Bulls are back in charge

Stocks started strong & continued rising all day. Dow gained 82 (recovering about ½ of yesterday's loss), advancers almost 4-1 over decliners & NAZ rose 25. Banks led the advance as the Financial Index also regained about ½ yesterday's loss:

S&P 500 FINANCIALS INDEX

Value 186.95

Change 3.53

% Change 1.9%

S5FINL:IND






MLPs, REITs & junk bonds came back strongly. The indices for MLPs & REITs each rose 2+ today. But the Alerian MLP Index is in the 237s, still down 15 from its highs set at the start of Aug (shown in the chart below). The VIX pulled back 1.71 to 26.18, returning it near its recent sideways trading pattern centered around 25. In this rally, Treasuries sold off. The 10 year Treasury yield backed up 3½ basis points to 3.53%.


Alerian MLP index --- 1 month





Storms in the Atlantic may be bringing the bulls back to oil. Their target is the high for 2009 of 73.

CLU09.NYM

..Crude Oil Sep 09

..69.07

.. 2.32 ......(3.5%)

Troubled financial, CIT (CIT), reported a whopper $1.7B loss but are able to muddle by, at least so far. The stock was up 3¢ to 1.40.

•CIT Group records $1.68 billion 2Q loss
AP (Tue 8:03am)


What a difference 24 hours makes! Storms are brewing in the Atlantic adding excitement to the oil market. But calm has returned to the financial markets beginning with the rebound in the Shanghai stock market. Many are calling for a quiet period to Labor Day.


Dow Jones Industrials --- 1 month

Markets rose after favorable earnings reports

Dow rose at the start & has remained about 50 points higher in the early part of the day. Dow is now up 53, advancers over decliners almost 3-1 & NAZ is up 16. Banks are also recouping some of yesterday's losses:

S&P 500 FINANCIALS INDEX

Value 186.72

Change 3.30

% Change 1.8%

The high yield sector regained some of yesterday's losses. The Alerian MLP Index & the Dow Jones REIT Index were each up 1+. Junk bond funds bounced back while the VIX or volatility index, fell .89 to 27. Treasuries continue in demand, the yield on the 10 year Treasury bond slipped 1 basis points to 3.48%.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




10-Year Treasury Yld Index - 3 months





Oil benefited from the rising stock markets.

CLU09.NYM

...Crude Oil Sep 09

...67.49

... 0.74 .......(1.1%)

Construction on new homes & apartments fell 1% last month, missing expectations. Construction starts were only 581K (annualized rate) compared to an upwardly revised rate of 587K in Jun & below the forecasted rate of 600K units. The decline was led by a 13% drop in apartment building. Construction of single-family homes rose 1% to the highest level since Oct 2008. However theses numbers are still a long way from non-recession levels. Housing starts last month were 38% below the prior year.

•Housing Starts in U.S. Unexpectedly Decline; Single-Family Starts Increase


Home Depot (HD), Dow stock, reported favorable earnings for Q2, the stock was up 1.11. Earnings declined 7% while sales dropped 9% but beat expectations (a common earnings theme, lower results beat estimates). Same-store-sales were down 8½%. They raised full guidance for earnings from continuing operations.

•Home Depot's Second-Quarter Profit Falls Less Than Estimated; Sales Drop

Home Depot --- 1 year





Target (TGT), Dividend Aristocrat, reported Q2 profits fell 6.3%, but beat forecasts with cost-cutting & improvements in its credit-card business. The stock rose 2.53. It earned 79¢ per share in the qtr ended Aug. 1 compared to 82¢ per share last year. Revenue fell 2.6% to $15B.

Target Second-Quarter Profit Tops Analysts’ Estimates

Target --- 1 year





The Shanghai stock market tumbled 5% on Mon, leading the decline in global stock markets. Last night their market recovered 1.4%. Their stock market has been red hot this year, up 60% YTD & almost double its low of last year. Of course, that's after falling over 70% from its previous peak. Excitement has quieted down. Dow has been in a sideways band above 9K in Aug. Sideways trading may continue until Labor Day.

