Markets muddle along, looking for direction

Mixed economic news leaves stocks unsure where to go. Dow is down 30, decliners ahead of advancers by 25% & NAZ slipped 17 (Cisco earnings did not give it strength). Banks were up, then gave up their gains. The Financial Index went over 190 at its high, a 9 month high.


S&P 500 FINANCIALS INDEX

Value 188.49

Change -0.88

% Change -0.5%

MLPs pulled back again, this time the Alerian MLP index is down 5¼ to the 240s. The index is off 11 from its high at the start of the week, although distributions account for a portion of the decline. Some of that money may be going into REITs. The Dow Jones REIT Index is up again today with a 2.65 gain bringing it to 160 (an eye popping 25 gain in just a week). Junk bond funds were mixed. The yield on the 10 year Treasury bond went up another 2 basis points to 3.75%. A higher yield looks like it shooting for the 4% recent high. This yield is unusually troubling because it is the basis for setting many mortgages rates. Oil is down 1+ to the 70s, still high territory.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




10-Year Treasury Yld Index - 2 weeks




The number of workers seeking unemployment insurance fell last week, to 550K, down from an upwardly revised figure of 588K in the prior week. The number is much lower than 580K estimate. The 4-week average dropped to 555K, its lowest level since late Jan. However, the tally of those claiming benefits rose 69K to 6.3M.

US Initial Jobless Claims Fall More Than Projected


Retail sales for Jul were sluggish with mall-based chains being hardest hit (i.e. Macy's (M) & Abercrombie & Fitch (ANF)), although their stocks were higher. Back-to-school shopping season is not going well. Retailers fear job losses are the biggest obstacle for their recovery. The International Council of Shopping Centers-Goldman Sachs tally fell 5.0% in Jul compared with last year, in line with expectations & worse than the 4.5% average decline since Feb. Jul marks the 11th consecutive monthly drop (excluding Wal-Mart).

Sluggish July Sales Show Tight-Fisted U.S. Consumers- AP


Cisco (CSCO), Dow stock, last night reported their 4th consecutive qtr of lower sales & profits. That beat forecasts, swell. Guidance for this qtr is for a 15% sales decline but they see this as the bottom of the recession related downturn. The stock is down 35¢. They are starting a partnership with Dell (DELL) which will be in addition to their partnership with IBM (IBM).

•Chambers Server Push Ends Cisco's `Cozy' Partnership With Hewlett-Packard


The Cash-for-Clunker program is being extended, but that creates problems. On the margin some of the money that would have gone to retail store sales is now spent on new cars. The latest economic news has been mid leaving stocks to meander. Tomorrow's jobs report for Jul is eagerly awaited.

Dow Jones Industrials --- 2 weeks

Markets muddle along, looking for direction

Mixed economic news leaves stocks unsure where to go. Dow is down 30, decliners ahead of advancers by 25% & NAZ slipped 17 (Cisco earnings did not give it strength). Banks were up, then gave up their gains. The Financial Index went over 190 at its high, a 9 month high.


S&P 500 FINANCIALS INDEX

Value 188.49

Change -0.88

% Change -0.5%

MLPs pulled back again, this time the Alerian MLP index is down %¼ to the 240s. The index is off 11 from its high at the start of the week, although distributions account for a portion of the decline. Some of that money may be going into REITs. The Dow Jones REIT Index is up again today with a 2.65 gain bringing it to 160 (an eye popping 25 gain in just a week). Junk bond funds were mixed. The yield on the 10 year Treasury bond went up another 2 basis points to 3.75%. A higher yield looks like it shooting for the 4% recent high. This yield is unusually troubling because it is the basis for setting many mortgages rates. Oil is down 1+ to the 70s, still high territory.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




10-Year Treasury Yld Index - 2 weeks




The number of workers seeking unemployment insurance fell last week, to 550K, down from an upwardly revised figure of 588K in the prior week. The number is much lower than 580K estimate. The 4-week average dropped to 555K, its lowest level since late Jan. However, the tally of those claiming benefits rose 69K to 6.3M.

