Dow tops 10,900

Dow is up 91 at the session's highs, taking it above 10,900 for a new 2010 high. Advancers are ahead up decliners 2-1 & NAZ is up 28. Banks continue VERY strong with the Financial Index reaching another 2010 high. A change of 5 for this index is eye popping!

S&P 500 FINANCIALS INDEX

Value 219.22

Change 4.82

% Change 2.5%

MLPs have been on a rocky road after the sell-off on last week's witching Fri. Today the Alerian MLP Index is down a fraction to the 298s. But the Dow Jones REIT Index is up 2+ to the 203s. Strong stock markets bring more demand for junk bonds. Many funds are at prices (with correspondingly low yields) that haven't been seen in a few years). Meanwhile the yield on the 10-year Treasury bond is up another 2 basis points to 3.85% & taking it nearer the important 4% level. The yield on the 2 year Treasury is up to 1.07%, another high & troubling number.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil & gas a barely up, not worth a mention unless you are a day trader.

CLK10.NYM

...Crude Oil May 10

...81.03

... 0.52 .......(0.7%)

Gold

...1,089.20

___0.40

__0.0%

Photo: Bloomberg

New unemployment claims fell more than expected last week as layoffs eased & hiring slowly recovered. The Labor Dept said first-time claims for jobless benefits dropped 14K to 442K, below estimates of 450K. But most of the drop resulted from a change in the calculations made in seasonally adjusted data. Excluding the effect of those adjustments, claims would have fallen by only 4K. The 4-week average of claims dropped 11K to 453K, the lowest since 2008 when the financial crisis intensified. While the news is encouraging, companies are still not rehiring in a major way, keeping the important jobless rate near 10%.

Jobless Claims in U.S. Decreased Last Week to 442,000

Weekly unemployment claims - 1 year

Photo: Bloomberg

Best Buy (BBY) beat estimates for profits & sales in Q4 & forecast stronger-than-expected earnings for 2010. The key holiday quarter was helped by demand for notebook computers, mobile phones & flat-screen televisions. BBY has benefited from investing in customer service, such as promoting Twelpforce to answer queries on Twitter & providing its Geek Squad repair assistance to shoppers. EPS rose to $1.82 in Q4 ended Feb 27, up from $1.35 in the prior year. Net revenue rose 12% to $16.55B. For FY2011, it expects to earn $3.45-$3.60 a share on revenue of $52-$53B. The stock was up 2.49 to 43.67.

Best Buy Surges as Profit Tops Analysts’ Estimates on TVs


Best Buy --- 2 years






The Treasury will unveil a trading plan next month for the sale of its 27% in Citigroup (C). The plan will give the gov a schedule for selling shares with the aim of eliminating any concerns that the sales are based on non-public information. Citi was up 18¢ to $4.33 & looks like it wants to shoot for its yearly high above 5.

U.S. Treasury Said to Have Plan for Citigroup Shares


Citigroup --- 1 year










Bulls have taken control of the markets as risk is being ignored in the pursuit of capital & trading gains. On the fringe, Treasuries are being sold to buy more junk bonds with dwindling yields. The European Union wants to work out some sort of bailout package for Greece which encourages the bulls. Dow should take out 11K, probably by tomorrow at the latest. Just not sure how long this euphoria can last.

Dow Jones Industrials --- 2 weeks

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Stocks fall for 4th straight day

Dow tumbled 119 (closing at the lows), decliners over advancers 7-1 (a very large spread) & NAZ dropped 56 (2.7%). Banks sold off in this decline, The Financial Index, again closing at its lows, is down 20 (10%) from its highs 2 weeks ago.


