Profit taking after gains this week

Dow began the day higher, but sank quickly. Maybe this is a case of buy on the rumor & sell on the news (stress tests). Dow is down 60, decliners over advancers 3-2 & NAZ fell 30. Banks were mixed, although Bank of America (BAC) was up 1½ ahead of the gov stress test report telling them to raise another $34B.


S&P 500 FINANCIALS INDEX

Value 165.21

Change -2.93

% Change -1.7%

The Alerian MLP Index dropped 1½ to 213 (& down from 216 on this morning's opening). The Dow Jones REIT Index was down 5 but junk bonds were up while the yield on the 10 year Treasury rose to 3.24% (maybe a delayed reaction to yesterday's sales of Treasury debt) on lower bonds prices.

Oil continues its winning ways. Just a few months ago it was sub 40. Last night an oil trader said the next technical level oil is shooting for is 62.

CLM09.NYM

...Crude Oil Jun 09

...57.66

... 1.32 .......(2.3%)

New applications for jobless benefits dropped to the a 14 week low, another sign that the wave of layoffs has peaked.The number of laid off workers applying for benefits fell to 601K last week, better than a rise of 635K expected. The 4 week moving average of jobless claims totaled 624K, a decrease of more than 30K from the high in early Apr (Goldman Sachs economists have said a decline of 30-40K in the 4 week average is needed to signal a peak). However, the total number receiving jobless benefits climbed to 6.35 million, the 14th straight record.

•U.S. Unemployment Claims Unexpectedly Fall to Lowest Level in Three Months


Below are 2 different views of what to expect after the stress tests results are announced. The Treasury Sec thinks they will be a "reassuring" picture of a U.S. banking system able to withstand whatever stresses the recession may inflict on it once a handful of institutions add to their capital base." I'm worried that the same regulators who were being paid with tax dollars are now the ones who well tell us how to fix the credit mess, not reassuring to me.

•Fed's Stress Test Results for Banks `Reassuring,' Show No Insolvency Risk

• Are the bank stress tests a fiasco?- CNBC

Small changes today

There was not a lot happening today. Dow rose 16, advancers & decliners were about equal while NAZ dropped 16 on more nervousness that a weakening global economy could bite hard. NYSE volume remains modest at 1.2B. S&P 500 FINANCIALS INDEX had a good day, up 4 to 294, but remained under 300 where it has lived for 10 weeks. Oil rallied by the end of the end, settling down only pennies, still in the 109s. The Alerian MLP index fell, down 4 to 267s. Worries about damage to their pipelines could have triggered selling.

For the brave who want to know how buy oil or sell oil, here are 2 key ETF funds. The DUG is ultra short for the ultra bear & USO is for those who want play the bullish side. This year they've already had their share of wild swings, chances are more will come. They are definitely not for the nervous, but fun to watch:

DUG -- UltraShort Oil & Gas ProShares





USO -- United States Oil Fund LP





I got to see inflation strike home. A local 99¢ store just raised prices to $1.29 for some of their stuff. They explained it was needed to survive. That inflation effect struck close to home for me.

Auto sales for Aug aren't looking good:

• Ford, GM, Toyota Sales Fall as Auto Slump Persists- AP

The FED's Beige Book, continuing on the sluggish auto sales theme, reports history that we know. Times are tough for the economy however inflation may moderate from current high levels.

Fed Beige Book Says Economy `Slow' in Most Regions as Price Pressures Rise

Retailers will be reporting results in the next couple of days on "back to school" business. This gives a early glimpse on holiday business, expectations are for weak results.