Dow gains 86 on oversold rally

Dow rose for technical reasons, after going down for 6 straight days it's expected to rise. The strongest are: Chevron (CVX), Exxon Mobil (XOM) & Home Depot (HD) which reported lower earnings that beat expectations. Dow gained 86, advancers ahead of decliners 3-2 & NAZ recovered 22.

Financials were up, if you can call it that. S&P 500 FINANCIALS INDEX was up 2½ trying to get back to 99, swell! A major news story was JPMorgan (JPM), Dow stock, cut the div to a nickel per qtr, tying to keep gov regulators at arms length. US Bancorp (USB), the last bank on the Dividend Aristocrat list, is now widely viewed as having a div waiting to be cut.

The Alerian MLP Index was hit with more selling. The index ended 2008 at 176 (followed by an eye popping 12 point gain the first day of trading in 2009), today it's down 2 to 175. REITs & junk bond funds are up today, but still selling at drab levels. Junk bond funds are back to 20-25% yields & 10-20% yields are common for REITs. VIX was down 3, remaining at an elevated reading of almost 50.


Alerian MLP Index --- 2 weeks





Oil was up pennies in the 38s while gold pulled back 10 to 985 on technicals (after its recent rally to 1000, this was expected).

The Conference Board reported that consumer confidence fell in Feb to an abysmal 25 (expectations were for 35½) from a revised 37.4 last month. By way of comparison, a year ago it was 76. Their Present Situation Index & Expectations' Index sank to similar dreary levels. These readings signal more very tough times ahead for retailers.

• Consumer Confidence Plummets to New Low in Feb.- AP

Home Depot had sharply lower earnings (after adjusting for special charges) but they beat expectations sending the stock up 1.50. They expect 2009 will be as a challenging as was last year. Macy's (M) reported similar dreary results, but beat expectations sending the stock up 35¢ (it's a $7 stock). Their CEO said last year reflected the worst economic situation in a generation, they are working to maintain profitability & conserve cash.

• Home Depot reports 4th-quarter loss of $54M- AP
• Macy's reports 59 percent drop in 4Q profit- AP

Bernanke is testifying before Congress, no great revelations. The contraction in the economy & stock markets is still out of control. AIG will need more $B to stay alive, the gov will have to work that out. Gov is providing large sums of money for many financials, but they are learning about the strings tied (more gov interference). Markets are already pricing that worry into valuations.

Economic stimulus bill appears near

Dow hugged the break even line for a 2nd day. Dow ended up 50 to 7939, advancers 30% ahead of decliners & NAZ rose 5 (dragged down by RIMM's disappointing guidance). Traders had their time divided between making trades & watching TV to see what was happening in DC.


Banks had a good day on hopes for their bailout package, S&P 500 FINANCIALS INDEX up 6. Bank of America (BAC), as a representative bank, gained 51¢, recovering part of yesterday's decline.

Value 124.81

Change 6.15

% Change 5.2%

US Bancorp (USB), the last remaining bank in the Dividend Aristocrat group, keeps getting mentioned as one of the stronger banks, having avoided the ugliest parts of the credit crisis. Berkshire Hathaway has a large holding, although diminished in size after the stock has fallen in half in just a few months. USB has an 11+% yield & a decent 10 year track record (i.e. it doesn't look overly ugly, a positive signal today).


US Bancorp --- 10 years




Bank execs are earning their multi $M salaries today testifying before congress. Just a few of the questions mentioned getting rid of divs (they will accept one penny/qtr) & selling corp planes so they can pay back credit holders (i.e. taxpayers). The bigger issue for congress is they would like to see banks get out there & lend.

•Bank Chiefs Urged to Boost Credit as House Cites Ire Over Taxpayer Support


The Alerian MLP Index pulled back pennies, closing at 199.02 (shown in the Yahoo badge in my right sidebar). The index can't decide whether it wants 200 to be a floor or ceiling. At least MLPs have had a good year (coming off depressed levels) so far. Other indices were little changed.

Oil pulled back to a contract low, well below 40. Oil has been weak on higher inventory levels in the US. Inventories rose 4.7M barrels last week, 30M barrels in the last 5 weeks. With the cold weather of winter easing, inventories may rise further in coming weeks. Oil stocks were weak (affecting MLPs) but Chevron (CVX) was down only pennies.