S&P 500 FINANCIALS INDEX

Value 190.23

Change -6.35

% Change -3.2%

MLPs are having a rough time of it, maybe it's just profit taking. After running 100 points from the lows, even the Alerian needs time to rest. Today it's down 9.28 to the 251s, one of its biggest daily drops ever. The Dow Jones REIT Index fell a very big 7, near its lows in recent months. Junk bonds took a nasty spill, maybe Bill Gross started selling some of his junk bonds. The Barclays Capital High Yield Bond ETF fell almost 1½% (buying near the close limited losses). Fears are growing as the VIX shot up 3.08 to 27.91. Money is flowing back into Treasuries, the yield on the 10-year Treasury dropped 5 basis points to 3.41%.


Alerian MLP Index --- YTD




Dow Jones REIT Index --- 3 months




Barclays Cap High Yield Bond ETF




VIX ---- 2 months





The weekly energy report said supplies rose by 2M barrels instead of dropping (for a 3rd week in a row) as expected. Oil had a very bad day, it's returning to the 67-75 range it had been in for much of 2009. Gold was also down (from over 1060 last week).

CLZ09.NYM

..Crude Oil Dec 09

..77.36

.. 2.19 ......(2.8%)

GCV09.CMX

..Gold Oct 09

..1,029.90

.. 4.80 ......(0.5%)

CIT (CIT), one of the nation's largest lenders to small and mid-sized businesses, received $4.5B credit from its own lenders & bondholders as it tries to avoid collapse. The loan comes as CIT has been facing pressure from Carl Icahn who was been trying to get investors to reject the company's restructuring plan. The new loan is being financed by lenders, including some bondholders, that provided CIT with a $3B lifeline over the summer. CIT is asking bondholders to swap their debt for stock & new debt that matures later in trying to reduce near-term debt maturities by $5.7B. Even if approved, it still might have to file for bankruptcy protection. It's been living on the edge for months, today the stock is up 10¢ to 1.06.

•CIT Group Obtains an Additional $4.5 Billion in Financing, Spurning Icahn

CIT --- 1 year





Earnings season has not gone well, especially in the last week, despite what the bulls say. Bulls talk about a correction being healthy after the Dow has run 3½K unchecked. But this could prove more serious. Today's sell-off by junk (high risk) bonds may be sending an important signal about where the markets are going. Dow is is off 330 from its highs 2 weeks ago while the VIX shot up 7+ points. The shorter term charts are going from dreary to ugly!


Dow Jones Industrials --- 2 months




Nasdaq --- 2 months

Late day buyers limit market losses

Markets sold off at the opening & continued in the red all day. Considering the 100+ decline for the Dow early in the day, it finished in good shape (the last 2 weeks have been nothing but stellar, especially coming off an already overbought market). The daily movements for Dow & NAZ are shown in the widgets on the right. Dow dropped 67 but just below the important 10K line, decliners over advancers 3-2 ratio was more moderate than earlier in the day & NAZ was off 16.

Dow Jones Industrials --- 2 weeks




Banks had a tough day but that's coming off an outstanding 7 month run.

S&P 500 FINANCIALS INDEX

Value 204.76

Change -5.53

% Change -2.6%

Even on a down day, MLPs rose. The Alerian MLP Index gained .50 to the 262s. At the start of Sep 2008, the Index had fallen to 270. It's recovered about all of the loss since then. REITs trimmed their losses from earlier in the day, the average fell 4+. Junk bonds rose again, generally to new highs for this year. The VIX, volatility index, fell a fraction to the low 21s, another new low in over a year. Meanwhile, Treasuries sold off. The yield on the 10-year Treasury bond rose 5 basis points to 5.42%, approaching its high in the last month.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




10-Year Treasury Yld Index - 1 month





Oil continued strong, extending its gains, reaching another new high for 2009 & clearly above its recent multi month trading band. Gold continues north of 1050.

CLX09.NYM

..Crude Oil Nov 09

..78.53

.. 0.95 ......(1.2%)

GCV09.CMX

..Gold Oct 09

..1,050.70

.. 0.90 ......(0.1%)

There was a lot of talk about the earnings today, especially for Bank of America (BAC) & GE (GE). The reports were not received well. GE is a cross section of many industries & the general tone was viewed as negative. BAC was the only one of the "Big 3" banks not to report a profit in Q3 & it reinforced in traders the problems related to bank loan portfolios. Today's sell off was hardly meaningful, as the averages are still just inches from the highs set yesterday. NAZ is added because of their strong performance in 2009.

