VerySmartInvesting: Markets slide on nervousness about the next moves by the Federal Reserve

Monday, November 1, 2010

Markets slide on nervousness about the next moves by the Federal Reserve

Stocks could barely hold early gains when financial & consumer companies turned lower. Dow had to settle for up 6, advancers barely ahead of decliners & NAZ dropped 2. The Financial Index was about break even with bank stocks selling off.

S&P 500 FINANCIALS INDEX

Value	195.80
Change	-0.03 (-0.0%)

The Alerian MLP Index gave up its early gains but late day brought back a gain of 0.76 in the 353s to yet another record. Higher prices bring lower yields. The yield on the index has fallen to 6¼%. The REIT index, off from its highs, still managed a gain of 2 to the 221s on favorable earnings. Junk bond funds also gave up AM gains. Treasuries are sloshing around prior to the FED meeting, but interest rates are already at near record or very low levels.

Treasury yields:

U.S. 3-month		0.10
U.S. 2-year		0.34
U.S. 10-year		2.62

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

10-Year Treasury Yield Index --- YTD

Oil prices surged on a series of reports that point to improving economic growth in the US & China. Gold is the classic bet against inflation, investors are waiting to see the results of the FOMC meeting.

CLZ10.NYM

...Crude Oil Dec 10

....82.94

...

1.51

(1.9%)

GCX10.CMX

...Gold Nov 10

.....1,351.30

...

5.80 (0.4%)

$$ Gold Super Cycle $$

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Photo: Bloomberg

The Federal Reserve (FED) is widely expected to begin a new round of unconventional monetary easing this week by announcing a plan to buy at least $500B of long-term securities after its meeting on Wed. The FED would restart a program of securities purchases to spur growth, reduce unemployment & increase inflation. However Fed officials have different ideas about the total amount of purchases needed to bolster the recovery. The FED has already cut the benchmark rate almost to zero & bought $1.7T (that's T as in trillion) in securities without generating growth fast enough to bring down unemployment from near a 26-year high. Some analysts question how much good this progam will do versus how much harm. If they restart this program, interest rates will fall further.

Fed Likely to Announce $500 Billion of Purchases, Survey Shows

Apple, with the 2nd largest market cap in the world, has finally hit a roof after soaring to new heights. Its peak was when it reported great earnings again & announced new products for its iPad & iPhone product lines. Since then it it has been slipping & sliding along with the markets, or perhaps leading the markets down. Today it rebounded 3.20 off the 300 floor but investors may be scenting increased competition for these lines. The New York Times just published an article about the competition for smart phones.

The Race to Dominate the Smartphone Marketat New York Times

Apple -- 1 month

Stock markets have not been performing well in the last few weeks. For the 3rd time in 2 weeks, the Dow rose above its highest closing price of the year only to see traders pull back. Little should happen tomorrow. But Wed, after election results are in & the FED announcement, will give us a better sense of where markets want to go. I'll take a holiday tomorrow, back on important Wed.

Dow Jones Industrials --- YTD