Stocks tumble in the last hour

Markets started the day strong but faded. The Dow shot up to 10,100 out of the gate but then its was all downhill especially in the last hour. Dow fell 92, going back under 10K, decliners ahead of advancers by 3-2 (it had been 3-1 in favor of the advancers earlier in the day) & NAZ dropped 12. Banks led the decline, the Financial Index plunged 6 in the last hour after an influential analyst recommended selling Wells Fargo (WFC):

S&P 500 FINANCIALS INDEX

Value 200.41

Change -3.89

% Change -1.9%

The Alerian MLP Index gained .93 to the 265s (but off earlier highs) & the REIT index was down 2 after a nice gain in the AM. Junk bond funds keep climbing. The VIX rose 1.32 to 22.22 after touching a new 14 month low of 20 in the AM. Treasuries were weak today, the yield on the 10-year Treasury went up 7 basis points to 3.41%.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Kinder Morgan (KMP), the largest MLP, declared their regular $1.05 quarterly distribution for Q4, in line with their guidance at the beginning of the year that their intention was to pay $4.20 in 2009. KMP was up 74¢ ahead of the announcement, but this was a good day for MLPs.

KMP Third Quarter Distribution $1.05 Per Unit


Oil surged to a 1 year high, going over 81. Higher oil prices came after a gov report showed crude supplies in the US are growing & refiners are producing very little gasoline because consumers aren't using as much. Below is a graph of an ETF tracking oil. Off its lows, oil has soared about 20%. Some think the US economy can handle higher priced oil at these levels. Considering how fragile the recovery is, I don't know. Gold is at new record highs, this is not supposed to happen in bull markets.

The weak dollar is helping all commodities. The Japanese ¥ weaken a little in the last week, it now takes 91 to buy a dollar but the € is at a new high, above $1.50. The weak dollar is not good for those who worry about the longer term.

CLZ09.NYM

..Crude Oil Dec 09

..81.39

.. 2.27 ......(2.9%)

GCV09.CMX

..Gold Oct 09

..1,063.10

.. 5.30 ......(0.5%)

OIL (ETF) --- 1 month





Word was leaked late in the day that firms receiving bailout money (Bank of America, Citi, AIG, GM, etc.) will be asked for big pay cuts for the highest paid execs. This is the kind of announcement that does not warm the hearts of traders, more gov interference, especially when bulls want to take stocks to new heights.

•Pay Cuts of 90% at Firms Getting Most Aid Are Said to Be Ordered by U.S.

Dow Jones Industrials --- 1 week




Dow Jones Industrials --- YTD

Markets mixed (up) again

Dow slipped 22, advancers over decliners 3-2 & NAZ was up 6. Dow keeps struggling, trying to break into the black for 2009. Banks were little changed on the news that stronger ones will be paying back their TARP loans.


S&P 500 FINANCIALS INDEX

Value 166.13

Change -0.50

% Change -0.3%

The high yield sector was weak. The Alerian MLP Index fell 2, possibly still reacting to an overbought condition. REITs & junk bonds funds were soft. However, oil is having a good day, getting back into the 69s.

CLN09.NYM

...Crude Oil Jul 09

...69.23

... 1.14 .......(1.7%)

The Treasury gave approval to 10 banks to repay $68B in bailout money. The banks have been eager to get out of the program to escape gov restrictions. Banks likely to repay bailout funds include Goldman Sachs (GS), JPMorgan (JPM) & American Express (AXP). This is a sign that some stability has returned to the system. However, the crisis isn't over. Repayments could widen the gap between healthy & weak banks.

•U.S. Lets 10 Banks Repay $68 Billion of TARP Funds, Easing Treasury's Grip


Pimco, which runs the world’s biggest bond fund, said the economic outlook “looks bad” for most central banks. As a result, central banks will refrain from raising interest rates. They said that signs of recovery in economies point to a slower pace of decline rather than recovery. The outlook over the next three to five years is for “weaker global growth and especially weaker growth in the developed countries."

•Pimco Says Economic Outlook `Looks Bad,' Higher Rates Still Some Time Away


The U.S. Supreme Court put a delay on Fiat's attempts to combine with Chrysler. 3 Indiana pension & construction funds want to protect their interests, Justice Ruth Ginsburg delayed going forward on the Fiat's plan. The funds, which hold a small part of Chrysler's debt, have been fighting the sale, claiming that it unfairly favors Chrysler's unsecured stakeholders ahead of secured debtholders like themselves. This issue could be resolved quickly or drag on with the potential to scuttle the deal. If Fiat were to walk away, Chrysler would have little option but to liquidate. These lawsuit can be expected to be repeated at General Motors.

Chrysler Creditors’ Win in Delaying Fiat Sale


Dow continues to bump against the ceiling, trying to break into the black for 2009. Economic reality has gotten the better of it in the last few days.

Dow Jones Industrials --- 2 weeks

Markets take a rest

Stocks are having a quiet day. Dow slipped 1, advancers ahead of decliners 3-2 & NAZ dropped 1. Banks are down just a tick:

S&P 500 FINANCIALS INDEX

Value 165.06

Change -0.66

% Change -0.4%

The gov received warrants from the banks last fall at the height of the financial crisis, giving the gov the right to buy stock at a set price over a period of time. With banks wanting to pay back bailout money, the issue about owning warrants gets complicated. Big banks, i.e. JPMorgan (JPM), Goldman Sachs (GS) & Morgan Stanley (MS), notified regulators that they want to pay back their loans. However, by holding warrants, the gov has leverage over banks. In addition, these warrants could be worth $Bs following the large run up in bank shares since Mar. We'll see if the gov is serious about not getting involved in running banks.

When banks ask to pay back loans, there are problems. Repayments can be sending signals about which banks are strong & which are weak. This additional uncertainty is hurting bank stocks today (in addition to profit taking).

• Efforts to repay bailouts may undercut taxpayer benefit- NYT
• Goldman Sachs, Morgan Stanley apply to repay TARP- AP

MLPs hang there, near their yearly highs. REITs are down a little while junk bond funds are higher & the VIX dropped to the 29s, another low for 2009.


Alerian MLP Index --- 2 weeks






A modest rebound in single-family home construction in Apr sounded good. But the supply of unsold homes is growing, foreclosures rising & falling prices, indicates no recovery is expected until early 2010 at best. Construction of new homes & apartments fell 12.8% last month to an annual rate of 458K units, the lowest on record going back over half a century. Applications for new building permits dropped 3.3% to an annual rate of 494K, another record low. But construction of single-family homes rose 2.8% to an annual rate of 368K, following a 0.3% gain in Mar & no change in Feb. A rebound for single-family construction remains distant with heavy job layoffs & record levels of foreclosures. The number of unsold homes is 3.7M (a 10 month supply up from 6.5 months in 2006).

•U.S. Housing Starts Unexpectedly Fall to Record-Low Pace; Permits Decline


The cash account at Berkshire Hathaway (BRK.A) slipped below $20B. It's approaching the $10B minimum level Warren Buffet has set. As a result, their stock purchases are being cut back.

•Buffett Scales Back Stock Purchases as Berkshire's Cash Holdings Dwindle


Dow is trying to get a head of steam going.

Dow Jones Industrials --- 2 weeks