Lower markets on weak July housing sales

Stocks were in the red all day but on low volume. Dow finished with a 133 loss & selling into the close, decliners over advancers were a more moderate 5-2 (than in the AM) & NAZ dropped 35. Bank stocks were lower on fears that weak home sales will give them more loan problems taking the Financial Index to its yearly low.


S&P 500 FINANCIALS INDEX

Value	181.56
Change	-3.16 (-1.7%)

The Alerian MLP Index improved in the PM to down only 1½, closing just above 320. The REIT index was down 1 to 197. Junk bond funds fell while the VIX was up 1½ to the 27s. The € was up a fraction of a penny to nearly $1.27. Once again, Treasuries were the big story. At today’s 2-year auction, the securities drew a record low yield of 0.498% with a bid-to-cover ratio of 3.12X (versus an average of 3.19X at the past 10 auctions). Indirect bidders, including foreign central banks, purchased 29.2%, compared with 32.8% at the last auction on Jul 27 & an average of 39.7% at the past 10 sales. The yield on the 10 year Treasury plunged 11 basis points to just under 2.50%, another 17 month low & getting near the record lows of 2.1% reached early last year.

Treasury Securities

U.S. 3-month		0.15%
U.S. 2-year		0.47%
U.S. 10-year		2.50%

Alerian MLP Index -- 2 months




Dow Jones REIT Index -- 2 months




VIX -- 2 months




10-Year Treasury Yld Index -- 2 months





Oil had a bad day with the dismal data on the economy, but gold did well & is still only 30 below its record highs reached recently.

CLV10.NYM

..Crude Oil Oct 10

..71.58

.. 1.52 ......(2.1%)

GCQ10.CMX

..Gold Aug 10

..1,231.80

.. 4.90 ......(0.4%)

$$ Gold Super Cycle $$
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Bill Gross, Photo: Bloomberg


Bill Gross, co-head of Pimco (the world’s biggest mutual fund), said mortgage yields could rise in the US as much as 4% points without gov support. “Ninety-five percent of existing mortgage creation over the past 12 months were government guaranteed,” Gross wrote today. “The private market was nowhere to be found because they charged too much.” He proposed last week that the gov maintain a role, combining US-run companies Fannie Mae, Freddie Mac & federal housing agencies into one entity that would guarantee “a majority of existing and future originations.” “Having grown accustomed to a housing market aided and abetted by Uncle Sam, the habit cannot be broken by going cold turkey into the camp of private lending,” Gross added. “Taxpayers would be protected through tight regulation, adequate down payments, and an insurance fund bolstered by a 50-75 basis point fee attached to each and every mortgage.” He continued that the “cost would be enormous in terms of yields,” which could rise 300 basis points to 400 basis points, “crippling any hopes of a housing-led revival to the economy.” Gross increased holdings of mortgage debt at the Pimco Total Return Fund (PTTRX) to 18% in Jul from 16% in Jun, the most since Sep.

Gross Says Mortgage Yields Would Soar Without Government Aid

Pimco Total Return Fund - 1 year





Apple (AAPL) & Google (GOOG) are 2 of the biggest companies in NAZ which are contributing to its 7% decline YTD. Today AAPL fell 6 while GOOG dropped 12½. They are market leaders, only this year it's to the downside.


Apple --- YTD




Google --- YTD





Stock markets are just plain dreary because investors are buying Treasuries & gold instead of stocks. Dow is just 40 above the 10K line, but that has not proven very important in the last year after it was crossed so many times. Support has come in just below that level, but it may not happen this time with all the gloom in the air.

Dow Jones Industrials -- 2 months

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