Dow rose 201 on strong earnings reports

Nothing like favorable earnings to bring out buyers, but stocks closed a little off their highs. Dow rose 201, advancers over decliners almost 4-1 (down from better than 8-1 earlier in the day) & NAZ was up 58. Banks were strong, a swing of 5+ in the day for the Financial Index is considered major.

S&P 500 FINANCIALS INDEX

Value	194.56
Change	5.85 (3.1%)

MLPS continue on fire! The index rose 1½ to 332, just 11 short of topping the record set 3 years ago. However, today the MLP index had only a modest gain. The Dow Jones REIT Index popped a big 8 to 200. Junk bond funds were typically up 1%, less than would be expected on such a strong day for stocks. The VIX dropped 1 to the 24s, again light compared with the gains in the markets. Treasuries sold off. The yield on the 10-year Treasury bond rose 4 basis points, not all that much & remains in a very low region. The charts are for 3 months to give an idea of how markets have behaved during a trying time. MLPs & Treasuries are the big winners! The € rose bringing it near to $1.29, still close to its short term highs.


Alerian MLP Index --- 3 months





Dow Jones REIT Index --- 3 months




VIX --- 3 months




10-Year Treasury Yld Index --- 3 months





Oil joined in the rally, heading back for its 80 high that it's traded under for more than a year. Gold had a muted rally, understandable given its defensive characteristics.

CLU10.NYM

..Crude Oil Sep 10

..79.24

.. 2.68 ......(3.5%)

GCN10.CMX

..Gold Jul 10

..1,195.60

.. 4.00 ......(0.3%)

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Congress approved legislation to restore unemployment benefits that were cut off to more than 2½ Americans. The vote was 272-152 largely along partisan lines. The $34B measure will be forwarded to President who will sign it. This measure involved an election- year fight over whether the cost should be added to the federal deficit.

Congress Extends $34 Billion Jobless Benefits Package



Mortgage rates fell to another record low for the 4th time in 5 weeks, but these rates haven't been able to lift the struggling housing market. The average rate for 30-year fixed loans was 4.56%, down from 4.57% last week, the lowest since Freddie Mac began tracking rates in 1971. The last time home loan rates were lower was during the 1950s, when most mortgages lasted just 20-25 years. The rate on the 15-year fixed loan dropped to 4.03%, down from 4.06% last week & another low since record dating began in 1991. These low rates may continue as the yield on the 10 year Treasury bond falls to it lowest levels since early last year.

• Mortgage rates hit new record low- AP

Markets had an impressive rally. Strength was fading later in the day, but buyers returned going into the close allowing the averages to close not too far below their highs. It's been a long time since earnings news made such a big impact on the markets. Microsoft (MSFT), a Dow stock, reports after the close & hopes are high. But a strong economic recovery has not taken hold. Many companies are getting a big help in earnings gains from strong markets in Asia & Latin America while the US markets are only so-so. Even after today's gains, Dow is still drifting sideways above 10K. The stress tests results for European banks will be released tomorrow, they should dominate the news.

Dow Jones Industrials --- 3 months




Nasdaq --- 3 months

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Gold shines while stocks waffle

Stocks began the day higher & then pretty much hugged break-even on this quadruple witching day. Lately these days have had only mild price swings. Dow was up 16, advancers ahead of decliners 4-3 & NAZ was up all of 2. Bank stocks also had a restful day, the Financial Index will have to wait until next week to see if it can break thru 200 (again).


S&P 500 FINANCIALS INDEX

Value	199.84
Change	1.06 (0.5%)

The Alerian MLP Index was down ½ in the 304s , where it's been for 4 days. The REIT index slipped ½ to the 206s, also doing very little for the last 4 days. Junk bond funds found favor, rising about 1%. The VIX dropped 1¼ to the 23s on easing tensions while gold was hitting new records. Treasuries fell, taking the yield on the 10-year Treasury bond up 3 basis points to 3.22%


Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




VIX --- YTD




10-Year Treasury Yld Index - YTD






Oil is doing well staying above 77, but gold is the star of the day. It broke thru 1250 easily & wants to go higher. Gold has had a stellar decade & there's no reason it shouldn't do well in the future, especially with growing demand from Asian countries. Foreign central banks have been net buyers of gold for the first time since 1997 with India, China & Russia being the biggest. More recently, the Philippines & Kazakhstan jumped into the fray. Buttons below are for those who want to learn more about gold.

CLN10.NYM

..Crude Oil Jul 10

..77.20

.. 0.41 ......(0.5%)

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Photo: Bloomberg


BP (BP) is seeking at least $5B in financing to meet compensation payments. It has asked lenders for one-year credit lines & is arranging transactions individually with banks. The financing is in addition to BP’s $10½B of undrawn lines. These funds may give BP additional flexibility if borrowing in bond markets becomes too expensive after its debt was cut 6 levels to BBB from AA by Fitch on Jun 15. BP had $28B in cash flow from operations in 2009. The stock was flat in the 31s as its financial health is very much in flux. Its stock chart over the last decade is presented below.

