Dow has best September in 71 years

This is statistically the worst month for the stock market, but not in 2010.  The Dow was up in Jul, down in Aug & up again in Sep for a total gain of 10% (off one of its lowest levels in the last year).  Today, Dow slipped 47 (from selling into the close), advancers & decliners were even while NAZ fell 7.  The Financial Index (composed primarily of bank stocks) was up 11 for the month but far off the yearly highs of 230 & very far under the 500+ record levels 3 years ago.

S&P 500 FINANCIALS INDEX

Value	193.18
Change	0.21  (0.1%)

The Alerian MLP Index gained another 1+ to the 337s, just 6 away from setting a new record high.  The REIT index was up a tad today at 210+ & also had a good month (although far short of record levels). Junk bond funds were flattish today but up around 5% in Sep. The € was little changed today at $1.36 & gained 6¢ in the month.  Treasuries were flat but at elevated levels all month with record low or near record low yields. Treasury yields were little changed today.

Treasury yields

U.S. 3-month		0.15%
U.S. 2-year		0.42%
U.S. 10-year		2.51%

Alerian MLP Index   ---   1 month




Dow Jones REIT Index   ---   1 month




10-Year Treasury Yld Index   ---   1 month






Oil had its biggest monthly gain since May 2009, after economic indications that demand for oil may improve.  Gold, what is there to day??  It topped 1300 & wants to go higher. 

CLX10.NYM

...Crude Oil Nov 10

...79.95

... 2.09  (2.7%)

GCV10.CMX

...Gold Oct 10

...1,306.20

... 2.30

(0.2%)

$$$Gold Super Cycle$$$ 

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Oil  (ETF)   ---   1 month




GLD  (ETF)   ---   1 month





Apple (AAPL) with the 2nd (maybe 3rd) largest market cap added 42 in Sep & reached new record levels, rising with higher market averages. 


Apple  ---   1 month






Jul up, Aug down & Sep up, quite a roller coaster ride. Maybe that suggests Oct will bring another down month.  Dow had a great month, but has topped out around 10.8K in the last 10 days.  Meanwhile, MLPs want to take their average to new records, gold is at new records &; Treasuries are at or near record levels (with correspondingly low yields).  This divergence is tough to decipher, but I'm still looking for the defensive plays to win out short term.  Congress has shut down so they can go home & beg for extensions on their jobs.  Tax rates for next year will not be decided until after elections, 5 weeks away (& probably longer).  The IRS has already said that it will have to revise tax withholding tables based on the old (higher) rates because they need lead time going into Jan.  The implications of higher taxes at the start of the new year will be tough for stock markets to swallow.


Dow Jones Industrials   ---   1 month

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Markets little changed on end of quarter trading

Stocks jumped on what was viewed as a favorable jobless claims report, but demand is ebbing.  Dow is down 18, advancers ahead of decliners 4-3 & NAZ fell 11.  Bank stocks are off their earlier highs.  While up, the Financial Index is 3 below its high. 

S&P 500 FINANCIALS INDEX

Value	193.89
Change	0.51  (0.3%)

The MLP index was up a fraction in the 336s, good enough for a new 2010 high while the REIT index was up 1 to 211.  Junk bond funds are mixed as they have been all week.  The € rose a little to $1.36½ on the weaker dollar.  Treasuries dropped on economic recovery signs making it less likely the Federal Reserve will buy Treasuries. The yield on the 10 year Treasury bond was up 3 basis points to 2.54%, not that serious of a sell off by Treasuries.

Treasury yields

U.S. 3-month		0.16%
U.S. 2-year		0.44%
U.S. 10-year		2.54%

Alerian MLP Index   ---   2 weeks




Dow Jones REIT Index   ---   2 weeks




10Year Treasury Yield Index   ---   2 weeks





Oil rose on the favorable outlook for the economy & gold is digesting its record run into the 1300s.