Dow Jones Industrials --- 2 weeks

Stocks decline after reality check

Markets plunged on the opening & couldn't get a head of steam going for the rest of the day. Dow fell 186, decliners over advancers almost 7-1 & NAZ dropped 54. The popular averages closed essentially at their lows. Banks have been leaders in this year's market rally, led on the way down & again closed pennies from the low. When the Financial Index loses 10 in a day, that's a very significant drop.

S&P 500 FINANCIALS INDEX

Value 183.42

Change -8.16

% Change -4.3%

S5FINL:IND





The story for the high yield sectors was pretty much the same as for the broad averages, weak at the opening followed by a buyer boycott. The Alerian MLP Index fell 5½ & the Dow Jones REIT Index nosedived 8½. Junk bond funds were weak all day while the VIX jumped 3½. Money sought safety, the 10 year Treasury bond yield dropped 7 basis points to 3.49%

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




10-Year Treasury Yld Index - 2 weeks




Oil participated in the decline but PM buying trimmed to losses to less than $1 a barrel.

CLU09.NYM

..Crude Oil Sep 09

..66.65

.. 0.86 ......(1.3%)

Lowe's (LOW) Q2 earnings fell 19% on weaker-than-expected sales. The stock tumbled along with the markets, down 2.46 (worst performing stock in S&P 500) on worries that consumers remain tight with spending habits. The weak results follows an indicator that consumer sentiment fell significantly short of expectations for the first part of Aug. Same-store-sales fell 9½%. Q2 results were a stark contrast to Q1, when LOW saw fresh signs of a consumer resurgence, Q2 results showed continued consumer weakness.

"Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter," Robert A. Niblock, Lowe's chairman and CEO, said. Same second-quarter results likely do not signal a shift in consumer behavior. Rather, weather was unseasonably cool and wet in the Northeast and fiscal-stimulus checks a year ago aided sales more than the company expected, Niblock said. The cool weather also seriously crimped air conditioner sales, but due to a hotter Aug, air conditioners are now selling "at a pretty good clip." LOW lowered guidance for Q3 & 2009 results.

• Lowe's 2Q profit falls 19 pct; shares fallAP(Mon 2:33pm)

Lowe's --- 1 year

This could prove to be a turning point for the markets. Stocks have soared in the last 5 months, Dow has risen 45% almost non-stop from the lows in early Mar. Everybody agrees that the free-fall period for the recession is over. But the pace of the recovery is being debated. Housing remains mired in its worst recession since the Great Depression. The auto industry is muddling along, if that. Retail sales continue soggy. Meanwhile unemployment is at levels not seen since the recession of the dreary early 80s & is forecasted to rise further, going over 10%. It seems logical the markets need a chance to rest.

Dow Jones Industrials --- 2 weeks

Risk averse returns to markets

Investor psychology reversed over the weekend. Enthusiasm for risk is gone, investors are looking for safety again. Dow tumbled 175, decliners over advancers a big 9-1 & NAZ plunged 50 (NAZ has been the hottest major average in 2009). Banks felt the selling pressure:

S&P 500 FINANCIALS INDEX

Value 185.21

Change -6.37

% Change -3.3%

High yield sectors took the change in investor attitude hard. MLPs sold off sharply. The storms brewing in the Atlantic didn't help, but this season arrives every year. The Alerian MLP Index & Dow Jones REIT Index each plunged more than 6. Junk bond funds were off 2-3%. The VIX, volatility index, shot up 3½ to 28+, a 5 week high. Frightened money went into Treasuries. The yield on the longer Treasuries (over 5 years) fell around 10 basis points & the yield on the 2-Year Treasury fell 6 basis points (representing a large increase in the price for that note).


Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




10-Year Treasury Yld Index - 2 months




VIX --- 2 months





Oil was caught up in today's selling, taking it near the 3 month lows.

CLU09.NYM

...Crude Oil Sep 09

...65.51

... 2.00 .......(3.0%)

Markets around the world sold off badly. Worries about the US consumer are getting everybody's attention. Massive gov borrowing is another major problem bringing on the selling. Dow has given up all the Aug gains & has backed up to the Jul 30 close of 9154. Zest for stocks has been dealt a serious blow. This week should give clues if the damage can be repaired.