BP Seeking at Least $5 Billion to Fund Spill Payments


BP --- 1 decade





An option expiration day is not as exciting as it used to be. Stocks behaved well, actually they have been going sideways with a slight upward bias for most of this week. The BP mess in the Gulf has pushed European debt crisis behind the scenes, but they are very much with us. That front may get more attention next week. The € is at $1.23¾, modestly above recent low levels. Until stocks hit a bump in the road, following winds can bring higher prices.


Dow Jones Industrials --- YTD




Nasdaq --- YTD

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Markets little changed after BP suspends next 3 dividends

Stocks started lower & rallied back to break even where they stayed for the rest of the day. Dow ended up 4, decliners ahead of advancers 4-3 & NAZ was up a smidgen. Banks also waffled around break even with the bill for financial regulation looming in the background.



S&P 500 FINANCIALS INDEX

Value	199.06
Change	0.05 (0.0%)

The Alerian MLP index was up 1¼ to the 305s (up 20 YTD) on this sideways day while the REIT index fell 2 to the 206s. Junk bond funds were little changed, but down around 10% from highs last month. The VIX rose a ¼ to 26. The yield on the 10-year Treasury bond fell 3 basis points to 3.28%.

Alerian MLP Index --- YTD




Dow Jones REIT Index -- YTD




VIX --- YTD





Oil rose on hopes for the economic recovery. It's bulls are hoping to take it above the 80 resistance level. Gold is hanging in there very well on all the financial uncertainties starting with Europe.

CLN10.NYM

..Crude Oil Jul 10

..77.66

.. 0.72 ......(0.9%)

GCM10.CMX

..Gold Jun 10

..1,229.90

.. 3.70 ......(0.3%)

Gold Super Cycle!!
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52 Week High Friday Rule
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BP (BP) agreed to suspend its quarterly div as part of its commitments to compensate victims of the Gulf oil spill. BP canceled the next payment & won't declare a div for its 2nd & 3rd quarters but will consider resuming payments in 2011 when it issues results for the 4th qtr of this fiscal year. In addition, BP agreed to set aside an initial $20B to pay the victims of the oil spill. In the meantime, the leak goes on & on & on. The stock rose 45¢ to 31.85 on a sense of relief that this move is key to its survival. Other big oil stocks had small changes.

BP Cancels Dividend for First Three Quarters of This Year


BP --- YTD






Congress is weighing proposals to strengthen investor protections & the powers of the SEC. They want to create an office at the SEC to respond to whistleblower complaints. This is part of the financial regulation bill going thru congress. I hope they put limits on the amount of time SEC lawyers can watch porn on their office computers. Some had been spending 8 hours a day watching porn & downloaded so much on their computers that their hard drives crashed!

Lawmakers Weigh Changes to SEC, Investor Protections



The € is waffling around $1.23, up from a few days ago but down sharply from earlier this year reflecting uncertainties about Europe's finances. BP knuckled under to political pressure & gave in on the div issue. Dow has had a nice run in the last 7 days but remains about 10% off its recent highs at 11.2K.

Dow Jones Industrials -- YTD




Nasdaq --- YTD

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Late day buying saves the Dow

Dow worked its way higher during the day but was not joined in by the tech stocks. This time, buying (not selling) came in the last hour. Dow rose 123, advancers ahead of decliners 3-2 & NAZ fell 3. Strength in the Dow came from DuPont (DD), Exxon Mobil (XOM), McDonald's (MCD) & Procter & Gamble (PG), each up 1+. Banks did quite well, again from buying in the last hour. The Financial Index bounced off its 186 lows, something the guys who watch technicals like to see.

S&P 500 FINANCIALS INDEX

Value 190.20

Change 3.77

% Change 2.0%

The high yielders didn't do a lot until the last hour when buyers returned. The MLP index recouped AM loses, ending up 1.83 at 291 (up 6 YTD). The REIT index also rebounded, up 3½ to the 189s, after 2 very rough days. Junk bond funds were flat to up a tad. The VIX slipped almost 3 to the 33s. The yield on the 10-year Treasury bond dipped almost 2 basis points to 3.17%.


Alerian MLP Index -- 2 months




Dow Jones REIT Index -- 2 months




VIX --- 2 months





Oil is flattish again while gold was able to record a new high. That didn't last, but gold is clearly strong at a time when stock markets are weak. Today's record did not hold, but it will go after that record again & soon.

