Stocks fall on increased economic worries

Dow is down 159, decliners over advancers 4-1 & NAZ is down 35.

S&P 500 FINANCIALS INDEX dropped 4 to 166, it just can't get out of its 1 month trading range in the 160s. The Alerian MLP Index topped out at 200 yesterday. Today its down 4 to 195, Dow Jones REIT Index dropped 4, Barclays Capital High Yield Bond ETF is down a big 3% while VIX spiked up 2+ to 41 (fears are growing).

Oil backed off from its recent rally as negative macro economic fears drive away buyers:

CLG09.NYM

...Crude Oil Feb 09

....47.40

... 1.18 .......(2.4%)

The economic reports keep coming & it's all grim & even grimmer.

ADP Employer Services’ reported payrolls shrank by 693K last month, the biggest drop since record keeping began in 2001. This signals the big unemployment report on Fri will be worse that expected & expectations are already very low. Alcoa (AA) & Intel (INTC), both Dow stocks, gave terrible guidance news. Then Time Warner (TWX) announced it will have a big loss in 2009. They're each down around 1.

•Alcoa shares fall after aluminum giant sets cost cuts
•Time Warner to Post Loss After $25 Billion Writedown of AOL, Cable Assets
•Intel Fourth-Quarter Sales Fall 23%, Missing Reduced Forecast; Shares Drop


More corp guidance reports are forthcoming & they won't be pretty.

I have my eye on the old adage about the first week of trading predicting the full year's performance. Generally the signal is correct, just check back to last year. Half way thru the week, it looks like this indicator will give another negative signal:


Dow Jones Industrials

1/2/09.... 9,034
Today......8,856

Stocks vacillate but gain

After struggling to come up with a gain all day, Dow finally ended in the black with an advance of 62, advancers over decliner 3-1 & NAZ rose 24. The biggest gainers in the Dow were: Hewlett-Packard (HPQ), IBM (IBM) & DuPont (DD), technology & basic commodities. The weakest was McDonalds (MCD), down more than 1.

S&P 500 FINANCIALS INDEX has been pretty much trading sideways in the 160s for the last month. Today it rose 3 to 170 but couldn't top the 4 week high of 172½. Below is a chart showing the spectacular rise for the Alerian MLP Index, up 30 but running into resistance at 200. Today it's been sitting at 200 for most of the day, shown in the 2nd chart.

Alerian MLP Index --- 1 week




Alerian MLP Index --- 1 day





Somewhat related is the bounce back for junk bond funds. This chart is for one month at Barclays (formerly Lehman) High Yield Bond Fund. It also has an impressive rebound from overly depressed levels (up 2% today). Individual funds have seen 50+% bounces as investors reach for yields with a 2000-2500 basis point premiums over Treasury debt. Meanwhile, REITs have been stuck in the trenches. But today they had a bounce, up 8 to 150½ taking the index to the higher levels of the last 2 months. The seekers of high income are looking hard these days.


Barclays Capital High Yield Bond Fund - 1 month




Dow Jones REIT Index --- 2 months




Oil slipped pennies near 49, maxxing out on its recent run.


The Federal Reserve at their last meeting had a very depressing assessment of the economy going forward. Among other thoughts, they predicted unemployment would continue to rise into next year.

Fed Sees Longer Economic Decline Than Earlier Forecasts


Stock buyers are betting on good news coming from the stimulus package. So far congress is getting organized while the senate is a mess. Even when a bill is passed, the specter of inflation may get more attention. Already, the Treasury bond rate has jumped from an unsustainable sub 2.1% rate to 2.51% today.

Markets stumble along

After starting with gains, Dow slipped back to down 3, but advancers are ahead of decliners 2½-1, NAZ rose 9.

The Alerian MLP Index is up again, up almost 4 today, inches away from 200. The Barclays Capital High Yield Bond ETF (JNK), note the name change from Lehman to Barclays, is up 61¢ to the high 33s (up from 27 last week). S&P 500 FINANCIALS INDEX, REITs & the VIX are up modestly, really treading water.