Dow Jones Industrials --- YTD




Nasdaq --- YTD

Markets advance to new 2009 highs

Stocks had another outstanding day, reaching new highs again for 2009. Dow rose 155, advancers over decliners 4-1 & NAZ shot up 31 breaking thru 2K again. After a decline on Mon, Dow gained 184 this week (back to where it was in Oct). Banks led the way higher, the Financial Index hit another high for 2009.

S&P 500 FINANCIALS INDEX

Value 195.77

Change 4.07

% Change 2.1%

The Alerian MLP Index rose 2+ to the 241s (still 10 below its recent high) & the REIT Index was up 4. Junk bonds were higher (bringing lower yields) while the yield on the 10-year Treasury bond soared 12 basis points to 3.56%. Oil gained 1 bringing it near 74, record territory for 2009

Alerian MLP Index --- 6 months




I went to an annual meeting for a junk bond fund. They said the ugly days of Q4 last year were driven by fear, not higher defaults. At that time, junk bonds were extremely oversold with yields around 25%. The very brave bought to lock up those extraordinary yields. Since then high yield securities have roared back bringing their yields closer to where they traditionally have been. Their projection is for the economy to grow 3½% next year (more optimistic than my view) which implies the present yields going forward may prove to be attractive. They are not forecasting default rates on junk bonds to rise from present levels. Their analysis could also be applied to other high yield securities, such as MLPs.


Bulls have complete command of the markets. The S&P 500 is up 50% (pretty much non stop) from its lows in early Mar. That track record would be excellent for 3-4 years, only they accomplished it in 5 months. Let's see how long the bulls can keep control as the one year anniversary of the financial meltdown in Sep approaches.

S&P 500 --- 6 months

Overbought markets need a rest

Stocks are taking time to catch their breaths. Dow is up 7, decliners are barely ahead of advancers & NAZ is down 2. Banks are also having a restful day.

S&P 500 FINANCIALS INDEX

Value 179.48

Change -0.07

% Change -0.1%

The Alerian MLP index is showing up 2+ to the 250s which does not tie with last night's close. There may be adjustments for ex-distributions accounting for the difference. But any way it's counted, MLPs are at 10 month highs. REITs are flat while junk bond funds keep moving up, reducing their yields. Treasuries sold off again, the yield on the 10-year Treasury bond rose 4 basis points to 3.68%. Oil is off pennies in a lackluster market.

Alerian MLP Index --- 2 weeks





GMAC Financial Services posted a Q2 loss of $3.9B as it transformed from an arm of GM into an independent bank. Last year the loss was $2.5B. Revenue fell 28% to $1.27B from $1.76B. Most of the quarterly loss stems from a $1.6B charge related to company's mortgage business. GMAC also incurred a $1.2B tax charge on its conversion from GM's financing arm to a separate company offering personal banking services in addition to auto loans for GM & Chrysler customers. Excluding those charges, GMAC said its Q2 loss was about $.4B. Gov help was key to keep GMAC alive in Q2 & looks like now they will be able to continue as a bank.

•GMAC Reports Wider $3.9 Billion Loss Amid Defaulted Mortgages, Auto Loans


This is the pause that refreshes.

Dow Jones Industrials --- 2 weeks

Markets little moved by favorable a GDP report

Dow only managed a small gain on a smaller than expected decline in GDP for Q2. Dow was up 27, advancers ahead of decliners 3-2 & NAZ added 5 (but is still under the important 2K line). The Financial Index remains near the 175 peak seen in May.

S&P 500 FINANCIALS INDEX

Value 173.01

Change -0.35

% Change -0.2

The Alerian MLP index has been hobbling along this week after a 40 point gain in the prior month. Today it's up fractionally to the 246s. REITs & junk bonds only had minor changes but Treasuries rallied. The yield on the 10-year Treasury bond dropped 9 basis points to 3.56%.

