Friday, August 6, 2010

Afternoon rally limits earlier losses

Losses were largely eliminated as buyers returned in the PM. Dow dropped 21 (it had been down 160 at its lows), decliners ahead of advancers 4-3 & NAZ fell 4. Banks stocks also regained lost ground in the PM as the Financial Index is trying once more time to go above 200. For those with good memories, it was above 500 in early 2007.


Value198.86One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change-1.66 (-0.8%)

The MLP index recovered some lost ground to close down 1¼ to 333. The REIT index also bounced back in the PM, closing in the 208s or down 1. With selling in the PM, junk bond funds had modest losses. VIX was flatish in the 22s. The € closed a shade under $1.33, another short term high.

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


Dow Jones REIT Index -- YTD

Selling took oil lower in the PM, but it remained above the 80 resistance level. Gold also saw selling which could be profit taking after good gains in the last 2 weeks. The chart below shows how good a year it's having.

CLU10.NYM..Crude Oil Sep 10..80.82 ..Down 1.19

GCQ10.CMX..Gold Aug 10..1,205.50 ..Up 8.30

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Treasuries are hotter than even MLPs. This has caused the yield on the 2-year note to drop below 50 basis points, a record low. Today's rally in Treasuries came after the payroll report showed the economy lost more jobs in Jul than forecast. Bonds were headed for a weekly gain as hiring by private employers trailed estimates from analysts, encouraging speculation the Federal Reserve may provide more stimulus. The yield on the 10-year note fell 9 basis points to 2.89%. The extra yield investors demand to hold 10-year notes instead of 2-year debt dropped 6 basis points to 232 basis points. Heavy demand for Treasuries is a huge disconnect versus rising stock markets.

Enbridge Energy (EEP), a leading MLP, last week was hit with selling after a break in its Mich pipeline caused a large oil spill which went into Lake Michigan. The chart below shows it had a nice recovery as they dealt with this disaster successfully & absorbed its $1 ex-distribution this week. The units are only slightly below the high last week, another sign of the high regard investors have for MLPs.

Enbridge Energy --- 2 weeks

Dow didn't do much this week. There was a big pop at the start of the week, giving it a gain but since then it has been going sideways other then the sell-off this AM. MLPs are strong. The index is just 1% off the 2010 high & about 3% below their record highs in 2007. However, even stronger are Treasuries which has to make investors in stocks nervous.

Dow Jones Industrials -- YTD

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