Monday, September 20, 2010

Markets reach 4 month highs

Stocks were strong, there is no other way to describe today's markets. They began higher & kept rising during the trading session. Dow was up 145 & closed near its highs, advancers over decliners 4-1 (good but not really great) & NAZ added 40 (encouraged by more takeover speculation). Of course, bank stocks led the way as the Financial Index broke thru 200 (first time over 200 since early last month).


Value200.52One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change3.99 (2.0%)

The Alerian MLP Index rose 2¼ to the 331s as it heads for the 2010 highs of 335 reached 4 months ago. REITs are hot as their index shot up 5+ to the 219s, tying the 2010 highs. Junk bond funds only inched higher, but still near record yearly highs. The VIX fell a fraction in the 21s, but not as much as might be expected given the strength in the stock markets. The € was flattish at $1.30½ despite more reassurances about the health of European banks. There was buying in Treasuries. The yield on the 10 year Treasury fell 4 basis points to 2.70%, remaining in low territory. The yield on the 2 year note is at a measly 0.46%, just a shade above its recent record lows.

Treasury Securities

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

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


10-Year Treasury Yld Index -- YTD

Oil rose for the first time in 5 days after equities advanced, signaling that economic growth will accelerate. Gold couldn't hold 1280, but remains in record territory & is eying 1300. Gold has had an excellent run this year, while stock market averages have been stumbling on balance.

CLV10.NYM..Crude Oil Oct 10..74.78 ..Up 1.12

GCU10.CMX..Gold Sep 10..1,279.30 ..Up 3.70

$$ Gold Super Cycle $$
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The National Bureau of Economic Research said the worst U.S. recession since the 1930s ended in Jun 2009. Unfortunately, many are responding with a "swell!" Expansion since then has been disappointingly slow. Last year the recovery was called "fragile" & that term still applies. The Federal Open Market Committee meets tomorrow & will consider these findings along with other economic figures released in recent weeks. All expectations are for rates to continue low for some time

Longest U.S. Slump Since '30s Ended in June '09, Group Says

American companies announced $56B in repurchases since Jun. When added to the $201B in H1, this far exceeds the $125B in all of 2009 (a figure held back by the recession). Cheap borrowings are encouraging management to make stock purchases. The average yield on US investment grade bonds fell to an all-time low of 3.70% last month. Buybacks also let firms boost EPS by reducing their equity base & may indicate executives find their stocks undervalued.

Stock Buybacks Surge as Companies Borrow for Share Repurchases

Buyers are back in command, although the breadth was less encouraging than it could have been. But strength in the Treasuries along with gold reaching another record represents major disconnects that can not last, there is demand for safety in the markets while others are buying stocks aggressively. Dow is close to 11K & its yearly high just above that level.

Dow Jones Industrials -- YTD

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