Tuesday, July 13, 2010

Markets surge on earnings hopes

Stocks started higher & it was uphill from there all day. Dow rose 146, advancers over decliners almost 6-1 & NAZ gained 43. However after this gain, Dow is still down ½% YTD. Banks joined in (led) today's charge. The Financial Index gained over 5, very big by its standards.


Value200.62One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change5.07 (2.6%)

What's there to say about MLPs & their spectacular rise? The index jumped 4½ to the 323s & is only 20 below the record set in Jul 2007. The comparable index which includes reinvested income has been in record territory for much of this year. The REIT index popped 5 to the 199s. While it's doing quite well, it's far below the record above 300. Junk bond funds were generally up 1+%. The VIX dropped another major fraction to the 23s as investment fears are easing. In this rally, Treasuries sold off big time. The yield on the 10-year Treasury bond rose 7 basis points to 3.11%, the highest since late Jun.

Alerian MLP Index -- 3 months

Dow Jones REIT Index -- 3 months


10-Year Treasury Yld Index --- YTD

Strong stock markets carried oil to the higher end of its range over the last year. If the bulls can break thru 80 & hold that level, higher oil prices will start pinching the economic recovery. Gold also had a big rise while stock markets were rising, a disconnect they will have to work out.

CLQ10.NYM..Crude Oil Aug 10..77.30 ..Up 2.35
GCN10.CMX..Gold Jul 10..1,213.00 ..Up 14.50

**Gold Super Cycle**
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The Treasury said that in the first 9 months of this budget year, the deficit totaled $1T (T as in TRILLION). That's down 7.6% from the $1.09T deficit during the same period last year. Swell!! The Jun deficit was $68B, down from the all-time high of $94B in Jun 2009 when the gov was spending heavily to stabilize the financial system & jump-start economic growth. Jun is normally a surplus month when taxes are collected from corps & individuals who make quarterly payments. Only 7 years in the past 56 have seen deficits in Jun. The forecasts for the year ending Sep 30 is the deficit will come in around $1.3T (the 2nd highest deficit on record, down slightly from last year's all-time high of $1.4T). The administration is forecasting that the deficit for 2011 budget year will remain above $1T for a 3rd straight year ($1.27T) & predicts the imbalances over the next decade will total $8.5T. These numbers should be very troubling for everybody!

June Budget Deficit in U.S. Narrowed to $68.4 Billion

Apple (AAPL), the darling of Wall Street, has been wounded by the negative publicity around the new iPhone. Today the stock dropped 5½ to the 251s & has a chart which looks like it is topping out.

Apple takes hit as iPhone 4 complaints get louder

Apple --- YTD

Buyers are basking in the glow of favorable earnings reports which are coming. The major overhaul of financial regulation (expected to be passed this week) is not bothering these markets. Even the € is looking good, it rose above $1.27. Stock markets have had a dramatic rise since last week but further advances will aggravate overbought conditions.

Dow Jones Industrials -- 3 months

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