CLX10.NYM

...Crude Oil Nov 10

...79.26 1

... 1.40

(1.8%)

GCV10.CMX

...Gold Oct 10

...1,305.50

... 3.00   (0.2%)

Gold Super Cycle Link!! Click Here

 

Photo:  Bloomberg

Initial jobless claims decreased 16K to 453K last week, lower than forecasted. Claims were projected to fall to 460K.  The total number receiving unemployment insurance & those getting extended payments also dropped 83K to 4.46M. However, enough jobs aren’t being added to reduce the unemployment rate.  The graphs below show that this data remains dreary!

Jobless Claims in U.S. Decreased 16,000 to 453,000 Last Week


Weekly jobless claims - 1 year





# continuing to receive benefits - 1 year






The U.S. economy grew at a 1.7% annual rate in Q2, marking the slowdown in growth that has concerned the Federal Reserve. The revised increase in GDP compares with a 1.6% estimate last month, a 3.7% in Q1 & 5% at the end of 2009.  More mixed news about the economy & its recovery. 

U.S. Economy Grew 1.7% in Second Quarter as Recovery Slowed



Markets gave up early gains quickly, but that could also influenced by end of the qtr selling.  It looks like AIG (AIG) will be paying back the gov, another good sign which will have little impact on the $1+ trillion deficit, showing how the financial markets have improved in the last 2 years.  Dow continues to lumber along staying close to 10.8K.  It's not getting that excuse to carry on to higher levels which are important technically.

Dow Jones Industrials   ---   2 weeks

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Markets slip while awaiting new developments

Stocks were in the red all day but never by much.  Dow fell 22, advancers ahead of decliners 5-4 & NAZ fell 3.  Banks stock sold off dragging the Financial Index to its yearly lows, just under 180.

S&P 500 FINANCIALS INDEX

Value	193.39
Change	-1.61  (-0.8%)

The Alerian MLP Index rose 1.81 to the 336s, another 2010 high, only 7 away from establishing an all time record.  REITs were weak, taking the index down 2 to 210 & junk bond funds were mixed.  The weak dollar took the € up another ½ a penny to above $1.36.  Treasuries are the main story in the financial markets only this time they dropped, pushing the yield on the 10 year bond up 5 basis points to 2.50% as Federal Reserve policy makers cast doubt on an increase in debt purchases.  Today $29B of 7 year notes were sold at the lowest yield on record (1.89%).  The bid-to-cover ratio was an impressive 3.04X, compared with an average of 2.84X at the past 10 auctions.  There is plenty of demand for Treasury debt, not good for competitive investments like stocks. 

Treasury yields

U.S. 3-month		0.16%
U.S. 2-year		0.44%
U.S. 10-year		2.50%

Alerian MLP Index  --  6 months




Dow Jones REIT Index  --  6 months




10-Year Treasury Yield Index  --  6 months





Oil rose when the weekly inventory report showed an unexpected drop in fuel inventories.  Gold continues strong & is heading for new record levels.

CLX10.NYM

...Crude Oil Nov 10

...77.73

... 1.55  (2.0%)

GCV10.CMX

...Gold Oct 10

...1,309.00

... 2.40  (0.2%)

***Gold Super Cycle*** Click Here

The Treasury Dept will start to sell $2.2B in trust preferred shares that it holds in Citigroup (C) to help recoup the costs incurred in the $700B financial bailout. These shares were received as part of Treasury's agreement in Jan 2009 to share potential losses on a pool of $301B of assets held by Citi.  The loss-sharing arrangement also involved the FDIC & the Federal Reserve. Citigroup paid the Treasury & the FDIC a premium in the form of securities for their willingness to share potential losses over a 5-10 year period.  The loss sharing arrangement was terminated in Dec 2009 at the request of Citi.  The Treasury was never required to make any payments under the arrangement with no further obligation to do so.  This stock sale is being handled separately from the sale of $25B in Citi common stock that the gov owns.  Citi received $45B in taxpayer support in addition to the insurance provided against losses on the pool of $301B in assets.  Of the $45B, $24B was converted to a gov ownership stake which was sold off last spring. The bank repaid the other $20B in December 2009.  The common stock has been lumbering along in low single digits since Citi needed this rescue.  As a reminder, the gov is really all the taxpayers who want to get some of their money back.

