Stocks surge on October housing purchases

Dow exploded out of the gate & continues near its best levels. Dow is up 155, advancers over decliners 6-1 while NAZ rose 36. Dow is at another 2009 high, NAZ is only a few points away from its high set last week. Banks are doing well, the Financial Index once again is trying to get over the 200 line (it needs 212 to set a 2009 high).


S&P 500 FINANCIALS INDEX

Value 199.98

Change 3.78

% Change 1.9%

High yielders are participating in this rally. The Alerian MLP Index is up 2½ to the 264s, very close to its high for 2009. The REIT index is up 3, only 8 away from its high set 2 months ago. Junk bond funds are fractionally higher. Treasuries sold off, the yield on the 10-year Treasury bond rose 4 basis points to 3.39%. However, the yield on on the 90 day bill is at or near zero interest (showing 0.01% annual rate). The yield spread charts shows the very large spread between the short rates of zero & long rates of over 3-4%. The last time Treasury bill rates were so low while the stock markets advancers was in 1938.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




90 day Treasury bill rate - 1 year




Treasury yield curve

Oil is having a good day trying to get back over 80. Gold is showing a big advance at Bloomberg, to another record:

CLF10.NYM

...Crude Oil Jan 10

...79.54 ...

2.07 .......(2.7%)

Prices from Bloomberg:

	VALUE	CHANGE	% CHANGE
Oil	79.41	1.94	2.5%
Gold	1,170.30	23.50	2.1%

Home resales far exceeded expectations in Oct, surging 10.1% to the highest level in 2½ years. Oct sales imply an annual rate of 6.1M, up from a downwardly revised rate of 5.54M in Sep. Sales were also nearly 24% above last year's level. The median sales price was $173K down 7.1% from last year & off 1.6% from Sep. The share of homes sold as foreclosures rose to 30% from 29% in Sep. While good news, sales were spurred by the threat of expiration of the tax benefit not to mention in the "good old days" sales were double this rate.


Existing U.S. Home Sales Jump to Highest Level Since 2007 on Tax Incentive

Purchases of new homes - 1 year





Stocks & commodities are flying while rates on Treasury bills are at zero. A shortened, holiday week, generally with only limited news, should be a quiet time for the markets. But stocks are attracting plenty of buyers as are Treasury bills (where frightened money goes). This cold be a very exciting week.

Dow Jones Industrials --- 2 weeks

Stocks remained depressed all day

Dow remained weak all day. It tumbled in the first hour & then just kept drifting lower, closing down 289, decliners ahead of advancers 7-1 & NAZ fell 64. 18 Dow stocks fell 3+% including 4 which fell more than 10% each (AXP, BAC, C & GM).

This is today's bleak picture of the Dow (courtesy of Bloomberg):

DOW JONES INDUS. AVG MEMBERS

					Time
3M CO	51.96	-1.85	-3.44	4,225,322	15:57
ALCOA INC	8.35	-0.91	-9.83	33,119,032	15:57
AMERICAN EXPRESS	18.96	-2.84	-13.04	35,390,611	15:57
AT&T INC	25.33	-0.62	-2.39	23,964,596	15:57
BANK OF AMERICA	8.04	-2.56	-24.15	761,560,418	15:57
BOEING CO	36.53	-1.79	-4.67	6,445,650	15:57
CATERPILLAR INC	30.51	-1.78	-5.51	13,341,261	15:57
CHEVRON CORP	63.89	-2.12	-3.21	9,848,334	15:57
CITIGROUP INC	2.95	-0.70	-19.18	796,155,685	15:57
COCA-COLA CO	44.43	-0.59	-1.31	12,360,057	15:58
DU PONT (EI)	26.79	-1.63	-5.74	14,480,323	15:57
EXXON MOBIL CORP	65.21	-1.54	-2.31	27,101,277	15:57
GENERAL ELECTRIC	11.33	-1.06	-8.56	136,419,847	15:57
GENERAL MOTORS	1.67	-0.19	-10.22	26,951,171	15:57
HEWLETT-PACKARD	34.68	-1.62	-4.46	14,483,610	15:57
HOME DEPOT INC	25.18	-0.92	-3.52	16,307,086	15:57
IBM	100.58	-0.69	-0.68	9,578,843	15:57
INTEL CORP	15.12	-0.48	-3.08	56,752,484	15:57
JOHNSON&JOHNSON	52.50	-0.55	-1.04	13,863,636	15:57
JPMORGAN CHASE	29.79	-3.47	-10.43	95,070,036	15:57
KRAFT FOODS INC	22.50	-0.16	-0.73	9,813,838	15:57
MCDONALDS CORP	55.31	-0.78	-1.39	6,459,274	15:57
MERCK & CO	25.23	-0.50	-1.95	11,636,501	15:57
MICROSOFT CORP	18.68	-0.52	-2.71	52,293,901	15:57
PFIZER INC	13.58	-0.58	-4.10	48,155,770	15:58
PROCTER & GAMBLE	50.66	-1.00	-1.94	13,658,351	15:57
UNITED TECH CORP	45.79	-1.53	-3.23	5,212,017	15:58
VERIZON COMMUNIC	30.95	-0.83	-2.61	12,185,590	15:57
WAL-MART STORES	49.31	-0.89	-1.77	18,703,859	15:57
WALT DISNEY CO	19.44	-0.94	-4.61	13,033,985	15:57

Banks were the biggest drag following BAC reporting that it boosted reserves for loan losses. S&P 500 FINANCIALS INDEX had one of its largest losses ever, with many prominent banks falling around 20% each. BAC fell almost 25%.