Alerian MLP Index --- 2 weeks




With the gain, oil is back to where it started Wed AM (prior to its big tumble). 73 is the interim high it may be going after.

CLU09.NYM

...Crude Oil Sep 09

...67.62

... 0.68 .......(1.02%)

The economy shrank at a 1% annualized rate in Q2, a better-than-expected showing. The dip follows an economy in free fall, tumbling at an annual rate of 6.4% in Q1 (the sharpest slide in nearly 3 decades). The economy has contracted for a record 4 straight quarters, underscoring the grim toll on consumers & companies. Higher spending by gov & less drastic spending cuts by businesses along with an improved trade picture were behind the better performance. Consumers, though, pulled back as rising unemployment, shrunken nest eggs & lower home values weighed down spending.

The Commerce Dept also reported that the recession inflicted even more damage on the economy last year than previously thought. It now estimates that the economy grew just 0.4% in 2008, much weaker than the 1.1% growth originally reported.

•U.S. Economy Shrinks at 1% Annual Rate; Spending Falls More Than Estimated


The Cash-for-clunkers program by the gov is one of their rare successful ones, in fact too successful. The idea is that a consumer can trade a car in for a more fuel efficient one. In just the first week of the program (it has 3 more months to run) the $1B budget has been depleted. Congress is trying to add a $2B extension, prompted by auto producing states.

• Cash for clunkers may go on hold- CNNMoney

Following 2 sluggish months, Dow had an excellent Jul, gaining over 800 (10%) to a new 2009 high. Earnings reports were the drivers, mediocre earnings that beat expectations were considered excellent. The high yield sectors, especially MLPs & junk bonds, have benefited greatly from this rally.

Dow Jones Industrials --- 3 months

Indecisive markets are looking for direction

Dow, after rising 1000 in 2 weeks, has been trading sideways (with a downward bias). Dow fell 26, decliners over advancers almost 2-1 & NAZ was down 7. After topping 9K 4 days ago, Dow is literally even over that period. Banks have also been trading sideways, remaining near the high levels of the 3 month trading range.


S&P 500 FINANCIALS INDEX

Value 168.88

Change -0.43

% Change -0.3%

MLPs recovered a bit in the PM, but still fell a very big 5.77 to the 243s. REITs slipped & junk bond funds were a little higher, reaching their best levels of 2009. The VIX, volatility or fear index, rose .60 to the 25.61 & up from the 23s last week.

Alerian MLP Index --- YTD




VIX ---- 2 months





Oil plunged over $4, one of its biggest losses this year. Driving in the US is down in response to higher prices & lower levels of consumer confidence. Inventories of crude oil & gasoline have been rising, not what the bulls like to see. More Q2 reports are coming from the major oil companies this week which should give their thoughts about future demand for oil in the recession.

• Energy prices slide as unused crude piles up- AP

CLU09.NYM

..Crude Oil Sep 09

..62.79

.. 4.44 ......(6.6%)

$39B in 5-year notes yielded 2.689% at auction today, above the 2.635% forecasted. Yesterday investors demanded higher yields on $42B of 2-year notes. The investor class including foreign central banks share declined at each auction from last month. Bond buyers are pulling back from the market signaling a shift in central bank buying.

The yield on existing 5-year notes rose 6 basis points to 2.66%. The 10-year note yield fell 3 basis points to 3.66% after earlier rising as much as 5 basis points. Indirect bidders (including foreign central banks) bought 36.7% of the 5-year notes, down from 62.8% at the Jun sale (the highest since Dec 2004). The bid-to-cover ratio was only 1.92X at today's auction. Demand for the notes is strong, but supply may be growing even stronger. The concept of saturation is becoming a worry to dealers. China has been a leading buyer of US debt & could be losing some enthusiasm for buying even more.

