Wednesday, September 1, 2010

Markets begin a new month with a strong rally

Oversold markets shot up today but volume remains low. Stocks are starting strong on the first day of trading in Sep as they were in Aug. Dow is up an impressive 244, advancers over decliners 7-1 & NAZ rose 61. Bank stocks are on fire, but the Financial Index remains in the lower end of its trading range over the last year.


Value 187.69 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change 5.42 (3.0%)

The Alerian MLP Index gained 4½ to the 322s & the REIT index was up almost 4 to 206. Junk bond funds were higher & the VIX, volatility index, dropped almost 2 to the 24s. The dollar was weak, taking the € up 1½ pennies to almost $1.28½. Largely overlooked with the strong stock market rally is a sharp decline in Treasuries. The yield on the 10 year Treasury bond leaped 11 basis points to 2.59%.

Treasury Securites

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

VIX --- 2 weeks

10-Year Treasury Yld Index --- 2 weeks

Oil advanced from a one-week low as the dollar fell against the € & Chinese manufacturing accelerated at a faster pace than expected in Aug. With strong stock markets, gold did well to just hold its own.

CLV10.NYM...Crude Oil Oct 10...73.48 ...Up 1.56

GCU10.CMX...Gold Sep 10...1,247.60 ...Down 0.70

$$ Gold Super Cycle $$ Click Here

Private employers unexpectedly cut jobs in Aug, delivering another blow to the already faltering economic recovery. A separate report showed the number of planned layoffs at U.S. firms fell to their lowest level in 10 years though, but there is still little to suggest companies are on the verge of hiring on a scale that would lower the unemployment rate. The private sector cut 10K jobs in Aug compared to a revised gain of 37K in Jul, according to ADP Employer Services. The ADP release followed the Challenger report, which showed the number of planned layoffs at US firms fell 17% in Aug from the prior month - employers announced 34K planned job cuts last month, down from 41K in July. It was the first month-on-month decline since Apr, when planned job losses had hit a 7-year low, & the lowest level since Jun 2000.

ADP Estimates Companies in U.S. Unexpectedly Cut Job

Manufacturing companies grew faster in Aug as the industrial sector continues to lead the recovery. Rising exports overseas & demand from businesses for capital equipment & supplies have helped propel production in factories for a year. The Institute for Supply Management said its manufacturing index rose to 56.3 in Aug from 55.5 in Jul (a reading above 50 indicates growth) & beating estimate of 53.0. The manufacturing sector has expanded for 13 straight months. While momentum had slowed this summer, the survey also shows manufacturing managers' desire to hire increased in Aug.

Manufacturing Index for U.S. Increased in August

Manufacturing factory index - 1 year

One-Year Chart for ISM PMI (NAPMPMI:IND)

There was really no special new news to account for unusually strong stock markets in a quiet week when many are away on holiday. Extreme moves with low volume is always suspicious. Manufacturing in China grew at a faster pace in Aug after a weak Jul signaling that the economy’s slowdown is stabilizing, giving buyers more courage. Dow is doing better, but has yet to test the 9.6-9.8K lows.

Dow Jones REIT Index --- 2 weeks

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