Friday, August 27, 2010

Bernanke spoke and the markets listened

After kind words from the head of the Federal Reserve, traders liked what they heard & bid up stocks. Dow jumped 163 closing at the highs, advancers ahead of decliners by an impressive 6-1 & NAZ added 35. Banks also had a good day but the Financial Index remains close to its recent yearly lows.


Value184.60One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change4.12 (2.3%)

The Alerian MLP Index rose 2 to the 322s, still 13 below recent yearly highs while the REIT index rose 3 to the 202s (in the middle of a 5 month trading band). Junk bond fuds were generally higher while the VIX dropped a very big 3 to the 24s. Calming words from Ben Bernanke caused Treasuries to plunge. For example the yield on the 10 year Treasury bond rose an eye popping 15 basis points to 2.65%! The € was marginally higher at $1.27+.

Treasury Securities

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


10-Year Treasury Yld Index -- YTD

While oil had a very good day, it meant little as it remains in its sideways trading range. Gold buyers took the day off, well deserved after 4 straight weeks of gains.

CLV10.NYM..Crude Oil Oct 10..75.10 ..Up 1.76

GCQ10.CMX..Gold Aug 10..1,236.00 ..Up 0.60

$$ Gold Super Cycle $$

Photo: Yahoo

Intel (INTC), a Dow stock, Corp. reduced its sales forecast for the current qtr saying it's seeing "weaker than expected demand for consumer PCs in mature markets," including the US & Europe. INTC now expects revenue of $10.8-11.2B for its fiscal Q3 which ends in Sep. That compares with a previous forecast of $11.2-12B & expectations by analysts of $11.5B. Last week, Dell (DELL) & Hewlett-Packard (HPQ), another Dow stock, also raised red flags about what is normally a robust season for sales. Since reporting earnings last month, INTC stock has sold off on expectations that the good news would not last. Today the stock rose 21¢ in a strong market.

Intel --- 1 month

Speaking of HPQ, it boosted the bid for 3Par (PAR) to $1.88B, topping DELL's offer by 11%. The $30-per-share offer came shortly after DELL matched the HPQ bid of $27 per share. DELL & PAR said earlier Fri that the board of PAR had accepted the latest bid from DELL. PAR shot up 6+ to the 32s on expectations of even higher offers. The extreme chart for PAR will not be repeated for some time

3Par --- 1 month

Markets had been oversold, good excuse for a rally. But volume was not impressive (0.9B shares on the NYSE floor), partially because this is a summer Fri. Longer term, Dow is still just sloshing around its lows since last Nov. The downward guidance by INTC is more disturbing because they sell to companies making finished products (i.e. computers).

Dow Jones Industrials -- YTD

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