CLN10.NYM

..Crude Oil Jul 10

..71.86

.. 0.42 ......(0.6%)

Gold Super Cycle!!! Click Here

Photo: Bloomberg


Dems in the Senate proposed an economic package that would extend benefits for the long-term unemployed, renew business tax breaks & soften a proposed tax on fund managers profits. The far-reaching plan extends payments for hundreds of thousands of unemployed whose benefits lapsed at the end of May. To help pay for the bill, taxes on investment fund managers would be raised, but at a lower level than approved by the House. The bill would restore funding to states for 6 months to help them pay for their Medicaid health program for the poor & extends expired business tax breaks, such as the research & development credit. The Senate bill would eventually tax 65% of profits at the higher ordinary income tax rate, with a break given to longer term investments.

•Buyout Managers Tax Increase Scaled Back Under Senate Democrats' Proposal



Apple (AAPL) has had a tough time of it in the last 2 months, but maybe not all that tough. It has outperformed many other averages (including the MLP index) but I view it as weak. The new iPhone & iPad were able to generate a lot of excitement which AAPL knows how to make happen. But it's all about sales. The iPhone is getting hit with competition & iPad already has a lot from netbooks (like this one). The first wave of business should be strong thanx to their fans. But the test will come on the 2nd & 3rd wave of sales. AAPL has very high standards, like getting an A+ in school. If they get a grade of A-, that would be marginal at best & B would be like a failure. That metaphor could play out spelling trouble for this high flyer.


Apple --- 2 months





Despite the late day rally, markets are plodding along going nowhere. The € which is at the center of many of the world's problems is $1.19¼, not encouraging for the bulls. However many of the value stocks I watch did well today while gold reached a new record, a rather strange combination. Dow remains down over 1200 from its highs 2 months ago. It seems like that was a long time ago.


Dow Jones Industrials -- 2 months




Nasdaq --- 2 weeks

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Dow plunges 376, worst day in a year

Stocks sank at the opening & remained in the dumps all day. Dow ended with a loss of 376 (over 300 below the close on that memorable day 2 weeks ago), decliners ahead of advancers 10-1 & NAZ dropped 94. Even worse, stocks closed at their lows! Banks also had a bad day, the Financial Index closed at its lows. Grrr!

S&P 500 FINANCIALS INDEX

Value 191.56

Change -9.48

% Change -4.7%

This was one very ugly day for the high yielders while Treasuries soared. The Alerian MLP Index plunged another 10½ to the 274s (down 12 YTD). The yield when it peaked last month was 6¾, since then it has risen about 100 basis points. The Dow Jones REIT Index sank 9½ to the 188s (219 was its 2010 high). Junk bond funds dropped 3-5% (very big by their standards) while Treasuries soared. The yield on the 10-year Treasury bond plunged again, down 9½ basis points to 3.26% (its low in over a year). The thinking today was bailout of everything & buy Treasuries. The VIX, volatility index, shot up an eye popping 10½ to the 45s (not seen in 14 months when stocks were climbing out of the sinkhole they had been in).


Alerian MLP Index --- 2 months




Dow Jones REIT Index -- 2 months




VIX --- 2 years





Commodities also sold off badly, oil had been down 5 (taking it to 65, lowest level in 8 months) but then it bounced back. Gold should have done better given its status as a home for investors seeking safety. Instead all that money went into Treasuries.

CLM10.NYM

..Crude Oil Jun 10

..69.26

.. 0.61 ......(0.9%)

GCK10.CMX

..Gold May 10

..1,191.80

.. 11.40 ......(0.3%)

Gold Super Cycle!!
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The Senate is expected to approve a sweeping overhaul of financial regulations by the end of the week after the measure just cleared a procedural hurdle with a 60 - 40 vote. This starts the process of wrapping up debate on the most comprehensive rewrite of rules for financial firms since the 1930s.

•Senate Agrees to Move Toward Final Vote on Financial-Overhaul Legislation



Instead of dragging out more dreary news, I wanted to show show charts for some of the biggies during the last month. Apple (AAPL) & Kinder Morgan (KMP, the largest MLP) are included along with 3 Dow stocks: Exxon Mobil (XOM, also a Dividend Aristocrat), JPMorgan (JPM) & AT&T (T). The 10% sell-off by the Dow has done damage to just about every stock (& units of MLPs). This is what is called a broad based retreat (although high yielders have seen more selling).


Apple --- 1 month




Exxon Mobil --- 1 month




JP Morgan --- 1 month




Kinder Morgan --- 1 month




AT&T --- 1 month





Believe it or not, the € rallied to $1.25 (but was sinking at the end of trading). That deserves a "go figgah" response. Maybe shorts had to close out positions. Despite the dreary report on jobless claims, Europe & its growing financial mess was at the heart of the sell-off. Unfortunately, solutions appear to be a long way off. One sign of hope, BP (BP) is finally getting a handle on plugging one its leaks in the Gulf. Swell!


Dow Jones Industrials -- 2 months




Nasdaq -- 2 months

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