US Initial Jobless Claims Fall More Than Projected


Retail sales for Jul were sluggish with mall-based chains being hardest hit (i.e. Macy's (M) & Abercrombie & Fitch (ANF), although their stocks were higher. Back-to-school shopping season is not going well. Retailers fear job losses are the biggest obstacle for their recovery. The International Council of Shopping Centers-Goldman Sachs tally fell 5.0% in Jul compared with last year, in line with expectations & worse than the 4.5% average decline since Feb. Jul marks the 11th consecutive monthly drop (excluding Wal-Mart).

Sluggish July Sales Show Tight-Fisted U.S. Consumers- AP


Cisco (CSCO), Dow stock, last night reported their 4th consecutive qtr of lower sales & profits. But that beat forecasts, swell. Guidance for this qtr is for a 15% sales decline but they see this as the bottom of the recession related downturn. Markets are taking all this well, stock is down only 35¢. They are starting a partnership with Dell (DELL) which will be in addition to their partnership with IBM (IBM).

•Chambers Server Push Ends Cisco's `Cozy' Partnership With Hewlett-Packard


The Cash-for-Clunker program is being extended, but that creates problems., On the margin some money that would have gone to retail store sales is now spent on new cars. The latest economic news has been mixed leaving stocks to meander. Tomorrow's jobs report for Jul will is eagerly awaited.

Dow Jones Industrials --- 2 weeks

Profit taking day

Stocks sold off at the opening & remained underwater for most of the day. A modest PM rally didn't have enough strength to take them into the black. Dow lost 39, decliners ahead of advancers 4-3 & NAZ was off 18. Banks have been red hot since earnings season began a month ago. The Financial Index has risen an amazing 40 or 28%. Citigroup (C), up 33¢ to 3.58 just today, is an excellent example, up 1 in a month. Not too bad shabby for a low priced stock!

S&P 500 FINANCIALS INDEX

Value 189.37

Change 6.11

% Change 3.3%

S5FINL:IND




Citigroup --- 1 month





The Alerian MLP Iindex dropped 4 to the 245s, but tough to tell what it really means with ex-distributions. After starting the week at 248, it's lower but distributions earned will soften the effect of the decline. REITs are soaring this week, the Dow Jones REIT Index shot up another 6 today taking it to 157, believe it or not, a new 2009 high. They have been left behind in the scramble to buy high yield securities. Maybe this is catch up time. Junk bond funds are continuing to do well. Once again, Treasuries sold off so investors can buy riskier securities. The yield on the 10 year Treasury bond rose another 9 basis points to 3.76% taking it nearer to the 4% high reached 2 months ago. Oil was up pennies but still in the 71s, close to its highs for 2009.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




10-Year Index Treasury Yld Index - YTD





This is the 2nd most important selling season at retail, Back-to-School. Early indications are that's it's going slowly. Retail sales for Jul should be out by next week (which will include the early portion of this season).

• Signs show slow start on back-to-school sales- AP

While lower, averages are still hovering near their 2009 highs. S&P 500 closed at 1002, keeping it above the magical 1K line. But NAZ fell, slipping below 2K. The jobs report on Fri will probably be the key event for the balance of the week. Today's job report makes predicting those numbers fuzzier.


Dow Jones Industrials --- YTD

Lower markets on weak unemployment data

Dow fell 79, decliners over advancers 5-2 & NAZ was off 22. These declines have taken NAZ below the magic 2K level & S&P 500 below 1K. But banks have been on fire in the last month. The Financial Index is up 24% from its low on May 10.

S&P 500 FINANCIALS INDEX

Value 184.90

Change 1.64

% Change 0.9%

The Alerian MLP Index is off 6½ to the 243s. This could be from profit taking or adjustments made for the many ex-distributions going on. REITs had modest gains after their big rise yesterday which brought the Dow Jones REIT Index back to break even YTD. Junk bond funds were mixed following recent gains. Treasuries fell, the yield on the 10-year Treasury bond rose 3 basis points to 3.65%. Oil was little changed in the 71s.

Alerian MLP Index --- 2 weeks





More jobs were lost in Jul but at the slowest pace since Oct signaling the labor market is stabilizing. 371K jobs were shed, compared with a revised 463K figure in the prior month as reported by ADP (a private employment service). This was worse than the median estimate of 345K. This figure is a proxy for the gov payroll reading on Fri with a median forecast for a decline of 320K in Jul, compared with a 467K drop in Jun.