CLH09.NYM

..Crude Oil Mar 09

...36.15

.. 1.40 ......(3.7%)

• Oil prices tumble below $36 on bulging inventories- AP

The Senate reportedly has trimmed back the stimulus bill to "only" $789B. The goal is to have it ready for final signing on Fri. Details will be announced. The reduced amount is necessary to get agreement for a final bill needed in both houses (not to mention the pres).

•U.S. Lawmakers Agree on $789 Billion Compromise Stimulus Bill, Baucus Says


Buyers should return as the biggest fiscal spending package in history approaches final approval. Dow had gotten used to trading under 8K, but a rally would reverse 8K from a ceiling to a floor.

After hours, Masco (MAS), a Dividend Aristocrat with a 50 year record of paying higher annual divs, announced lower earnings & will recommend the annual div rate be cut from 94¢ to 75¢ to help conserve cash.

Masco Corporation Reports 2008 Results, Provides 2009 Full-Year Guidance and Announces Planned Dividend Reduction

Initial market rally fades fast

Buyers were encouraged that the world didn't come to an end, so they returned. The Dow started with a 100 point gain but that has evaporated, now it's down 11, advancers 3-2 ahead of decliners & NAZ is up 8. Banks, in particular, found buyers but that enthusiasm withered.

The S&P 500 FINANCIALS INDEX rebounded a little after the drubbing it's been taking. However, it remains well below the 125 low set on Nov 20. Banks look to have more head winds in front of them:

Value 110.64

Change 2.16

% Change 2.0%

US Bancorp (USB) saw its profits take a beating. Even though they have avoided the ugliest write-downs that other large banks have taken, they were still hurt. EPS fell in Q4 to 15¢ from 53¢ in the prior year, stock down 2.69. They are an S&P 500 Dividend Aristocrat that will have to struggle this year to keep its status in the group, but I think they will. Even though their chart is dreary, this is one of the best for any bank.

• U.S. Bancorp profit falls to lowest since 2001- Reuters

US Bancorp --- 10 years




Other yield securities have bounced back a little from yesterday's lows. The Alerian MLP Index got up to 191, but has settled back to 189. 190 may become a difficult ceiling to break thru. As with the major averages early gains are being trimmed while I write. Meanwhile the VIX is down 5 to the 51s.

Mar oil is in the 41s, above the 38s that the Feb contract closed out at yesterday.

CLH09.NYM

...Crude Oil Mar 09

....41.65

... 0.81 .......(2.0%)

• Oil around $41 amid grim economic news- AP

Toyota (TM) became the largest auto company in the world in 2008 because their sales fell only 4% to about 9M cars while General Motors (GM) was hurt more badly by the global slowdown in auto sales. TM is still getting pinched hard. They are cutting back the workforce in Japan, a very touchy subject for them.

•Toyota Passes General Motors as Biggest Automaker Amid Global Sales Slump


Obama's team is coming up with a stimulus package which will have to be combined with the $825B package congress is proposing.

•Obama Team Readies Bank-Rescue Plan to Bolster Capital, Cull Toxic Assets


Markets continue playing defense.

Stocks barely up after afternoon rally

The morning was dominated by gloomy news & grim outlooks for bank earnings. The Dow sunk to down 200 at the low. However the PM brought buyers back, taking the Dow up for an 86 point gain at the high & settled back to a 12 point gain. Not bad all considered.


Dow Jones Industrials --- YTD




This year, markets have gotten off to a very bad start, worse than last year. Below is a review of the first 15 days for the Dow (10 days of trading, last year vs this year):

12/31/07......13,264
01/15/08......12,501___down_5.7%


12/31/08.......8,776
01/15/09.......8,212___down_6.4%


Today, advancers were 20% ahead of decliners & NAZ was up 22 despite the negative news at Apple (AAPL) - we all wish Steve Jobs a speedy recovery.


S&P 500 FINANCIALS INDEX rebounded off their lows, trimming the loss to 7, at 133. Oil sank below 35 despite the extremely cold weather in the northern hemisphere.

On a day when banks saw heavy selling, I'd like to mention US Bancorp (USB), an S&P 500 Dividend Aristocrat, closing at 19.02 - down 2.05. They raised the div to 1.70 for this year, yielding 9%. They've avoided dreadful times bigger banks are going thru. But they are still getting pinched. Earnings this year & next are projected to only cover the div. This a bank in which Warren Buffett has a large investment. Obviously, USB is not for those weak of heart. Their fundamentals appear to be strong (whatever that means in today's world) & might appeal to the brave of heart.

