Friday, July 27, 2012

Markets advance on euro bailout hopes

Dow rose 105, advancers over decliners 5-1 & NAZ gained 37.  The Financial Index was up 1+ to the 196s.  The MLP index slipped a fraction to the 392s & the REIT index was up 2+ to the 266s.  Junk bond funds were mixed while Treasuries pulled back on profit selling.  Oil & gold also advanced.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU12.NYM...Crude Oil Sep 12...89.98 ...Up 0.59  (0.7%)

GCN12.CMX...Gold Jul 12.......1,613.40 ...Down 1.60  (0.1%)

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  • <p>               FILE - In this Tuesday, May 1, 2012, file photo, worker Maria Contrero, of Boston, removes an elite running shoe from a sole press during the assembly process at the New Balance Athletic Shoe, Inc. factory in Boston. A U.S. economy that plodded along in the first three months of the year likely grew even less in the April-June quarter. And most economists no longer think growth will strengthen much in the second half of 2012.  (AP Photo/Steven Senne, File)
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The US economy grew at an annual rate of just 1.5% in Q2, as Americans cut back sharply on spending.  The slowdown in growth adds to worries that the economy could be stalling 3 years after the recession ended.  The Commerce Dept also said that the economy grew a little better than previously thought in Q1, raiseing its estimate to a 2% rate, up from 1.9%.  But growth at or below 2% isn't enough to lower the unemployment rate, which is 8.2% presently.  The growth rate is not expected to pick up much in H2.  Europe's financial crisis & a looming budget crisis in the US can slow business investment further.  Some economic data improved over in Q2, while others worsened.  Hiring, for example, rose slightly from Apr to May to Jun.  But home sales weakened.  Some believe the Federal Reserve will launch another round of bond buying at its Sep policy meeting to drive long-term interest rates lower & encourage more borrowing & spending.  The 1.5% growth rate was the weakest since the economy expanded at a 1.3% rate in Q3 last year.  

U.S. Economic Growth Slows to 1.5% as Unemployment Pares Consumer Spending

While this is another day for the bulls, the markets are really in a lackluster mode.  Yes Dow broke thru the technical ceiling to almost 13K, but this is summer & hard to make much of moves.  The next objective for the bulls is 13.4K.  The ECB will have to take positive actions to make that happen.  In the meantime hopes are riding high that Big Ben & the Federal Reserve will provide magic.  As an aside, I just went to a meeting with fund managers for junk bond funds.  They continue to be optimistic about the future of high yield debt.  Longer term, these bonds have done well.  The only real losers were in late 2008 when some panicked & sold at market lows.  Brave investors stayed the course & allowed divs to reinvest at low prices (to get extraordinarily high yields) & did quite well.,

Dow Jones Industrials

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