Oil continues climbing on worries the Mid East conflict could interrupt oil supplies. In addition, Russia is playing hardball about supplying natural gas to Europe (thru the Ukraine), not helping the energy complex.

CLG09.NYM

...Crude Oil Feb 09

....49.14

... 0.33 .......(0.7%)

•Russia Reduces Natural-Gas Supply to Europe in Price Dispute With Ukraine


Factories orders fell in Nov for a 4th consecutive month. The decline was 4.6%, much worse than analysts had expected.

•U.S. Factory Orders Fall Twice as Much as Forecast as Companies Cut Costs


The services sector index rose to 40.6 in Dec from 37.3 in the prior month. This reading was slightly better than expectations, however below 50 is considered a key sign of contraction (above 50 signals growth). The Nov reading was considered extremely gloomy, but the present level continues as a solid negative.

• Services index shows less contraction in December- AP

Pending home sales fell in Nov to the lowest level on record, the economic meltdown caused buyers to delay home purchases. The index plunged 4% to 82.3 from a downwardly revised Oct reading of 85.7, much worse than expected by economists.

•Pending Home Resales in U.S. Decline 4%, Worse Than Economists' Forecasts


Gary Shilling, who predicted the 2008 market collapse, sees more pain in 2009:

• Gary Shilling's 2009 Predictions: More of the Same Pain- Tech Ticker

Congress is trying to come up with a stimulus package for the new president to sign while the senate is still trying to get its house in order, allowing it to pass key legislation.

Another mild trading day

After extreme volatility lately, markets have quieted down at least for the time being. Fluctuations were moderate today:




Dow dropped 81 taking it below 9K, but advancers were over decliners 3-2 & NAZ was down 4. The VIX ticked up a few pennies, but still moderate in the 39s (when compared with recent values in the 80s).

Worldwide conflicts & strife were the major influence on oil, up big again:

CLG09.NYM

...Crude Oil Feb 09

....48.43

.. 2.09 ......(4.5%)

Auto sales last month were in line with expectations, disastrous. Toyota & Honda led the decline, but the American companies were just behind them in sales declines. Year-end discounts & free financing programs did little good. General Motors (GM) said sales last year were the lowest since 1959. As a result, US companies only had 47% of the US auto market. Ford already said Q1 auto sales will continue to be bad. Last year auto sales were near 13M, lowest level in 16 years.

• Toyota, Honda lead declines in December auto sales- AP

•GM's 2008 U.S. Sales Drop to 49-Year Low; Ford, Honda December Sales Fall


The Madoff case goes from ugly to uglier. Federal prosecutors are asking that Madoff be sent to jail for violating terms of bail (transferring assets). Meanwhile congresional hearings are proceeding, trying to figure out what went on with his scheme.

•Madoff Transferred $1 Million of Assets, Should Be Imprisoned, U.S. Says


The Alerian MLP Index has had undoubtedly its best 3 days in history with a 30 point gain, getting within inches of 200. It pulled back in the PM, to close at 195.70, up 7 (still not a bad day) for a 3 day gain of 25 points or 15%. However, high yield securities are getting different responses. The Lehman High Yield Bond ETF had a nice bounce in the last few days. But REITs still can't get no respect, even with double digits yields:


Alerian MLP Index --- 2 weeks





Lehman High Yield Bond ETF --- 2 weeks




Dow Jones REIT Index --- 2 weeks

In first real day of new year, stocks lower

Stocks recovered from their early loses (Dow had been down 100+), Dow was down 48, but advancers over decliner 3-2 and NAZ slipped 8.

The big news is the Alerian MLP Index roared ahead another 6½ to 195 (26 point gain in less than 3 days). The major support relates to Lehman High Yield Bond ETF rising over 1% & the VIX dropped almost one. High yields are attracting investors as fears ease. However while the VIX is settling back from astronomical levels a few months ago, it still remains VERY high. The chart shows how dramatically the VIX has pulled back in the last few weeks. The 38s are high territory but 20 used to be the dividing line for high anxiety.