Value 132.15

Change -17.03

% Change -11.4%

MLPs, REITs & junk bond funds all sold off. The 4+ drop for the Alerian MLP Index brought it back to the 200 line. Now it has to decide again whether to keep it as a floor or make it a ceiling as it has been for most of 2009. The Dow Jones REIT Index fell a very big 14 & junk bond funds sold off badly. On increased fears, the VIX shot up 5:


VIX ---- 2 weeks





Oil had one of its worst days in a long time resulting from a strong dollar & weak stock market.

CLK09.NYM

..Crude Oil May 09

..45.77

.. 4.56 ......(9.1%)

The rate on Treasury 90 day bills is falling, heading for zero (if not negative as in late 2008). China is now the biggest lending to the US gov, but they recently expressed their concern (dissatisfaction) with excessive gov borrowing. When buying gov paper, they are switching to shorter maturities with the lowest rates. Not sure how all this will play out (the big boys probably don't know much more), but worth keeping an eye on the 90 day rate which is only 12 basis points (annualized). Data courtesy of Bloomberg:

U.S. Treasuries

	COUPON	MATURITY DATE	CURRENT PRICE/YIELD	PRICE/YIELD CHANGE
3-Month	0.000	07/16/2009	0.12 / .12	-0.008 / -.008

•Zero Percent on Treasury Bills as China Demand Converges With Fed Policies


A leading economic indicator published by the Conference Board points to the recession lasting until later this year. Then the rebound may be slow, something recent stock market enthusiasm has not been counting on.

• U.S. recession seen likely to go through summer- Reuters

Dreary Mon is pointing to a very bad week for a very tired market. Dow has made virtually no progress in the last 3 weeks:


Dow Jones Industrials --- 1 month

Markets settle back

Markets were fairly calm in very light, holiday trading. But this was a down day. At the low, Dow was off over 180 & came back in the PM to end down 31. Decliners were 3-2 ahead of advancers & NAZ dropped 20. Volume on NYSE was under .9M shares. The S&P 500 FINANCIALS INDEX fell 1.57.

The bleak outlook for retailing hit REITS very hard. The Dow Jones REIT Index dropped 8 to 137½ after the prediction that many stores will have to be closed this year. The index had been in a sideways pattern near 145 for most of 2 weeks. After selling today, buyers came back in the last hour to trim the loss.


Dow Jones REIT Index --- 2 weeks




The Alerian MLP Index was soft all day, ending down 1 to 169 on worries about demand destruction for oil & gas, not to mention distribution cuts coming for the weaker MLPs. Oil had a strong day on tensions in the Mideast, finally closing above 40.

CLG09.NYM

...Crude Oil Feb 09

....40.20

... 2.49 .......(6.6%)

Lehman High Yield Bond ETF pared its AM losses to down 77¢ as other junk bond funds were also weak.

The Treasury auctioned $27B of 6-month bills at a record low rate of 0.25% (annualized). They also auctioned 3-month T-bills at 0.05% (annualized), slightly higher than the prior week's auction rate of 0.04%. Frightened money easily absorbed the large supply of bills.

• Rate on 6-month Treasury bills hits record low- AP

Gloomy thoughts about corp profitability. Economists predict profit declines for the S&P 500 will continue until Q3 of 2009. Much of the weakness is caused by banks & autos which has now been extended to include ordinary companies:

•U.S. Corporate Profits Probably Fell for Sixth Quarter as Spending Plunged

Dreary economic news sinks stocks

Reality got the better of stocks. Markets had a great run from their lows 2 weeks ago, but profit takers controlled markets today especially in the PM. Dow dropped 243, decliners over advancers 2-1 & NAZ dropped 24. Charts for the Dow are similar to many groups, up in the AM followed by continuous selling in the PM.

S&P 500 FINANCIALS INDEX surrendered most of the gains from yesterday:

Value 174.13

Change -8.96

% Change -4.9%

The Alerian MLP Index gave up early gains bringing it to a minor loss. The Dow Jones REIT Index pull back 12½, Lehman High Yield Bond ETF slid 1% while VIX advanced pennies (worries are up again). All yield instruments (aside from Treasury debt) are suspect & have to pay the price: lower prices resulting in even higher yields.

Oil slipped back to 42. Like stocks, economic worries brought on selling.

