Markets edge lower on profit taking

Stocks were weak but losses are limited.  Dow fell 33, decliners over advancers 4-3 & NAZ is off 11.  Banks led the way down, but again not with serious selling.



S&P 500 FINANCIALS INDEX

Value	195.38
Change	-1.34  (-0.7%)

The Alerian MLP Index rose a fraction to 333, just 10 away from setting a record while the REIT index fell 2+ to 211.  Junk bond funds edged higher & the VIX was up a fraction to the 22s remaining in a sideways trading zone.  The € is little changed close to $1.35, a 5 month high.  But the yield on the 10 year Treasury bond fell 6 basis points to 2.55% & closing in on the lows reach a couple of weeks ago.  These low rates are very troubling for the stock markets. 



Treasury Yields

U.S. 3-month		0.13%
U.S. 2-year		0.42%
U.S. 10-year		2.55%

Alerian MLP Index   ---   2 weeks




Dow Jones REIT Index   ---   2 weeks





VIX Index   ---   2 weeks





10-Year Treasury Yld Index   ---   2 weeks





Oil futures fell as a stronger US dollar reduced the appeal of commodities as an alternative investment  But gold is hanging in just below the 1300+ record reached last week.  This alternative still has a lot of appeal.

CLX10.NYM

...Crude Oil Nov 10

...76.07

... 0.42  (0.6%)

GCU10.CMX

...Gold Sep 10

...1,297.70

... 1.70

(0.1%)

Gold Super Cycle Link! Click Here

Photo:  Yahoo


Southwest Airlines (has the cute symbol LUV) will buy AirTran (AAI) for $1.04B in cash & stock that will allow LUV to expand in major East Coast markets.  "The acquisition of AirTran represents a unique opportunity to grow Southwest Airlines' presence in key markets we don't yet serve and takes a significant step toward positioning us for future growth," said CEO Gary Kelly.  Kelly added the deal with Atlanta-based AirTran would allow Southwest to expand in markets such as New York LaGuardia, Boston Logan, and Baltimore/Washington & get access to leisure markets in the Caribbean & Mexico.  AAI shares jumped $2.75 to $7.30 & LUV rose 81¢.  LUV said excluding the impact of one-time costs, the acquisition is expected to add to its pro-forma earnings per share in the first year after the closing of the deal.

Southwest expands presence with AirTran buyReuters 


AirTran  ---  1 month




Southwest Airline   --   2 years






IBM (IBM), a Dow stock, agreed to buy closely held Blade Network Technologies to gain products that connect server computers in company data centers.  No value was given for the transaction.  Blade Network makes switches that connect servers, storage & networks in data centers, large rooms of computers that handle corporate tasks. This is the 3rd acquisition IBM has announced in Sep.  IBM was up 29¢.

IBM to Buy Blade Network to Gain Data-Center Switches


IBM   ---   2 years





Wal-Mart (WMT), Dow stock & Dividend Aristocrat, is buying a retail chain in South Africa.  But Monday merger fever is not affecting the markets.  Quarter end adjustments might be muddling the direction of the markets. 


Dow Jones Industrials   ---   2 weeks

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Home sales decline again

Stocks sank on negative economic news. Dow is down 107, decliners ahead of advancers better than 3-2 & NAZ is down 17. New home sales for June fell 2.6% from the prior year, double the estimates & the median price for a home was down 6% from last year. Gloomy news in the housing sector drags on. The Labor Dept reported that new claims for unemployment benefits shot up 34K to 406K (a recession kind of number for many). The forecasted number was 375K & last year it was only 308K. Oil rebounded 1 to 125½. Gasoline demand in the US fell 2.4% from the prior year, high prices are biting the consumer. Dreary economic news drones on.

Ford (F) lost almost $9B mostly on asset write-downs, down 40¢ (a lot for a $5 stock). Southwest airlines (LUV - love that symbol) reported higher sales & higher earnings from the sales increase & hedging oil. They remain under pressure from higher costs & cut back growth plans to 4% or less this year, stock slipped 28¢.

Master Limited Partnerships

MLPs are one of my favorite investments, let me explain them for newbies. They trade like stocks but are actually limited partnerships in pipeline businesses. These pipelines move oil & gas around the US, expanding this network is a national priority. Many of the units yield 8+% which is 80-90% tax-free. However there is a fair amount of tax hassle associated with distributions, the non-taxable portion is generally reduces cost basis plus you learn more about depletion. Annual tax statements are sent on March 15. However, tax package programs are supposed to handle these numbers well. They have an excellent track record, with or without reinvested distributions (see the Alerian MLP index based only on security prices below).





One year ago, the index maxed out at 342 followed by a sharp drop taking it under 300 from which it hasn't been able to recover. It has been trading sideways this year with a downward bias. Joe has an excellent blog on MLPs, limitedpartnerships.blogspot.com, if you want to follow them more closely. The long term outlook is excellent & high yields makes it easier to wait for higher markets. Today the index is down about 1 to 267 after a one day rally of 8 last week.