VIX ----- 6 months





Also of help for the MLPs is the rise in oil on fears about the Mid East conflict and Russia-Georgia (rest of Europe) supply (possible) problems:

CLG09.NYM

...Crude Oil Feb 09

....47.04

... 0.70 .......(1.5%)

Later today auto sales figures for Dec should be announced. The monthly unemployment numbers will come on Fri & they are expected to be dreadful, maybe 6.9%. The senate is trying to get squared away so they can deal with the stimulus package. This is considered the first day of the first week of the new year (for those who believe that the first 5 days performance predicts the full year performance).

I just had a root canal, so far so good.

Cheery start for 2009

Last week started the new year with a bang. Oil, as tracked by the OIL ETF, also began the year the year with a bang (after its recent bear market). Not sure what it all means other than they're both betting on a quick economic turnaround.


Dow Jones Industrials --- 2 weeks





Oil (ETF) ---- 2 weeks




One of strongest performers was the Alerian MLP Index. The last 2 trading days saw it jump 20 points (12%) for no apparent reason other than MLPS are greatly oversold. Other high yielding securities (REITs & junk bond funds) had more mild responses to gains in the markets. The chart below shows the MLP had its 3 biggest daily gains in the last 3 months: Oct 13, Nov 24 & Fri. The first was followed by a 3 week rally which fizzled. The 2nd was followed by a flat period. Let's see what follows Fri's big pop.


Alerian MLP Index --- 3 months




Stock markets are sailing into headwinds. Auto monthly sales figures for Dec will be reported tomorrow, they're expected to be ugly. In DC, there are vacancies in the senate. It's unclear when they will be filled & who will fill them. The vacancies can have major significance for the markets which are looking for a $1T stimulus package to be proposed & passed by congress.

Gangbuster day for buyers!

The new year started off with bargain hunters snapping up beaten up stocks. Dow was up 258 with buying strength throughout the day, advancers over decliners 5-1 & NAZ was up 55. Volume continues very light (under .8M at NYSE), in a holiday mode.

The major news story was the Alerian MLP Index. It popped an amazing 12.30, 7%, one of its best days ever (which means the last couple of months). It looks like it benefited from a favorable mention yesterday:

[video] Top 2009 Oil Stocks

I posted an article on MLPs which should be published on the overnight, but it has the same message I have been talking here. When there is a sudden reversal from deeply oversold conditions with no fundamental changes, I always feel queasy. But this pop takes the index to a 6 week high:


Alerian MLP Index --- 2 months




Other averages were soft, that's putting it mildly. REITs, & junk bond funds were off while the S&P 500 FINANCIALS INDEX picked up 2% on a PM rally. However, the VIX pulled back 3 taking it under 37.


VIX ---- 3 months




Even beaten up oil had a very good day:

CLG09.NYM

..Crude Oil Feb 09

...46.23

... 1.63 .......(3.7%)

Mon the new year really starts in the business world & stock markets. Auto companies will report sales for Dec which are assumed to be dreary.

Markets start new year with a bang

Dow rose 124, advancers ahead of decliners 4-1 & NAZ was up 24, all on light volume.

The Alerian MLP Index began the year with a gain of 6+ taking it above the 180 line. In the old days (say a year ago), that was an eye popping performance. In recent times it is considered routine. The S&P 500 FINANCIALS INDEX & Dow Jones REIT Index are flat while Lehman High Yield Bond ETF is off fractionally. The VIX, volatility index, is down another 2 to 38. A sense of calm is returning to the markets, at least for the time being.

Oil is down on a light day in trading.

CLG09.NYM

...Crude Oil Feb 09

....44.17

... 0.43 .......(1.0%)

The manufacturing index in Dec fell to the lowest level in 28 years. The reading of 32.5 was 3 points below expectations. By way of comparison, 50 signifies contraction! Expectations for Jan can only be dreaded.

•U.S. Manufacturing Shrinks at Fastest Pace Since 1980 as Recession Spreads


Dismal economic news didn't prevent world markets from beginning the new year with gains, but on thin trading.

• World markets kick off 2009 brightly- AP

Little should be decided today. However, the very strong start for MLPs going above 180 is a positive signal for the index. Next week, news stories will resume driving markets.