Monday, August 22, 2011

Nervous markets vacillate

After opening higher, markets have been sliding lower. Dow is up 29 (it had been 74 higher), advancers ahead of decliners 4-3 & NAZ slipped a fraction - call it even. Banks are also heading south, taking the Financial Index into the red with a terrible looking chart.

S&P 500 Financials Sector Index

Value	162.39
Change	-0.65 (-0.4%)

The MLP index is having another dreary day, down 25 from last week. But the REIT index rose 1+ to the 212s. Junk bond funds edged higher & Treasuries fell. There is talk that the Federal Reserve may try for another aid kind of package this week (last year, it came up with QE2). Oil rose, hoping the Libyan situation may be bullish for oil prices. Gold, what is there to say? Risk averse thinking is back in vogue, those people are buying gold & Treasuries.

Alerian MLP Index

Value	332.40
Change	-4.30 (-1.3%)

Get the latest market update below:

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.197%
U.S. 10-year	2.101%

CLU11.NYM

...Crude Oil Sep 11

...83.17

...

1.06

(1.3%)

GCQ11.CMX

...Gold Aug 11

...1,873.00

...

24.10

(1.30)

Retailers are bracing for a weakened H2 as the economy & consumers face the prospect of losing jobs & a volatile stock market. Q2 EPS for 43 retailers in the S&P 500 Index gained an average of 11%, the smallest increase in 2 years. Profits rallied 71% last year but declined 2.2% in Q2 2009 as the 18-month recession ended. Wal-Mart (WMT) said last week that lower-income consumers, concerned about losing their jobs are trading down to lower- priced brands & smaller sizes of goods to stretch their paychecks. Wealthier shoppers may be retreating from luxury purchases as the stock market falls. Confidence among consumers in Aug fell to the lowest level since May 1980, according to Thomson Reuters/University of Michigan. US GDP climbed at only a 1.3% annual rate in Q2 following a 0.4% annualized gain in Q1. The economy is weak & that will hurt retailers.

Retailers Brace for Weak Second Half

There was a lot of optimism at the opening but that did not last. Traditionally, the 2 weeks before Labor Day are semi holiday periods when many are away. This year there is a lot going on, much of that with a negative bias. Bulls are hoping the Federal Reserve will come up with another magic bullet (probably by Fri) to help the stock market. I just had a meeting with prominent junk bond fund managers & they are optimistic about the future of junk bonds. Defaults remain extremely low & they view the sell-off in Aug as a time to buy more, especially lower rated bonds, to lock up high yields. Junk bond funds are now yielding 9-11%. I'm, looking for even lower prices with higher yields & this is the time to prepare shopping lists for stocks, etc.