Wednesday, February 23, 2011

Triple digit drop for Dow in 2 consecutive days

Dow fell 107, decliners ahead of advancers less than 2-1 & NAZ sank 33 in a weak tech sector.  Bank stocks were lower all day.


Value223.09One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -0.92  (-0.4%)

After the MLP index reached 379 (almost touching its record high) in the AM, there was major selling in the PM.  The index ended down 1½ to the 374s.  The REIT index fell 2+ to the 232s & junk bond funds were little changed.

Alerian MLP Index   ---   3 months

Dow Jones REIT Index   ---   3 months

10-Year Treasury Yield Index   ---   3 months

The chart below shows that oil touched the magic $100 mark & then pulled back in the PM.  Gold continues strong, rising more than 100 off its lows last month.

CLJ11.NYM...Crude Oil Apr 11...98.04 ......Up 2.62 (2.8%)

GCG11.CMX...Gold Feb 11.....1,411.70 ...Up 11.20  (0.8%)

$$$ Gold Super Cycle $$$  

CLJ11 (oil contract)   ---   1 day

The Treasury 10-year bonds rose earlier, pushing the yield to a 3-week low on speculation that higher oil prices will slow the economic recovery. But those gains were erased after the sale of 5-year debt drew the lowest level of participation since Nov.  Yields on current 5-year notes gained 3 basis points to 2.16%.   At today’s auction, the 5-year notes drew a yield of 2.19%, compared with a forecast of 2.17% & the bid-to-cover ratio was 2.69X, compared with an average of 2.79X at the previous 10 sales.  Indirect bidders, including foreign central banks, purchased 34%, compared with 45% at the previous sale & an average of 42% for the past 10 sales.  At yesterday’s $35B auction of 2-year notes, the bid-to-cover ratio was 3.03X, the least since May. The Treasury will sell $29B of 7-year debt tomorrow in the last note sale of the week.  Yields on 10-year bonds gained 2 basis points to 3.47% after touching 3.43%, the lowest level since Feb 2.  In addition, Philadelphia Fed President Charles Plosser said in a speech that an early end to the central bank’s plan to purchase debt $600 of Treasury debt may be required to help limit inflation pressures.

Treasury Five-Year Notes Drop on Concern U.S. Debt's Refuge Appeal Waning

Treasury yields:

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

Enterprise Products Partners (EPD) will purchase all units of Duncan Energy Partners (DEP) through a unit-for-unit exchange. EPD would offer 0.9545 EPD units for each DEP unit, representing a value of $42.00 per unit (a premium of 30%, based on the 10-day average closing price of DEP on Feb 18).  EPD is the largest MLP & will become even larger.  Its assets include over 50K miles of pipelines; 192M barrels of storage capacity for NGLs, refined products & crude oil; & 27B cubic feet of natural gas storage capacity.  The 2 companies were founded by Dan Duncan & are closely related, so no opposition is expected.  As is usual in these deals, DEP shot up 7.84 to near the value of EPD units while EPD fell 73¢ with a meager yield of 5½%.

Enterprise Products Partners   ---   3 months

Duncan Energy Partners   ---   3 months

2 bad days in a row is something stock markets will have to adjust to.  The chart below reminds us that many may have forgotten, markets can go down.  Techs were weak again, although Apple (AAPL) rebounded 4 to the 342s after losing 25 in recent days.  Its annual meeting gave encouragement to its investors.  But higher oil prices are starting to bite hard around the world.  The average price for auto gas in the US was $3.19 yesterday according to AAA & is heading north.  The summer driving season is still a few months away.  High prices adversely affect all countries importing oil, crimping their growth rates.  Economic forecasts may have to be lowered.

Dow Jones Industrials   ---   3 months

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