Dow Jones Industrials --- 2 months

Stocks fall on negative consumer attitudes

Dow dropped sharply on the opening & remained sloshing around its low levels. However, buying in the last hour reduced the losses. Dow was off 76, decliners over advancers 3-1 & NAZ is now under 2K after falling 23. Banks recovered most of their losses. Citigroup (C) was flat & Bank of America (BAC), Dow stock, up 38¢. Citi has fought its way back to $4.

S&P 500 FINANCIALS INDEX

Value 191.58

Change -0.95

% Change -o.5%

S5FINL:IND




Citigroup --- YTD





MLPs & REITs recovered much of the AM losses in the PM. The Alerian MLP Index ended down pennies in the 240s & the Dow Jones REIT Index was off only 1+. Junk bond funds were higher, many at levels not seen since Oct. Over $19B of junk debt was sold this week, more than double the prior week. YTD junk debt sold is running 30% over last year with much of it coming in the most recent months. Treasuries had their best week of the year. The yield on the 10 year Treasury bond fell from 3.85% at the start of the week to 3.56% (today down 4 basis points). Buying Treasuries has to have hurt stocks this week.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




10-Year Treasury Yld Index - 2 weeks





Nervousness about the future of economic recovery gave oil one of its biggest daily losses this year. The graph below shows the trend of how oil prices have been bouncing around recently.

CLU09.NYM

..Crude Oil Sep 09

..67.42

.. 3.10 ......(4.4%)

OIL (ETF) --- 2 months





Stocks are coming off a stellar month in July, but going nowhere in Aug. Dow is up only 34 since Aug 3 when it closed at 9286. The Treasury has to keep auctioning off more debt but interest rates are holding at the same levels they were at last fall during the worst of the credit crisis. Money is embracing stocks (risk) & massive amounts of new treasury debt (viewed as risk free). If the current balance between the 2 holds, stocks should do well. The question becomes when will risk averse thoughts start to grip investors & bring on selling pressure?

Dow Jones Industrials --- YTD

A drop in consumer confidence sinks stocks

Dow tumbled 145, decliners over advancers 4-1, & Naz sank 36 taking it well below 2K. The S&P 500 fell 16 to 996. Banks are sharing in the sell-off after the Financial Index almost recorded a new high yesterday.

S&P 500 FINANCIALS INDEX

Value 189.13

Change -3.40

% Change -1.8%

The Alerian MLP Index fell 1½ to the 238s, profit taking in the last 2 weeks after its recent run to 251. The Dow Jones REIT Index dropped 4, also probably from profit taking. Junk bond funds were higher & the yield on the 10-year Treasury bond fell 8 basis points to 3.51%, down sharply from 3.85% early this week.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil broker thru 70 floor on worries about weaker consumer demand.

CLU09.NYM

...Crude Oil Sep 09

...68.42

... 2.10 .......(3.o%)

Consumer confidence fell in early Aug. A growing number of Americans worried about their finances even though they expected the broader economy to improve. The Surveys of Consumers said its index of confidence for Aug fell to 63.2 from 66.0 in Jul, below expectations of 68.5. The index of consumer expectations fell to 62.1 in early Aug, its lowest reading since Mar & down from 63.2 in Jul. The fewest consumers, in the survey's 60-year history, reported improved finances, with many citing job losses, shorter working hours & smaller wage gains.

•U.S. Consumer Confidence Declines on Job Concerns, Michigan Survey Shows

J.C. Penney (JCP) posted a small loss in Q2, just topping estimates as the department store chain benefited from cost-cutting moves. JCP also boosted its annual profit outlook, but expects sluggish sales for the rest of the year after Q2 revenue fell 7.9%. JCP lost $1M (break-even per share) in Q2 ended Aug. 1 versus a profit of $117M, or 52¢ per share last year. Revenue was $3.94B, down almost 8% from $4.28B last year. Same-store sales fell 9.5% in Q2. They said the consumer climate is "very difficult." In Q3, JCP expects same-store sales to decline 5-7% & total sales to drop 3-5%. For the full year, same-store sales should fall 7- 7½% with total sales declining 5½-6%. The stock fell 1.44.