•Treasuries Fall as $39 Billion Five-Year Sale Yields Higher Than Expected


The one week chart for the Dow is about as flat as it has ever been coming after an enormous 2 week rally. Markets are looking for direction. Chinese have been meeting with US officials this week, so far no significant announcements. The sharp sell-off in the Chinese stocks markets may be dimming their interest in US equities.

Dow Jones Industrials --- 1 week

Markets drift lower

Stocks can't decide what to do. With a lack of direction, they are selling off. Dow fell 61, decliners over advancers 3-2 & NAZ was off 14. Bank stocks are also slipping.


S&P 500 FINANCIALS INDEX

Value 168.91

Change -0.40

% Change -0.2%

MLPs ran into selling. The Alerian MLP Index dropped 8+ to the 240s (& off the 250 high on Mon). A daily point change greater than 5 is significant for MLPs, but after their run this type of reaction should be expected. REITs slipped while high yield (junk) bonds continue on a tear, up again today. The chart for the Barclay High Yield Capital Bond ETF understates results for many individual junk bond funds. High bond default rates are not being factored in when pursuing high yields. Ahead of today's note auction, the Treasury 10 year bond rose, bringing the yield down 5 basis points to 3.64%.

Alerian MLP Index --- 2 weeks




Barclays Capital Hi Yld Bond ETF - YTD





Oil slumped on worries about lower demand for oil & a 5.2M barrel surge in US oil supplies last week.

CLU09.NYM

...Crude Oil Sep 09

...65.12

... 2.11 .......(3.1%)

The Shanghai Composite Index suffered the biggest decline in 8 months on speculation the gov will curb inflows into the stock market. Their index dropped 5%after reaching the highest levels since Jan 2008. Their index dropped almost 75% from over 6K during the bear market & since then has more than doubled from 1½K to 3¼K. Driving stocks lower was speculation the central bank could rein in liquidity. The Hang Seng (Hong Kong) market tumbled 2.4% after a similar run up this year.

Other markets in the Asia region (& around the world) have had similar gains off depressed levels earlier this year. The Australia market had a 12 day winning streak broken last night. However European markets weren't bothered by the China news, they rose today.

China Stocks Plunge Most in Eight Months on Tightening Concern


BP Plc, Europe’s 2nd biggest oil company, reported profits fell 53% on lower energy prices & said there is little evidence of a recovery in demand. Royal Dutch Shell, its larger rival, as well as other major European oil companies will report this week. Analysts expect Shell to report earnings fell 69%. US majors, Exxon Mobil (XOM) & Chevron (CVX), Dow stocks, are expected to report similar significant profit declines from lower oil prices.

BP Says ‘Little Evidence’ of Oil Demand Recovery as Net Falls


Time Warner (TWC) reported lower Q2 profits but reaffirmed its guidance of roughly $2 EPS for 2009 (similar to last year). The stock dropped 1.05.

• Time Warner posts smaller 2Q net, affirms outlook- AP

Stocks are looking for direction. This week, Dow has barely budged after its 1K gain in 2 weeks.

Dow Jones Industrials --- 2 weeks

Stocks slosh around

Markets, once again, began treading under water & remained at sub break even levels for the rest of the day. Dow fell 11, decliners over advancers by 20% but NAZ was up 7. Only 9 Dow stocks advanced & Exxon Mobil (XOM) was the only 1+ loser in the Dow. Banks also took a breather after a 20 point advance which started on Jul 10.

S&P 500 FINANCIALS INDEX

Value 169.31

Change -0.63

% Change -0.4%

S5FINL:IND




The high yield sectors were also quietly lower. The Alerian MLP Index slipped 1¼ (off its 2009 high) to the 248s while REITs & junk bonds were mixed. MLPs need time to catch their breath.


Alerian MLP Index --- 2 weeks




The 3 week rally in oil futures has stalled out. Worries about less driving in the US & industries becoming more efficient using oil caused oil to pull back. However, it's still $10 above its recent low.

