Tuesday, September 7, 2010

Markets fall on concerns about European sovereign debt problems

Stocks dropped at the opening and remained lower as European finances are center stage again. Dow fell 82, decliners over advancers 3-1 & NAZ was off 17. Financial stocks were hit hard, the Financial Index dropped more than 3.


Value 191.73 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change -3.46 (-1.8%)

The Alerian MLP Index fell 2 to the 325s while the REIT index was off almost 2 to the 212s. Junk bond funds were flat to higher. On increased nervousness in the markets the VIX, volatility index, shot up 2+ to the 23s. The € fell almost 2 pennies on increased worries about European bank problems. Treasuries are back in demand. The yield on the 10 year Treasury bond dropped 6 basis points to under 2.65% & may be headed back for the sub 2.50% recent lows.

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 was lower related to minimal storm activity in the Gulf (which could disrupt oil production). But gold keeps moving higher, getting with a few dollars of its recent record prices as stock market averages sold off.

CLV10.NYM...Crude Oil Oct 10...72.92 ...Down 1.68

Gold 1259.40 +8.30 +0.7%

++ Gold Super Cycle ++ Click Here

Many stocks have yields that exceed bond yields, more than at any time in at least 15 years. Even some Dividend Aristocrat stocks have yields that top the 3.8% yields available in the bond markets. Johnson & Johnson (JNJ), a Dividend Aristocrat, sold bonds last month with a yield of 2.95% while the stock offers a 3.7% yield. The last time the number of S&P 500 companies offered stock yields above the corporate bond rate was in Mar 2003. This makes for a strange combination, stock yields and gold are king.

Dividends Beating Bond Yields by Most in 15 Years

Enterprise Products Partners (EPD), a midstream energy services MLP, wants to buy Enterprise GP Holdings (EPE) for about $8B to reduce its capital costs & simplify its partnership structure. EPE owns the general partner of & limited partner interests in EPD. EPE unitholders would receive 1.5 EPD units in exchange for each EPE unit. EPE jumped 6.10 to 56 while EPD fell 38¢ to 38.07. The merger will lower EPD long-term cost of capital through the permanent elimination of the general partner's incentive distribution rights. Since EPD is the largest MLP, this may be a signal for other MLPs to buy out their general partners that manage the businesses.

Enterprise Products to Buy Pipeline Partnership for More Than $8 Billion

Enterprise GP Holdings (EPE) -- 2 years

Enterprise Products (EPD) --- 2 years

After markets close in Aug, they had a mini rally in early Sep. But volume was low. Now traders are back & today's sell-off may be a better indicator about where stocks will go in Sep.

Dow Jones Industrials --- 2 weeks

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