Markets are nervous prior to Federal Reserve meeting

Stocks sold of at the opening & the losses are continuing. Dow is down 95, decliners over advancers 4-1 & NAZ fell 33. Not surprisingly, bank stocks were weak taking the Financial Index back below 200.


S&P 500 FINANCIALS INDEX

Value	197.77
Change	-2.29 (-1.1%)

The Alerian MLP Index fell 5 to the 324s bringing the 2 day decline to 10. When an index goes straight up, this has to be expected. The REIT index fell 3 to 208. Junk bond funds edged higher. The VIX rose 1½ to the 23s, still in moderate territory but on the rise. The yield on the 10-year Treasury index was up 1½ basis point to 2.83%. This very low number deserves more attention than it has been getting. The € sank again to below $1.31 as the dollar is getting stronger.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks




10-Year Treasury Yld Index --- 2 weeks






Oil tumbled on worries that the economy is struggling to recover. Gold fell for the 2nd straight day as the dollar climbed. Overall, commodities were lower on speculation about what the FED might do.

CLU10.NYM

...Crude Oil Sep 10

...79.59

... 1.89 .......(2.3%)

GCQ10.CMX

...Gold Aug 10

...1,194.80

... 5.90 .......(0.5%)

**Gold Super Cycle**
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Worker productivity declined at an annual rate of 0.9% in Q2 after posting large gains throughout 2009, the Labor Dept said. The drop in productivity was the first decline since a 0.1% dip in Q4 of 2008 & was the biggest fall since a 1.3% decrease in Q3 of 2008. Unit labor costs edged up 0.2% in Q2, the first increase since the spring of 2009. Employee output rose by large amounts during the recession as companies slashed payrolls & pushed unemployment up to the highest levels in more than 2 decades. It is thought that a slowing in productivity would be a welcome development if it translates into more hiring. Productivity for all of 2009 rose 3.5%, the best showing in 6 years & a reflection of companies' ability to produce more with fewer workers

Worker Productivity in U.S. Unexpectedly Fell in 2nd Quarter


Unit labor costs - 1 year

Bank of America (BAC), a Dow stock, may add $13B to its book value when it posts gains from a Chinese bank stake in October. BAC owns 11% of China Construction Bank (symbol of HK:939 & traded in Hong Kong). CCBHK has a pretty chart below over the last 5 years (a lot prettier than BAC). The shares have been valued at original cost of $9.2B & with the lockup expiring in less than a year, accounting rules require the stake to be carried at market value, now $22B. BAC fell 23¢.

BofA May Get $13 Billion Capital Boost From China Banking Stak


China Construction Bank (HK) - 5 years




Bank of America --- 5 years





There's not much to say as everybody eagerly anticipates what the Federal Reserve will do following its meeting. There is speculation that it will increase money supply by means other than rates, such as buying gov bonds (which would drive low rates even lower). Meanwhile MLPs are encountering profit taking, the first time since late May.

Dow Jones Industrials --- 2 weeks

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