CLU09.NYM

..Crude Oil Sep 09

..67.17

.. 1.21 ......(1.8%)

The $42B sale of 2-year Treasury notes drew a higher-than-forecast yield. The yield was 1.08%, above the 1.058% forecast (viewed as a weak auction). The yield on the 10-year note fell three basis points to 3.69% after it touched 3.76% yesterday (the highest level since Jun 22). Today’s auction was the biggest offering of 2-year notes since monthly auctions for them began over 30 years ago. The bid-to-cover ratio was 2.75X, compared with an average of 2.58X at the last 10 auctions. Indirect bidders, including foreign central banks, bought 33% of the notes, compared with 68.7% at the Jun auction (the most in at least six years). This disappointing auction raises concerns about how well future auctions (for 10 & 30 year bonds) will be. If disappointment plays out, that will translate into higher yields.

Treasury Two-Year Notes Decline After Record Sale of Securities

Janet Yelleln, Federal Reserve Bank of San Francisco President, said the U.S. economy is showing the “first solid signs” of emerging from the recession & should resume growth later this year. But she continued with, “Recovery is likely to be painfully slow” and then added that “a gradual recovery means that things won’t feel very good for some time to come.” FED officials anticipate the economy will contract less this year than they had projected in Apr, even though unemployment is climbing towards 10%.

•Fed's Yellen Seeing `First Solid Signs' of Emergence From U.S. Recession


This was one of those days when little was decided in the markets. Most significant was the weak Treasury auction & resulting concerns about auctions going forward. Tomorrow. $39B of 5-year notes will be auctioned followed by $28B of 7-year notes on Thurs. And that's just for this week. Growing supply may take money from stock markets. Dow has been flat for 3 days straight.

Dow Jones Industrials --- 2 weeks

Markets fall from lower consumer confidence

Stocks are resting after their recent rally. Dow gained 1K in a couple of weeks, it needs time to rest. Dow fell 42, decliners over advancers 2-1 & NAZ was down 7. Banks are also resting after working their way up to the high end of their 3 month trading range:

S&P 500 FINANCIALS INDEX

Value 168.73

Change -1.21

% Change -o.7%

MLPs pulled back 2 to the 248s, they're entitled. REITs also fell but junk bonds were mixed with yields around a moderate 13%. The 10 year Treasury bond yield dropped 4 basis points to 3.67% ahead of today's Treasury auction.


Alerian MLP Index --- 1 month





Oil is also settling back with the stock markets.

CLU09.NYM

...Crude Oil Sep 09

...66.79

... 1.59 .......(2.3%)

Americans' confidence dropped again in Jul. Job security worries offset enthusiasm about the stock market rally helping bolster retirement accounts. The Conference Board said its Consumer Confidence Index fell to 46.6 in Jul from 49.3 in Jun (after a decline in Jun). Economists were expecting a reading of 49 (a reading above 90 signals the economy is on solid footing). Shoppers are looking past surging stock prices & a stabilizing housing market. Instead they remain nervous about their own financial security from mounting job losses (yesterday Verizon announced 8K job cuts). Consumers pessimism about income expectations does not bode well for spending in the coming months. Early indications for the important "back-to-school" season should be available next week.

•U.S. Consumer Confidence Falls More Than Forecast Amid Rising Joblessness


Home prices were up a little last month & sales were also higher last month. However, the problem is they're coming off low bases. Sales remain down 70% or so from the good old days, small ticks up aren't going to make a big difference.

• Home price index has first monthly rise since 2006- CNNMoney

US Steel (X), the largest US steel company, reported a 392M loss in Q2. The loss was less than in Q1, but it shows demand for steel is weak around the globe. They are forecasting a loss for Q3. The stock fell 1 to 40.

• US Steel reports 2Q loss as demand remains low- AP

US Steel --- 1 year





The markets are quiet again, but lower. They've lost their positive edge in recent weeks. The consumer confidence report signals more dreary days ahead for this recession. US Steel, a major supplier to economies around the world, tells us that the recession will not have a speedy recovery. Treasury auctions this week will be another negative influence for stocks.,

Dow Jones Industrials --- 1 month