MLPs have put in a strong showing this year. The Alerian MLP Index began the year, at 176, with a nice pop on the first trading day. Since then, it has been trading sideways, above 190.

Alerian MLP Index --- YTD




General Motors (GM), still in the Dow, lowered its estimate for the auto sales in 2009, from 12M to only 10½M. Gloomy for them & even gloomier for the rest of the economy.

•GM Says U.S. Industrywide Auto Sales May Tumble to 27-Year Low on Economy

Waffling but up Wednesday

Stocks had a difficult time making up their minds which way to go. Except for a brief surge & then pullback around midday, they hugged the flat line. By day's end, Dow was up 30, advancers over decliners 3-2 & NAZ was up a more impressive 22. Volume on NYSE was 1.6B, a little higher than on many other recent days. Banks continue to roar ahead. Bank of America (BAC) was up 1 to 33½, nearing double its low just a week ago. US Bancorp (USB) another one I like went from 20 to 30 in a week. Today the outstanding recovery performance by financials was overwhelmed by oil. Oil was down 4¼ at 124, a price last seen in June when it was going up. I've given up trying to come up with brilliant reasons for wild swings. It's easier to accept them as "normal" moves with little reason behind them. Of course, slowing economies in the US & to some extent around the world might be in back of the minds of traders. We are also going into main part of hurricane season, introducing more unknowns going forward.

The FED released their beige book report which told us what we already know. The economy is struggling, they have to balance the needs of raising interest rates to fight inflation vs lowering rates to help the economy. Amazon (AMZN) just reported strong sales & earnings for Q2. They were up 2.57 during the day but little changed after hours awaiting the conference call which will clean up details. Costco (COST) had a very gloomy report greeted with a big sell-off, down 8.57. Congress should be finalizing their plans today aimed at helping FNM/FRE, the pres will sign their bill. Stay tuned!

Undecided

Undecided. This was one of those days markets couldn't figure out what to do. Dow ended up 29, advancers over decliners almost 2-1 while NAZ eaked out a 3 point gain. NYSE volume came in under 1.2B, very low. Dow only had 8 winners, with 3 eaking out a tiny gain (under 10¢). Bank of America earnings announcement dominated the news today. This was a source of relief but after the huge rebound gains last week, difficult to follow thru. Below are listed major financials with their mixed performance:

BAC 28.56 up 1.07, 4% 147,478,651

USB 27.25 down 1.14, 4% 25,558,819

LEH 18.32 down 0.79, 4% 40,166,761

WB 13.18 up 0.21, 2% 101,861,574

FNM 14.13 up 0.73, 5% 105,736,514

FRE 8.75 down 0.43, 5% 72,271,009

The Alerian MLP index shot up 7.82 to almost 281, one of the biggest gains in its history! Many of the ones I follow gained more than 1. They were helped by a 2.16 gain for oil as traders worried about the storm called Dolly. REITs were strong but not as exciting gains as for MLPs. Junk bond funds continue to drag around their lows.

Apple (AAPL) reported earnings that didn't satisfy investors, down over 5 in after hours trading. This could make for a rough start for techs tomorrow. Tomorrow will also see a lot of financial reports highlighted by Wachovia (WB) which had an up day but down from its highs.

Banks higher while others are only mixed

Banks were up sharply from depressed levels on good earnings & DIV news from Wells Fargo (WFC). Dow, NAZ & S&P 500 were essentially even & advancers over decliners by about 1.4 to 1. WFC reported sort of good earnings, earnings were down 22% at 53¢ but beat estimates of 50¢, along with a 10% increase in the div to 34¢ per qtr. A bank raising the div is unheard of these days. Bank of America (BAC) rose 1.35 reducing the yield to "only" 13%. Yesterday, US Bancorp (USB) reported lower earnings & sold off along with other banks but they have been getting thru the crisis better than others. Large positions in WFC & USB are owned by Berkshire Hathaway. Buyers jumped on the depressed bank sector but their enthusiasm did not spread to to other stocks.

The Labor Dept reported consumer prices were up 1.1% in June, highest rate in 26 years! Inflation readings haven't been pretty & have been holding back FED interest rate reductions to aid the economy. Oil had been down 6 earlier but bounced back to near break even at 138. Oil inventories gained 3MM last week vs a 3MM decline the prior week. In these days any thought can move its price around a lot.

