VerySmartInvesting: Market losses limited after morning selling

Monday, March 14, 2011

Market losses limited after morning selling

Stocks found buyers in the PM, reducing losses for the day. Dow fell 51 (100 above its lows), decliners ahead of advancers 2-1 & NAZ dropped 14. Banks stocks also reduced their losses as the Financial Index finished 2 above the AM lows (but still down 11 from the Feb 18 high).

S&P 500 FINANCIALS INDEX

Value	220.37
Change	-2.19 (-1.0%)

The Alerian MLP Index also rebounded. The index was essentially even in the 366s, after being down 2½ in the AM REITs were weak, bringing their index down 2¼ to under 231 while junk bond funds were little changed. Crude oil settled little changed at above $101, after reversing an earlier drop of almost 3%. Gold rose modestly. Safe haven buyers bought as protection against escalating devastation in Japan as profit takers sold gold to cover losses in other assets.

CLJ11.NYM

...Crude Oil Apr 11

...101.06

...

0.10 (0.1%)

Gold

...1426.40

...+4.60...

+0.32%

Treasury notes rose, pushing 2-year yields to a 5-week low, as Japan's earthquake spurred demand for the safety of US gov debt. Yields on 2-year notes dropped 4 basis points to 0.60% after touching 0.56%, the lowest level since Feb 1. The 10-year note yield slid 5 basis points to 3.35% while the 30-year bond yield was little changed at 4.54%. The difference in yield, or spread, between 2- & 30-year securities rose for a 2nd day, increasing to 394 basis points, the widest in 5 weeks. At today’s $30B auction of 6-month Treasury bills, the securities drew the lowest demand in almost 2 years, including foreign central banks (indirect bidders). They bought 20.4% of the debt, the lowest since the buyers purchased 17.3% 2 years ago. The Federal Reserve (FED), as part of its $600B Treasury program, bought $7.56B of Treasury debt. At tomorrow's FED Meeting, the policy of low interest rates is expected to be extended.

Treasury Notes Advance as Japan's Earthquake Bolsters Demand for U.S. Debt

Treasury Yields:

U.S. 3-month		0.07%
U.S. 2-year		0.60%
U.S. 10-year		3.35%

Gas at the pump was $3.56 yesterday & higher prices can be expected.
State's Graph

Markets behaved well under pressure, making bulls happy. But Dow failed to hold above 12K. There is a lot of confusion on how the disaster in Japan will play out. Nuclear energy & Japanese insurers will suffer, but less is understood about how oil, gold, commodities & many businesses will fare. MLPs have been weak in 2011, but remained in the black YTD. For investors this is a time to await developments before committing funds.

Dow Industrials (INDU)