Markets wander higher

Stocks started with gains but could not build up a head of steam. Dow closed up 40, advancers ahead of decliners 3-2 & NAZ gained 12. The only Dow stocks up 1+ were IBM (IBM) & United Tech (UTX). Banks had a lackluster advance, the Financial Index is just bumbling along near its 6 month lows.


S&P 500 FINANCIALS INDEX

Value 192.36

Change 0.73

% Change 0.4%

MLPs had another decent gain as their index was up 2½ to the 291s & the REIT index gained 1½. Junk bond funds were mixed, little changed. But Treasuries sold off, the yield on the 10-year Treasury bond rose 8 basis points to 3.74%. The Treasury's report yesterday that China sold a large amount of Treasury debt in Dec may be felt in the bond market. The bond's yield is near the high end of its range for the last 2 years.

Alerian MLP Index --- 1 year




Dow Jones REIT Index --- 1 year




1- Year Treasury Yld Index - 2 years









Oil & gold were mixed after yesterday's rally, the biggest in 3 months.

CLH10.NYM

..Crude Oil Mar 10

..77.44

.. 0.43 ......(0.6%)

Gold

___1,115.20

__-4.60__

-0.41

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Toyota (TM), world's largest auto company, said their president has no plans to testify before US congress. Instead they will send the North America chief to testify. A series of vehicle recalls in the last month have damaged Toyota's once-vaunted reputation for quality, safety & reliability. The stock has been punished, down 2 today taking it near the low set 2 weeks ago.

• Toyota chief sidesteps Congress as pressure mounts- Reuters

Toyota --- 2 months









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On the 1 year anniversary of the stimulus bill, the president insisted that the package is "working" (whatever that means). Last year, the bill had to be passed in a rush which meant flying a congressman back from a funeral to participate in the vote. However, the president took another 3 days to sign the bill. Since then unemployment is up 2M & only 1/3 of the money has been spent largely on projects that don't employ too many. Humana (HUM) said it will let 2500 employees go (although it will hire 1100 in growth areas). The net loss of 1400 jobs amounts to 5% of its work force, reductions will come from attrition, outsourcing & job eliminations. Toyota is trying to fix an endless stream of problems. Toyota's problems may be doing damage to the US economy if they scare customers away from all auto dealers. The Greek debt problem lingers on. Dow after recovering this week is still back to where it was in Nov.

Dow Jones Industrials --- 1 year

Markets gain ahead of Intel earnings

Dow rose 29 to yet another 15 month high, advancers ahead of decliners 3-2 & NAZ climbed 8 on hopes for a good report from Intel (INTC) after hours. Bank stocks ignored the proposals for added fee/taxes on the top 20 banks. The Financial Index posted a nice advance as it heads for the higher end of its 5 month trading range.

S&P 500 FINANCIALS INDEX

Value 205.54

Change 1.30

% Change 0.6%

The Alerian MLP Index recovered from yesterday's down draft, up 1+ to the 292s & off only 4 from its recent high. But REITs were weak, the index was down a ½ while still clinging near the 181 high back in Sep. Junk bond funds were mixed remaining near their recent highs. The yield on the 10-year Treasury bond was off 2 basis points to 3.76%.


Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months








Oil & gold are flattish. Warm weather in the northern latitudes is holding oil back. But gold may be starting another leg up. It's not too far from the recent high of 1200+. An economist was talking about the need to have gold back Treasury debt, making it stronger with a lower interest cost to taxpayers. This new line of thinking is getting more attention & is part of the fundamentals for gold in the 21st century.

CLG10.NYM

..Crude Oil Feb 10

..79.49

.. 0.16 ......(0.2%)

GCF10.CMX

..Gold Jan 10

..1,145.90

.. 9.50 ......(0.8%)

GLD (ETF) --- 2 months




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According to the Congressional Budget Office (CBO), the unemployment rate is unlikely to drop below 8% before 2012 without further gov help. The Dems, under pressure, may want to pass another stimulus package to create jobs before facing voters in Nov. The House of Representatives already passed a $155B jobs bill in Dec & the Senate is expected to act shortly. CBO's estimate shows the unemployment is likely to remain high for several years. The unemployment rate stood at 4.9% before the recession took hold in Dec 2007. The effects of the $787B stimulus bill (passed 11 months ago) will peak in the first half of this year. Any stimulus efforts probably will not to add to inflation but would worsen the budget deficit, which was a record $1.4T in FY09.