Treasury to Sell $2.2 Billion Citigroup Bailout Trups


Citigroup   ---   2 years






Another day of lackluster trading on very low volume (1.0B shares on the NYSE floor) with little decided.  Next week Sep reports are due which will give the markets something to chew on.  Oct is statistically the 2nd worst month for stocks but is best remembered for major drops that made worldwide  headlines.  MLPs have taken a couple of months to move forward, but look like they're getting ready to establish new record highs (for the basic Alerian MLP Index).  The comparable index with reinvested income has been setting records many times this year.


Dow Jones Industrials  --  6 months

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Markets waffle while looking for direction

Stocks are lower, but the selling is not serious. Dow fell 42, decliners ahead of advancers 4-3 & NAZ was off 8.  Bank stocks led the selling.  However this has been a good month for the Financial Index, up 12 from its yearly lows at the start of Sep.

S&P 500 FINANCIALS INDEX

Value	193.52
Change	-1.48  (-0.8%)

The MLP index was flattish in the 334s while the REIT index dropped 2½ to the 209s.  Junk bond funds were mixed near their yearly highs & the VIX, volatility index, was up a fraction in the 23s.  The yield on the 10 year Treasury bond inched up 1 basis point to 2.47%, remaining at worrisome low levels.

Treasury yields

U.S. 3-month		0.15%
U.S. 2-year		0.42%
U.S. 10-year		2.46%

Alerian MLP Index   ---   2 weeks




Dow Jones REIT Index   ---   2 weeks




VIX   ---   2 weeks





10-Year Treasury Yld Index   ---   2 weeks




Oil slipped while gold was little changed after climbing to record levels above 1300.

CLX10.NYM

...Crude Oil Nov 10

...75.69

... 0.49

(0.6%)

GCV10.CMX

...Gold Oct 10

...1,307.00 ...

0.40

(0.0%)

Gold Super Cycle Link!! Click Here

The dollar fell to an 8 month low against a basket of currencies including the € and ¥ on speculation the Federal Reserve will increase purchases of gov debt to spur the US economy.The € was up again, this time to $1.36.


Dollar index  -  1 year






Family Dollar Stores (FDO), a Dividend Aristocrat, forecast profit for the current fiscal year will beat most estimates & said it will speed up the pace of new store openings.  The retailer, with prices mostly under $10, has attracted cash-strapped consumers in a weak economy. FDO expects to reap the benefit of longer store hours & an overhaul to give more room to fast-moving items like food. The company also posted Q4 profit that beat estimates & authorized a new $750M share repurchase plan. FDO forecast fiscal 2011 EPS of $2.95-$3.15 on a same-store sales increase of 5-7%. Forecasts were for EPS of $2.96.  300 new stores will be opened during FY2011, up 50% from FY2010 which ended on August 28.  EPS in Q4 was 56¢, beating forecasts of 51¢ before one-time items & above 43¢ last year.  Earlier this month, FDO said sales rose 8% to $1.96B during Q4 & sales at stores open at least a year rose 6.1%.  The stock rose 91¢ (2%).

Family Dollar Profit Tops Analyst Estimates; Company Boosts Store Openings


Family Dollar Stores  --  2 years





Hewlett-Packard (HPQ), a Dow stock, forecasted that for the fiscal year ending Oct 2011, EPS would be $5.05-5.15, excluding certain accounting items related to its recent acquisition spree. It sees revenue of $131.5-133.5B.  Analysts had been expecting EPS of $4.99 on revenue of $131.4B.  Despite a recent slump in personal computer sales, recent sales trends have been strong.  The stock rose 63¢ (1½%).

Hewlett-Packard Forecasts Profit, Revenue Topping Estimates


Hewlett-Packard   --  2 years





Nothing dramatic going on in the markets as has been the case all week.  Dow has not strayed far from 10.8K in recent days.  Qtr end selling adjustments have not been significant this time.  The MLP index has been inching up towards its yearly high but could not get a good head of steam to carry to new 2010 highs.  More inaction can be expected until the new month & qtr start.

Dow Jones Industrials   ---   2 weeks

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