JC Penney --- 1 year





The leading averages are coming off major surges in Jul. They may need more time to digest those gains. Or maybe the difficult economic reality is starting to sink in.

Dow Jones Industrials --- 2 weeks




NAZDAQ --- 2 weeks

Stocks fluctuate in narrow trading range

After dropping at the start, Dow hovered near break even for the rest of the day. Dow closed up 36, advancers almost 2-1 over decliners & NAZ gained 10, taking it over 2K once again. Banks want to take out the yearly high of 193 on the Financial Index. They came close today with a strong finish. Among the gainers for banks was Bank of America (BAC), Dow stock, up 1.07 to 17, a price not seen since Dec.

S&P 500 FINANCIALS INDEX

Value 192.53

Change 3.70

% Change 2.0%

S5FINL:IND





MLPs, REITs & junk bond funds had small changes. The Alerian MLP Index was down a fraction but remained in the 240s. REITs are coming off an excellent time in the last month.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Oil doesn't want to give up ground, remaining near its recent high in the73s.

CLU09.NYM

..Crude Oil Sep 09

..71.04

.. 0.88 ......(1.3%)

Treasuries rose on the weak retail sales report for for Jul suggesting inflation remains restrained. $15B of 30-year bonds were auctioned off at a yield of 4.541% compared with a forecast of 4.556%. The bid to cover ratio was 2.54X, compared with an average of 2.36X at the last 10 auctions. This was viewed as good demand for long-dated Treasuries in a weak economy. Indirect bidders bought 48.1% versus 50.2%in Jul, the most since Feb 2006. The 30-year yield fell 11 basis points to 4.42% & the 10-year note yield fell 11 basis points to 3.59%.

30-Years Treasury Yld Index - YTD




Another indecisive day. Dow managed to eek out a 2009 high, 28 above the high of last week. In the last 2 days it hasn't strayed far from 9300-9350.

Dow Jones Industrials --- 1 week

Markets mixed on weak economic data

Dow fell on the opening but recovered back to break even. Dow is now up 10, advancers over decliners 3-2 & NAZ rose 6 bringing it back over 2K. Banks are having another good day, shooting for its 193 high.

S&P 500 FINANCIALS INDEX

Value 191.51

Change 2.68

% Change 1.4%

The high yield sectors were up or down only pennies, following the lead of the major averages. Oil was also flat. However the yield on the 10-year Treasury bond rose 4 basis points to 3.66% ahead of another bond auction today.

Alerian MLP Index --- 2 weeks




The big story was the negative economic news. Jul retail sales were disappointing & the number of new claims for unemployment benefits rose unexpectedly last week raising concerns about how quickly consumers will contribute to an economic recovery. Retail sales fell 0.1% in Jul versus an expected a gain of 0.7%. Autos, helped by the start of the Cash for Clunkers program, showed a 2.4% jump, the biggest in 6 months, but there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets & furniture stores all reported declines. This was the first setback following 2 months of modest sales gains. Excluding autos, sales fell 0.6%, worse than the forecasted 0.1% rise.

Unemployment claims increased to 558K, from 554K in the prior week (analysts expected new claims to drop to 545K). The number of people remaining on the rolls, fell to 6.2M from 6.34M in the previous week. The 4-week average of initial claims rose by 8½K to 565K, reversing 6 straight weeks of decline. The weak job market hurt sales last month.

Wal-Mart (WMT), Dow stock & Dividend Aristocrat, reported virtually flat Q2 income compared with last year which beat expectations & they raised the low end of its profit outlook as a series of cost-cutting moves draw frugal shoppers away from rivals. WMT was up 84¢.

•Retail Sales in U.S. Unexpectedly Fall on Concern Over Job Losses, Income

Wal-Mart --- 1 year

The Jul weakness in retail sales highlighted worries about the potential strength of the recovery from the recession as consumer spending accounts for about 70% of total economic activity. But Dow still has an optimistic tone, looking for about any gain today to reach another high for 2009.

Dow Jones Industrials --- 2 weeks