Talk about frightened capital, the Treasury sold 4 week T-bills at zero percent interest rate. I repeat, zero interest. That means a $1000 bill due in 4 weeks costs $1000 today. The bills were 4X oversubscribed. The 90 day T-bill traded at a slightly NEGATIVE rate today. These low rates may not hold next year when the Treasury has to finance a whopper deficit, partially caused by an economic rescue package

The auto bailout package may be decided tomorrow, but the outcome has not been settled. Economics mean little, politics will decide the details. The Dems are optimistic but the Reps are saying, not so fast. They could decide the fate of the autos by tomorrow. Approval of a package might give a quick lift to stocks, but negative news stories should carry the day.

3M, a Dow company & an S&P 500 Dividend Aristocrat, came out with negative guidance yesterday costing it on a strong up day. Selling continued today, bringing the 2 day losses to $4.

Dow has 4th worst day

It's hard to believe that the Dow has had 3 worse days than down 680 (& all in the last few months), putting today in 4th place. Dow was down about 430 going into the final hour when it dropped another 250. Heavy selling at the end of the day is always a bad sign. The recession feeling, not to mention auto maker worries, brought on sellers in droves. Damage was widespread. The Alerian MLP Index dropped 11, the Dow Jones REIT Index dropped an eye popping 25 (over 20%) while the VIX (better known as the fear index) shot up 13 to 68½. There will be more bleeding.

Oil slipped on global recession worries & even save haven gold pulled back 2.

CLF09.NYM Crude Oil Jan 09 48.08 down 1.20 (2.4%)

GCZ08.CMX Gold Dec 08 ... 772.30 down 2.30 (0.3%)


Meanwhile Treasury securities rose dramatically. The 10 year Treasury now yields only 2.72% & the 90 day Treasury bill yields only 2 basis points (annualized). To buy that Treasury bill, it costs $1000 less a nickel in order to receive the full $1000 in 90 days. Frightened money is seeking safety in Treasuries. When they begin to grasp the significance of future enormous budget deficits, it will have to seek another investment. These are unusually troubling times.

Late day rally lifts Dow

Dow had a major rally in the last hour, from 8100 to 8425, maybe on hopes that auto makers will be bailed out again. Much of the gains came from : Chevron (CVX), Exxon Mobil (XOM), Hewlett-Packard (HPQ), IBM (IBM), Johnson & Johnson (JNJ) & 3M (MMM). However decliners lead advancers 2-1 & NAZ was just about even.

Big Three Plead With Congress for $25B in Uphill Fight- AP

Meanwhile, oil was down 37 pennies. Times are tough for oil when even hijacking a tanker off Africa can't bring out buyers.

S&P 500 FINANCIALS INDEX was down "only" 1.26 to another multi year, the Alerian MLP Index dropped 3 to a new low (aside from the week prior to Columbus Day). Without the last hour 5 point rally, it would have been a lot worse. The Dow Jones REIT Index slipped 1 (again, even after rallying 6 in the last hour) to another multi year low. In the last hour, prices got too low so bargain hunters were attracted. In addition to all the macro economic problems, tax loss selling & selling by funds to meet redemptions are taking their toll. Meanwhile the VIX Index, or fear index, was down 1.51 to 67.64, still near its recent record levels:

VIX --- 2 months




The annualized yield on the 90 day Treasury bill is only 11 basis points. To buy a Treasury promise to prepay $100 in 90 days, it costs $100 less 3 pennies. The 10 year Treasury bond has a yield of only 3.52%. Those are places frightened money is going.

The auto makers are testifying before congress pleading for more aid beyond the $25B they have already been granted to retool for more fuel efficient cars.

• What U.S. automakers must do to become viable again- CNBC

Late day rallies are always suspicious, especially in these times. Tomorrow's a new day, let's see what it brings.

As a note, Websense is blocking my picture on the right (along with many others). This may vary from one computer to the next, hopefully Google will get after them & soon!

Dow plunges 700 after failure to pass House bailout plan

This was to be a close vote, but it was supposed to pass in a nail biter. NOT SO!!! The House plan was shot down, Dow is down over 700 as decliners are ahead of advancers 20-1. NAZ is down 180 & S&P 500 slumped 100 in what is clearly a FINANCIAL CRISIS:

•S&P 500 Falls Most Since 1987, Commodities Plunge After Defeat of Bailout
•Financial Rescue Plan Backed by Bush, Democrats Collapses in 228-205 Vote
•Paulson Vows to Use `All Tools' to Protect Markets After Bailout Rejected
•Fed Injects Additional $630 Billion Into Financial System to Stoke Lending

Meanwhile oil is having one of its worst days ever while gold rallies on the flight to safety:

CLX08.NYM

Crude Oil ...Nov 08

... 96.42...

10.47 (9.8%)

GCV08.CMX

Gold ... Oct 08...

905.00...

22.10 (2.5%)

The flight to safely means money from stock sales is going into Treasury bills where the ANNUAL yield tumbled from 0.87% to 0.32%. Keep in mind, these are ANNUAL rates for T-bills:

Investors Swarm T-bills as House Rejects Bailout- AP

Let's see how markets close, I'll return.