Friday, October 1, 2010

Markets edge higher in new quarter

Stocks started the new month looking for direction.  Dow is up 10, advancers 3-2 ahead of decliners & NAZ dropped 6.  The Financial Index shows that bank stocks are up a smidgen.


Value 193.48 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change +0.30 (+0.2%)

The Alerian MLP Index rose 1+ to 339, just 4 below breaking the record close from Jul 2007.  But there is nothing dramatically new going on with MLPs.  The index is up an amazing 54 (19%) YTD, even more impressive following record breaking gains last year.  In contrast the Dow Jones REIT Index is up 1+ to the 209s, but has been going sideways since May.  Junk bond funds were higher, many to new yearly highs. A weaker dollar is taking the € to new 6 month highs at $1.37½.  Treasury two-year note yields fell to a record low percent from speculation that the Federal Reserve will increase purchases of debt.  But the yield on the 10 year Treasury bond rose 3 basis points to 2.52%, still in very low territory.

Treasury yields

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

Alerian MLP Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10-Year Treasury Yld Index   ---   2 weeks

Oil rose above 80, an important technical line.  But it has done this several times in the last 12months without breaking out of its sideways trading range.  Gold continues HOT at new record levels.

CLX10.NYM...Crude Oil Nov 10...81.18 ...Up 1.21  (1.5%)

GCV10.CMX...Gold Oct 10...1,315.20 ...Up 7.40  (0.6%)

Gold Super Cycle Link! Click Here

Consumer Spending in U.S. Rose More Than Forecast

Photo:  Bloomberg

Consumer spending rose a moderate amount in Aug while incomes increased by the largest amount in 8 months, propelled by the resumption of extended unemployment benefits.  Spending increased 0.4%, matching the Jul increase, according to the Commerce Dept. The 2 increases followed a flat reading in Jun.  Incomes rose 0.5%, better than a 0.2% rise in Jul & a flat reading in Jun.  The Aug rise would have been much lower, just 0.2%, without the extended unemployment benefits.  While incomes are only growing modestly, it is not expected that spending will gain significant momentum.  With incomes up slightly more than spending, the personal savings rate edged up to 5.8% of after-tax incomes in Aug versus 5.7% in Jul. Both are much higher than the 2.1% average savings rate in 2007, before the recession began.  More indications that the economic recovery is just lumbering along.

U.S. Consumer Sentiment Index Reading of 68.2 Exceeds Estimates

Personal incomes - 1 year

One-Year Chart for MoM % Change (PITLCHNG:IND)

Savings rate - 1 year

One-Year Chart for Savings Rate (PIDSDPS:IND)

The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 68.2 from 68.9 in Aug, better that projections of 67 & compares with a preliminary reading of 66.6 issued last month.  The confidence index averaged 89 in the 5 years leading up to the recession that began in Dec 2007 & has yet to reach that level.  The survey’s measure of current conditions rose to 79.6 from 78.3 in Aug.  But the index of consumer expectations for 6 months from now decreased to 60.9, the lowest since March 2009, from 62.9. Additional evidence explaining why the recovery is not robust.

Consumer Spending in U.S. Rose More Than Forecast in August

Consumer sentiment - 1 year

One-Year Chart for Sentiment (CONSSENT:IND)

Consumer expectations - 1 year

One-Year Chart for Expectations (CONSEXP:IND)

Stock markets aren't doing very much in quiet trading.  But gold, Treasuries & MLPs are making money for believers in these securities.  Oct may be the month these very different investments will diverge & go on their separate ways..

Dow Jones Industrials   ---   2 weeks

Diversification Doesn't Work!! 

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