Monday, August 23, 2010

Markets adrift again on economic worries

Stocks wanted to begin the week on a positive note, but buyers quickly gave up. The rest of the day, stocks drifted into the red where they remained with selling in the last hour. All this on low summertime volume. Dow was off 39, decliners ahead of advancers 3-2 & NAZ fell 20. Banks continue to slosh around, the Financial Index wants to take out its previous low set 7 weeks ago.


Value184.72One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change-1.11 (-0.6%)

The Alerian MLP Index was up only pennies in the 322s, almost 3 below its earlier high. The REIT index slipped 1 to 198. Junk bond funds were mixed, little changed. The VIX was down a fraction to the 24s & the € was off a fraction of a penny taking it below $1.27. Treasuries remain in demand. Yields were little changed today, at or near record lows. The 2 year note reached a new record on Fri (see below). The yield chart for the 30 year Treasury was added to show how it plunged of more than 100 basis points since early Apr (while stocks have been playing defense).,

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD


10-Year Treasury Yld Index --- YTD

30-Year Treasury Yld Index --- YTD

This has been a sleepy day for oil & gold.

CLV10.NYM..Crude Oil Oct 10..73.13 ..Down 0.69

GCQ10.CMX..Gold Aug 10..1,227.00 ..Down 0.20

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2 year Treasury yields were within 3 basis points of a record low ahead of a $37B auction tomorrow. Today there was a $7B sale of 30-year inflation-linked Treasuries which drew the highest demand ever! The yield on the benchmark 10-Year Treasury bond fell on Fri to 2.53%, the lowest level in 17 months. The 2-year note yield dropped less than 1 basis point today to 0.48% after touching a record low 0.4547% on Fri. Investors are willing to accept 3.65% annually for 30 years, hard to believe.

Treasury Two-Year Note Yields at Almost Record Low Before Auction of Debt

Treasury Securities
U.S. 3-month
U.S. 2-year
U.S. 10-year
U.S. 30-year

Financials & tech are supposed to lead market rallies but they haven't been in recent months. The chart above for the Financial Index shows how it's been sloshing around & drifting lower. Below is a chart for Apple, with the 3rd largest market cap. The stock is below its recent peak & drifting lower despite the new iPhone & iPad, 2 popular tech products. Instead of tech & financials, money is going into Treasuries & gold. AAPL slipped 4 to the 245s.

Apple --- YTD

Summer trading can be dull & this qualifies. But momentum for stocks is on the downside while Treasuries remain red hot. It's difficult to imagine, but the Treasury rally will end & it's hard to forecast how that will play out.

Dow Jones Industrials --- YTD

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