Banks & financials will dominate the news. Just having congress sort out the FNM/FRE mess, over the short term, will add to what is already a confusing situation.

Stocks are looking for direction

Stocks were little changed but decliners were ahead of advancers 3-2. Dow is hanging in there just above 12K. Oil is down 2.80 on news that China will raise fuel prices. However Nigeria remains a sore spot for oil. Royal Dutch Shell shut their oil field in Nigeria which pumps 200,000 barrels of day after more rebel attacks. Jobless claims fell 5K last week. Leading indicators and unemployment reports gave few signals about where the economy is going. Another way to view these reports is the economy is stumbling along while the financials try to sort out huge problems. Life goes on.

Bloomberg TV had a report this morning that 2 ex Bear Stearns managers were arrested by the FBI on charges related to misleading investors in the sub-prime mess. Banks are selling off on their dreary outlook, but that varies. Look at the 2 listed on the right. Bank of America (BAC) has fallen 50% from its highs last year, while US Bankcorp (a regional bank, many have been brutally hammered) continues to muddle along in the low 30's. Maybe that's because Berkshire Hathaway has invested more than $1B in their stock.

Lehman problems worry markets

Lehman (LEH), down 2.81, problems continued to be a drag on the markets. Dow was up 70, but decliners outnumbered advancers 2-1 & NAZ was down 15 on 1.35B volume (a little below average). Dow was helped by McDonalds, Alcoa & the 2 oils (Chevron & Exxon). Oil was down 4 to 134, but at these levels the decline didn't have a major influence on the markets. Financials were weak, check BAC & USB on the right. Timothy Geithner, FED Reserve Bank of NY President, said there is need for more regulation of the largest banks & investment banks. Read the attached summary of his comments, the markets sold off while he was speaking. Meanwhile the Alerian MLP index only pulled back ½ a point, not bad. It's getting a lot of support just above 290, probably helped by the high oil prices even though their effect if anything might be negative for pipeline companies.

This was a very disappointing day for the bulls. Instead of the sharp sell-off, markets remained soggy. They largely had an off day, the kind which may be repeated. Banks are getting hammered & hard. For the brave, the high yields will be attractive. The trick is to separate the wheat from the chaff in the bank stocks.

Stocks tumble on oil gusher

Oil prices shot up above 139, before pulling back a few cents to close at 138.87 up 11.08 (18 in 2 days). This was plenty, causing the markets to have a mild crash. Dow tumbled 394, decliners ahead of advancers 4½ to 1 & NAZ down 75. Wheww!!! All this activity on just 1.2B shares. That low level of volume is not the climactic sell-off bulls bulls would like to see signaling the end of selling. Oil is living in it's own world as speculators have taken charge, but the analyst forecast about reaching 150 by July 4 lit a fire under speculators in the last 2 days. In this sell-off, even Chevron (CVX) & Exxon Mobil (XOM) fell. Banks were punished badly, check BAC & USB in the right column. However, the Alerian MLP index help up pretty well, falling less than 1 to 293½, near the low end of a trading range where it has lived for much of the year. Boring pipelines with high yields looked attractive!

Not much to say. The weekend will be good time to check prices & valuations, preparing for buying opportunities at lower levels.

Lehman uncertainty confuses markets

Lehman (LEH) uncertainty is confusing the markets. They are little changed while trying to figure out what the future holds for Lehman & how that will impact markets. In this confusing situation, something the markets do not like, Lehman is looking for outside capital probably from Korea. Grrr! We are in a new world where the US is not always at the center. Oil fell below 124 from concerns that the slowing economy will reduce demand. At other times, that news brings out buyers in droves. The Labor Dept reported mixed numbers for Q1 on worker productivity & wages. A private report by ADP Employer Services reported that private sector jobs increased by 40K last month, a good sign for the gov's upcoming labor report on Fri.

Time for a comparison of the 2 banks shown in the widget on the right. Bank of America (BAC), in the Dow, is at a 6 year low as is the case with most of the big name, famous banks. US Bancorp (USB) has been kicking around the 30-34 range for the last year, while major banks have taken a beating. Both are members of the S&P Dividend Aristocrat list (track records of over 30 years of year over year higher divs in their cases). USB is kind of a boring bank with a modest longer term stock track record. But today, boring records look pretty good: