Markets advance after the G20 pledge

Stocks rose on the weaker dollar.  The Dow went over its yearly high of 11.2K but pulled back to up 59 (just below setting a new yearly high), advancers over decliners 3-1 & NAZ added 15.  There is a sense of relief that there will be no currency wars.  Banks started higher but selling took the Financial Index barely into the red. 


S&P 500 FINANCIALS INDEX

Value	196.52
Change	-0.09  (-0.0%)

The Alerian MLP Index is up 1½ to the 351s, flirting with a new record at 352 (actually it just inched over last week's record for a few minutes).  The REIT index gained a fraction to 224, near its yearly highs.  Junk bond funds were marginally higher while Treasuries were strong.  The yield on the 10 year Treasury bond fell 5 basis points to 2.51% mostly from the weaker dollar.

Treasury Yields:

U.S. 3-month		0.12%
U.S. 2-year		0.35%
U.S. 10-year		2.51%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 week



10-Year Treasury Yield Index   ---   2 week





Nothing like a weak dollar to bring out buyers for commodities.  It used to take 100 ¥ to buy a dollar, then that dropped to the lows 90s.  Now it's just 80, a 15 year low!  Oil gained for a 2nd day from a weakening dollar & Hurricane Richard headed for the Gulf of Mexico, home to 31% of US crude production. Gold rose the most in more than a week as the dollar fell, boosting demand for the precious metal.

CLZ10.NYM

...Crude Oil Dec 10

....83.14

..... 1.45

(1.8%)

GCV10.CMX

...Gold Oct 10

.......1,336.00

.... 11.60

(0.9%)

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Photo:  Bloomberg


Sales of previously occupied homes rose in Sep after a dismal summer but remain well short of healthy levels.  The National Association of Realtors reported sales grew 10% last month to an annual rate of 4.53M but they were still down 19% from last year. The Aug results were revised downward slightly.  High unemployment, tight credit & the prospect of future declines in home prices have kept people from buying homes. Plus, the prospect of lawsuits from former homeowners claiming that banks made errors when seizing their homes is making some consumers fearful about buying foreclosed properties.  The median sale price was $172K, down 2.4 % from last year.  The number of previously owned homes on the market fell 1.9% to 4.04M. At the current sales pace, it would take 10.7 months to sell those houses, compared with 12 months in Aug. Housing remains stuck in the mud.

U.S. Existing Home Sales Rose 10% to 4.53 Million Rate


Median Home Price - 1 year






Global finance ministers met over the weekend & agreed to avoid competitive devaluations of their currencies, but they didn't lay out specific guidelines. There has been growing concerns that countries would artificially drive the value of their currencies lower. Weakening a national currency can help a country boost exports because goods become cheaper overseas.  While that can lift a country's economic growth, it also creates imbalances in global trade leading to protectionist responses from other countries, threatening to slow or halt a broader economic recovery.  Short term, stocks liked the news but longer term implications are not clear.

G-20 to Avoid `Competitive Devaluation,' Prod China


Bank of America (BAC), a Dow stock, has had tough going in the last 2 weeks with the foreclosure mess.  The stock is down a few pennies, still stuck under 11½.  A bright spot is home refinancing is up as owners want to save money on interest & monthly mortgage payments. 

Refinancing Surge Lifts Banks Amid Foreclosure Scrutiny


Bank of America   ---   2 months





Housing data was grim as expected.  But all markets are higher from a weak dollar.  Major changes in foreign exchange rates can get complicated.  Among other problems, a strong dollar is helpful in getting foreign countries (like China) to buy massive amounts of new gov debt.  But Dow is flirting with its yearly high & a breakthrough to new highs will be bullish for stocks.  Meanwhile, MLPs, REITs & junk bonds are hot (as is gold).


Dow Jones Industrials   ---   2 week

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Higher markets after health care reform passes

Dow is climbing trying to reach to a new 18 month high after the House passed the health care bill. Dow is up 36, advancers are slightly ahead of decliners after decliners had led advancers 2-1 in early trading & NAZ is up 13. It's difficult to believe but a health care rally is underway. Banks are joining in. Again after starting lower, buyers have brought the Financial Index into the black. Another couple points & it will be at a new 18 month high.

S&P 500 FINANCIALS INDEX

Value 211.64

Change 0.45

% Change 0.2%

Not sure if there is a connection between MLPs & health care reform, but the index sold off again today. It bounced off the lows resulting in only a 1+ loss to the 297s. The REIT index is up pocket change. Junk bond funds were a little lower but still at lofty levels with relatively modest yields. The yield on the 10-year Treasury bond slipped a basis point to 3.67%, nothing going on here.


Alerian MLP Index --- 2 weeks



Dow Jones REIT Index --- 2 weeks





Oil has rebounded from early AM losses which brought it below 79. Gold is probably doing better, but that's nothing showing presently.

CLJ10.NYM

...Crude Oil Apr 10

...80.39

... 0.29 .......(0.4%)

Gold...

1,096.70__

-10.90

__-0.98

An interesting story from Bloomberg, the 2-year notes from Berkshire Hathaway (BRK.A) yield 3.5 basis points less than Treasuries of similar maturity. That's not supposed to be, the Treasuries are expected to yield less. Procter & Gamble (PG), Johnson & Johnson (JNJ) & Lowe’s (LOW) debt also has similar low yields. The last 3 are Dividend Aristocrats. This comparison brings into question the ability of the gov to retain its AAA credit rating which will come into greater question with the passage of the health care reform & its added costs.

•Obama Paying More Than Buffett as Treasuries Show U.S. Losing AAA Stature


Below are charts for 4 Dividend Aristocrats which are health care providers. They're up about 50¢ each today but have had muted track records in the last 2 years. JNJ is a laggard with a 26¢ gain because its medical devices are viewed as losing out with the new health reform.


Abbott Labs --- 2 years




Eli Lilly --- 2 years




Johnson & Johnson --- 2 years




Merck --- 2 years

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This looks like it will be a "go figga" rally day. Dow is in a long run trading zone with an upper level of about 10.8K. If Dow can close at a new 2010 high, it may want to carry on above 11K.

Dow Jones Industrials --- 2 weeks

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Stocks fall on negative consumer attitudes

Dow dropped sharply on the opening & remained sloshing around its low levels. However, buying in the last hour reduced the losses. Dow was off 76, decliners over advancers 3-1 & NAZ is now under 2K after falling 23. Banks recovered most of their losses. Citigroup (C) was flat & Bank of America (BAC), Dow stock, up 38¢. Citi has fought its way back to $4.

S&P 500 FINANCIALS INDEX

Value 191.58

Change -0.95

% Change -o.5%

S5FINL:IND




Citigroup --- YTD





MLPs & REITs recovered much of the AM losses in the PM. The Alerian MLP Index ended down pennies in the 240s & the Dow Jones REIT Index was off only 1+. Junk bond funds were higher, many at levels not seen since Oct. Over $19B of junk debt was sold this week, more than double the prior week. YTD junk debt sold is running 30% over last year with much of it coming in the most recent months. Treasuries had their best week of the year. The yield on the 10 year Treasury bond fell from 3.85% at the start of the week to 3.56% (today down 4 basis points). Buying Treasuries has to have hurt stocks this week.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




10-Year Treasury Yld Index - 2 weeks





Nervousness about the future of economic recovery gave oil one of its biggest daily losses this year. The graph below shows the trend of how oil prices have been bouncing around recently.

CLU09.NYM

..Crude Oil Sep 09

..67.42

.. 3.10 ......(4.4%)

OIL (ETF) --- 2 months





Stocks are coming off a stellar month in July, but going nowhere in Aug. Dow is up only 34 since Aug 3 when it closed at 9286. The Treasury has to keep auctioning off more debt but interest rates are holding at the same levels they were at last fall during the worst of the credit crisis. Money is embracing stocks (risk) & massive amounts of new treasury debt (viewed as risk free). If the current balance between the 2 holds, stocks should do well. The question becomes when will risk averse thoughts start to grip investors & bring on selling pressure?

Dow Jones Industrials --- YTD

Congressional hearings send stocks lower

Dow was down 161, decliners over advancers 5-2 & NAZ was dropped 25. S&P 500 FINANCIALS INDEX was down 4 to 274 as financials markets are trying to figure out what today's testimony will mean for them. NYSE volume was mediocre.

Dow Jones Industrials has had one of the wildest 5 periods in some time. But after the initial reaction adding 800 points in 2 days, enthusiasm is dwindling rapidly:


DJI -- last 5 days




Oil pulled back on profit taking after the big gains yesterday:

CLX08.NYM

Crude Oil Nov 08__

..106.90__

.. 2.47--- (2.3%)

Gold pulled back 11 to 892, the 900 price didn't last very long. The Alerian MLP Index was down 6 to 233 (shown in the Yahoo badge on the right). Dow Jones REITs, rebounded only 2 (from being up 6 before the last hour of trading). Junk bond funds continue near the higher levels reached on Fri (with yields remaining a good 1000 basis points over the Treasury bond).

Testimony given in Congress is the main news story today. Below is a summary of what has been said already. I watched some & it looks like tough grilling but everybody realizes something has to be done to fix the mess.

•Bernanke Tells Congress U.S. Economy Will Contract If Bailout Isn't Passed

•Treasury Should Avoid Paying `Fire Sale' Prices for Assets, Bernanke Says

FDIC chief wants home loans part of bailout plan- AP

Below is what the testimony is all about & initial indications are that selling a $700B package is very tough, which it should be! Even among voters, there is only modest support for the concept of a bailout package. With all the confusion, supporters only have a modest majority. Dow sold off about 200 during the testimony in Congress, telling us how the markets are handicapping the hearings.

•U.S. House Leaders Struggle to Generate Support for $700 Billion Bailout

High inflation & jobless claims, but stocks up

After starting off lower Dow is up 68, advancers ahead of by 40% & NAZ is up 17. Inflation rose 0.8% last month, double the forecasts. Core inflation was up 0.3%, beating 0.2% expectations. The number of home foreclosure notices increased 55% over last year & were ahead of the June numbers. The Euro economy shrank 0.2% in Q2, they're also feeling the effects of higher food & gas prices. No economy is in a recession, but that word is on everybody's minds going forward. The Labor Dept reported jobless claims fell 10K last week to 440K, a smaller drop than expected. The 4 week average rose 19½K to 440½K. Oil is down a few cents in the 115s after yesterday's oil & gas inventory report. Macro economic numbers remain gloomy.

Wal-Mart (WMT), a Dow stock, reported profits from continuing operations rose 9% in Q2, the stock slipped back pennies. In Q2, same store sales increased 4.5% (vs 1.9% last year) but growth should slow to 1-2% in Q3. Intl sales rose 19% while US sales were up 8%.

Dow Jones Industrials - YTD




The graph shows Dow, kicking around the 12Ks early in the year, fell to the 11Ks over the last 2 months. Not a pretty chart.

While macro economic news continues dreary, the inflation picture should ease a little as the decline in commodity prices works thru to inflation numbers. Inflation will remain worrisome with housing, auto, retail sales, credit problems, etc. dragging on.

Lower markets continue

Markets in Asia are down, following the US decline on Fri. All are lower, the Korean market, down 2+%, is the leader. Oil is up more than 1 on rising tensions from Iran. The 8th US bank to fail was mentioned. This is a small bank in FL, their insured deposits have been taken over by a larger bank.

Asian markets begin August lower

Markets started the new month down 1-2½%. Oil fell to the 123s. They point out that Exxon's profits in Q2 are bigger than the annual budget for Afghanistan. Asian markets are concerned about the unemployment report due out before trading begins in the US.

Weak economy hurts stocks

Dow is down 54, advancers & decliners were about even & NAZ is up 18. The top news story causing stocks to slide was GDP in Q2 grew at a 2.1% annual rate prices, below 0.9% in Q1 & compares with an average forecast of 2.4%. In Q2, the economy was helped by tax rebates which largely went to pay for higher food & gas prices. The Commerce Dept also revised the rate in Q4 2007 to negative (it takes 2 consecutive qtrs to signify a recession). The number of applications for jobless benefits soared by 44K to 448K last week, a 5 year high. The Labor Dept said the increase was influenced by an outreach program they started, informing people they were eligible for filing. But it remains a large increase & when 400K is considered a recession kind of number, paints a gloomy picture.

Exxon Mobil (XOM), a Dow stock, reported record profits reaching almost $12B. Royal Dutch Shell (RDS.B), similar size to Exxon - whopper, reported similar profits but each declined 2-3. Tough to buy friends these days when you're so big. Speaking of oil, it slipped back 1 to under 126. The Alerian MLP index dropped 1 to 271. It has pretty much been under 275 this month, just bobbing around following moves in oil stocks & prices. Banks & REITs were down, but bounced back to little changed. Being the last day of the month, evening out positions could produce volatile swings. Meanwhile, assessing the GDP & jobless data will give analysts something to do.