• Jobless rate to stay above 8 percent until 2012: CBO- Reuters

Alcoa (AA), Dow stock, started earnings season on Mon. The 2 week chart shows the before & after effect of the announcement. Alcoa supplies basic ingredients for a lot of manufactured goods & AA didn't get a high grade on its report card. This may be an early signal of what to expect for earnings from other companies (like its clients).

Alcoa --- 2 weeks









Markets are awaiting earnings from 2 Dow stocks. Intel reports after hours & JP Morgan/Chase (JPM) reports tomorrow before the markets open. Tomorrow will also be an options expiration day, adding to the excitement of trading.


Dow Jones Industrials --- 2 months




Nasdaq --- 2 months

Lower stock prices persist

Despite the encouragement about the largest US spending bill in history, stocks keep sinking. Last week the Dow fell 400, bringing the YTD decline to over 900 (or 10%). There is recognition that "make it up as we go along" carries risk of failure or only mediocre success. It's sad that all this spending had to be rushed thru Congress. There is an old saying, "haste makes waste." That thought is probably weighing down markets.

Even though stocks have gotten off to a bad start, one group, has done very well, MLPs. The first chart shows their rise this year compared to the sinking bars for the Dow. Record high yields of 12% at the start of the year for the Alerian MLP Index brought back buyers. Higher MLP prices caused the yield come to fall to 10.3% (& some distributions were raised in the last few weeks).

Meanwhile REITs (represented by the Dow Jones REIT Index), another high yield group, as shown in the 2nd graph, have followed the Dow down & did much worse in the last week. The strongest in the group have 10% yields, others offer yields well into double digits.


Dow Jones vs MLPs --- YTD





Dow Jones vs REITs --- YTD





How long the REITs can buck the negative trend in the market is uncertain. This performance has come in spite of the decline in oil prices (much of their business is moving oil). REITs are facing the threat of losing tenants while they have to continue paying expenses (i.e. interest). Uncertainty about their future is being priced into the stock prices, producing record yields.

Passing the stimulus bill is only another step in trying to help the economy. Bank bailout II has to be dealt with. Because of the lack of success with the first $350B, there is more scepticism in Congress. It's future is uncertain. In addition, auto companies will give Congress an update report of what they've done with their bailout money. Markets have to decide whether to go with the optimism shown by the MLPs or succumb to the pessimism of the REITs.

Late day sell-off again

Dow was weak, but got back to break even around 2 PM. Then selling began as the House passed the spending bill. Dow sank 82, decliners ahead of advancers by 20% & NAZ fell 7.

Banks have been leading market moves all week, that continued today. S&P 500 FINANCIALS INDEX fell, getting nearer its Nov low of 108. $12 buys 1 share of Bank of America (BAC) + 1 share of Citigroup (C) + 1 share of General Motors (GM), all in the Dow.

Value 117.97

Change -5.20

% Change -4.2%

The Alerian MLP Index rose 2 to the 205s (3 month high), but REITs fell & junk bond funds were weak. Oil had a good day, but remains near recent lows.

CLH09.NYM

..Crude Oil Mar 09

...37.76

.. 3.78 ......(11.1%)

The House passed the stimulus package & cut another couple billion $ out of the total. Now, on to the Senate

•House Passes Obama's $787 Billion Economic-Stimulus Plan in 246-183 Vote


Economists & consumers have dreary outlooks for the economy. The US economy is expected to shrink at a 5+% annualized rate during this qtr, worst performance in 27 years. Consumer confidence fell to 56.2, the lowest level since they aren't sure when. It may be headed for the lowest level on record, 51.7, set in May 1980 (when inflation, interest rates & unemployment were well into double digits). However, some economists see growth returning to the economy by late this year while unemployment will peak at 9% next year. No matter what, forecasts are grim.

• U.S. consumers, economists unanimously grim- Reuters
• This Counts as Wild Optimism: Economist Sees Modest GDP Growth in Late 2009- Tech Ticker

The administration will announce a plan next week to help home owners facing home foreclosure notices. Foreclosures hit 274K in Jan, 10th straight month with more than a ¼M filings. Already, JPMorgan (JPM), Citigroup (C) & Morgan Stanley (MS) agreed to suspend foreclosures until Mar, they're way of trying to be helpful.

•Obama Will Unveil Plans Next Week to Stem Foreclosures on Homes, Aide Says


Dow had another dreary week, learning to live under 8K in the last 4 days.

Dow Jones Indusrtials --- 1 week