Markets are indecisive after lower homebuilder data

Dow is up 17, advancers over decliners 3-2 & NAZ gained 14. Bank stock are also doing very little.

S&P 500 FINANCIALS INDEX

Value	189.18
Change	0.08 (0.0%)

The MLP index & REIT index are each up a fraction, essentially no real change. Junk bond funds were weaker. The VIX was flattish near 26, up a notch from where it's been recently. Yields on Treasuries plunged again. The yield on the 10- year Treasury bond fell 9+ basis points to just below 2.60%. I hate to sound like a broken record, but these low yields & going even lower are very bad for the stock markets. The € found strength, going up almost a penny to $1.28½.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil is doing little on this quiet day, but gold is charging forward. It only needs another 40 for a new record. Its long term fundamentals remain strong as a safe haven & participation in global economic growth.

CLU10.NYM

...Crude Oil Sep 10

...75.17

... 0.22 .......(0.3%)

GCQ10.CMX

...Gold Aug 10

...1,225.00

... 10.10 .......(0.8%)

**Gold Super Cycle** Click Here

Photo: Bloomberg


The homebuilder confidence dropped for the 3rd straight month in Aug as the struggling economy & a flood of cheap foreclosed properties kept people from buying new homes. The National Association of Home Builders monthly index of builders' sentiment fell to 13, the lowest reading since Mar 2009. Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in Apr 2006. The market is struggling because jobs are scarce & credit is tight, nothing new! Many predict home prices are likely to drop again in the fall. Builders say consumers are worried about the weak recovery & job market & many buyers are opting for deeply discounted foreclosed properties.

U.S. Homebuilder Confidence Unexpectedly Drops to Lowest Level Since 2009


Home builder confidence index - 1 year





This is turning into another nothing kind of day for stocks on low volume. I just went to a meeting with prominent fund managers to discuss junk bond funds. They were optimistic about junk bonds despite the fabulous gains last year followed by another excellent performance in 2010. Many funds are up 10% YTD & income brings total gains to around 20%. The feeling was that the future is bright in an improving economy (key to their assumptions). However funds find that rolling over investments (reinvesting proceeds from maturing debt) brings lower rates on new bonds as interest rates fall. This brings div cuts. Also net investment income will be hurt significantly when interest rates (eventually) rise. But investors are pursuing high yields with a yield spread over Treasuries of roughly 600 basis points versus previous lows around 400 basis points (largely a function of the extraordinarily low yields on the 10 year Treasury bond).

Dow Jones Industrials --- 2 weeks

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