of financial institutions. Hypo Real Estate Holding, the German lender, already taken over by the gov, failed the banking stress test (according to anonymous sources). The € continues firm holding above $1.29½.

European Banks May Face Same Capital Threshold as U.S. Tests

Germany's Hypo Real Estate Said to Fail EU Banking Stress Test

Further reports on the housing market are due later this week. They are expected to show more weakness & few signs that business will pick up anytime soon. Housing is key for any strong economic recovery. But the main attention is on earnings. IBM (IBM), a Dow stock, reports after the market close. It has posted 29 consecutive qtrs of year-over-year earnings per share growth & investors have also grown accustomed to higher guidance. IBM is expected to earn $2.58 per share versus $2.32 last year. But the Dow's retreat of 44 off its high in the last hour shows markets are nervous.

Dow Jones Industrials --- YTD

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