Market rally fades in late day trading

Stocks had an oversold rally but finished off their highs, selling in the last hour limited the advance. Dow gained 103, advancers over decliners 4-1 & NAZ was up 27. Bank stocks also gained but the Financial Index finished in the middle between its high & low. The Financial Index is also not far above the 182 lows in early Jul.

S&P 500 FINANCIALS INDEX

Value	190.08
Change	1.39 (0.7%)

The Alerian MLP Index was up a fraction to 323¾ (almost 2 below its high). The REIT index leaped 5 to 205. Junk bond funds continued higher while the VIX fell 2 to below 24. Higher stocks meant lower bond prices. The yield on the 10 year Treasury bond rose 6 basis points to 2.64½% . Low Treasury yields remain a cause of concern for all investors. The € was up ½ penny to almost $1.29.

Treasury Securities

U.S. 3-month		0.15%
U.S. 2-year		0.50%
U.S. 10-year		2.63%

Alerian MLP Index -- 2 months




Dow Jones REIT Index -- 2 months




VIX -- 2 months




10-Year Treasury Yld Index -- 2 months





Crude oil climbed from a 5 week low on confidence from rising stock markets that the economic recovery will be sustained, increasing fuel demand. Gold was still on hold but is only 40 below its record prices reached in Jun.

CLU10.NYM

...Crude Oil Sep 10

...75.73

... 0.49 ......(0.7%)

GCQ10.CMX

..Gold Aug 10

..1,226.60

.. 2.10 ......(0.2%)

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


Banking executives were asked to offer advice on changing the gov role in the mortgage market. Their response: stay big. The executives disagreed on the exact level of support needed, but they overwhelmingly advocated the gov should maintain a large role propping up the nearly $11T market. Bill Gross, managing director of bond giant Pimco, said the economic recovery required more gov stimulus, particularly in the housing market. He suggested the administration push for the automatic refinancing of millions homes backed by mortgage giants Fannie Mae & Fannie Mac. Treasury Sec Tim Geithner pledged "fundamental change" to the structure of Fannie & Freddie. The 2 companies, the Federal Housing Administration & the Veterans Administration together backed about 90% of loans made in the first half of the year. While this financial mess plays out, housing remains down in the dumps.

Pimco's Gross Urges `Full Nationalization' of Housing Finance



The producer price index increased 0.2% in Jul after a 0.5% drop in Jun. A measure excluding food & energy costs climbed 0.3%, more than projected & the biggest gain since Jan. Forecasts were for producer prices to rise 0.2%.

U.S. Producer Prices Rise for First Time Since March


PPI less food & energy - 1 year





Stocks had a nice relief rally which accomplished little & selling into the close is discouraging. Dow remains below 10½K, looking for directions from the bulls or bears. Volume remains lethargic.

Dow Jones Industrials -- 2 months

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