Friday, July 9, 2010

Sticks advance on earnings hopes

Markets extended their gains during this week. Dow gained 510 in 4 days. Today Dow was up 58 helped by buying into the close, advancers ahead of decliners 3-1 & NAZ was up 21. Bank stocks led the rally, the Financial Index is up 14 off its recent low.


Value195.50One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change3.03 (1.6%)

The Alerian MLP Index added 1½ to almost 319, esentialy reaching its high 10 weeks ago & only 24 below its all-time record high reached Jul 2007. New funds tracking or investing in MLPs have to be responsible for much of this strength. MLPL, an ETN which tries to double the moves in the Alerian index, was up 1.4% today versus a 0.5% gain for the index. But bigger swings mean bigger risks. I will write an article on this investment to be posted at on Mon. The REIT Index was up 2.32 to 193½ & has also had a nice run this week. Junk bond funds were generally a little higher. The VIX slipped almost 1, taking it below 25 & approaching its 2 month lows in the 23s. Easing fears caused Treasuries to be sold. The yield on the 10-year Treasury bond rose 4 basis points to 3.06%. While the yield is up from the 2.92% lows last week, it still remains very low. A side benefit is that it will bring lower mortgage rates to help the ailing housing market.

Alerian MLP Index --- 2 months

Dow Jones REIT Index -- 2 months

Oil rebounded 5 off the recent lows, but has done little for those with a longer term outlook. Gold found buyers after the recent decline from its record highs. The bulls are happy to see it above 1200.

CLQ10.NYM..Crude Oil Aug 10..76.16 ..Up 0.72

GCN10.CMX..Gold Jul 10..1,208.90 ..Up 13.10

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The Development Driller II platform

Photo: Bloomberg

A new containment cap & an additional ship collecting oil could effectively contain the Gulf oil spill in the next 3 days. The work to replace a leaky containment cap on the well head with a tighter one will begin Sat. At the same time, a ship connecting to a different part of the leak is expected to come online Sun. But oil will flow unimpeded into the Gulf during the cap switch for at least part of the weekend. If all goes according to plan, the combination of the cap & the new vessel could collect all the leaking oil by Mon, stopping it from escaping into the Gulf of Mexico for the first time since Apr 20. Work will continue on what is hoped to be the final plugging of the well, drilling 2 relief wells through which mud & cement will be pumped to stop the oil flow. That's expected to happen by mid-Aug. The schedule for both efforts has been accelerated to take advantage of what could be a rare window of good weather. BP was up 31¢ on this news (along with more talk about mideast money willing to BP assets & invest in BP stock).

BP, U.S. Aim to Seal Gulf Oil Gusher Within Days, Allen Says

BP --- YTD

Markets had an impressive week, up on all 4 trading days with large gains. European debt problems are fading, the € has risen back to $1.26½. Progress on plugging the leak in the Gulf gave the markets an intangible lift. But dreary economic recovery data keeps coming. Next week the first Q2 earnings reports will drive stocks. The advance this week shows traders have high expectations.

Dow Jones Industrials -- 2 months

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