•Service Industries in U.S. Contracted at Faster Pace in July on Job Losses


Dems in the Senate are pushing to add $2B for the Cash-for Clunker program. After all, that has become chump change when they are eager to throw around $Ts (trillions) on pet projects like health insurance. There is controversy about extending this program since other industries are not getting help.

•Senate Set to Add $2 Billion for U.S. `Clunkers' as Reid, McConnell Agree


In less than a month, the Dow has risen 1K. Markets are overbought & need a rest. The unemployment report coming later this week will give more information about how the recovery is going. However even so called "good" numbers are really dismal when compared to better times.

Dow Jones Industrials --- 2 weeks

Strong close brings new 2009 highs to markets

Stocks zigzagged but couldn't make up their minds. Dow squeaked out another gain, this time 33 with help from buying at the close, for a new 2009 high, advancers ahead of decliners 4-3 while NAZ was up 2 to another 2009 high. In this flattish market, banks were strong, taking the Financial Index to a new 2009 high. Even Citigroup (C) participated, up 7¢ to 3.25.

S&P 500 FINANCIALS INDEX

Value 183.26

Change 3.71

% Change 2.1%

S5FINL:IND




MLPs are digesting gains pretty well. Their index is showing up 1¼ to the 3 49s (even though it closed in the 351s yesterday). MLPs continue as one of the strongest groups this year. REITs caught fire, the Dow Jones REIT Index was up an eye popping 7½ to the 151s where it started 2009. Junk bond funds keep attracting buyers, up again to new 2009 highs. Treasuries were weak with the 10-year Treasury bond yield rising another 4 basis points to 3.68%. The combination of rising prices for high yield securities with lower prices for the Treasury bond narrows their yield spreads. For example, the MLP index yield is only 450 basis points above the Treasury yield (compared with 2-250 being a more common spread in the past). Oil, which has been on fire, slipped pennies, still in the 71s near its 2009 highs.

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD





Risk & risky investments are being purchased. This is part of the reason for the weak dollar. While the ¥ has been holding at 95 to the dollar (but strong relative to the recent past), the € is up to $1.44. A secondary currency which I watch is the Australian dollar which has risen to 84¢, shooting up from 65¢ in Mar. Risk is being rewarded.

American Dollars to 1 AUD



Source: http://www.x-rates.com/d/USD/AUD/graph120.html


Whether buying currencies or buying stocks, investors are buying with little attention being paid to risk. When markets get very overbought, as they are now, it should be time to worry. But bulls point to the saying that "The trend is your friend."

Dow Jones Industrials --- YTD

Overbought markets need a rest

Stocks are taking time to catch their breaths. Dow is up 7, decliners are barely ahead of advancers & NAZ is down 2. Banks are also having a restful day.

S&P 500 FINANCIALS INDEX

Value 179.48

Change -0.07

% Change -0.1%

The Alerian MLP index is showing up 2+ to the 250s which does not tie with last night's close. There may be adjustments for ex-distributions accounting for the difference. But any way it's counted, MLPs are at 10 month highs. REITs are flat while junk bond funds keep moving up, reducing their yields. Treasuries sold off again, the yield on the 10-year Treasury bond rose 4 basis points to 3.68%. Oil is off pennies in a lackluster market.

Alerian MLP Index --- 2 weeks





GMAC Financial Services posted a Q2 loss of $3.9B as it transformed from an arm of GM into an independent bank. Last year the loss was $2.5B. Revenue fell 28% to $1.27B from $1.76B. Most of the quarterly loss stems from a $1.6B charge related to company's mortgage business. GMAC also incurred a $1.2B tax charge on its conversion from GM's financing arm to a separate company offering personal banking services in addition to auto loans for GM & Chrysler customers. Excluding those charges, GMAC said its Q2 loss was about $.4B. Gov help was key to keep GMAC alive in Q2 & looks like now they will be able to continue as a bank.

•GMAC Reports Wider $3.9 Billion Loss Amid Defaulted Mortgages, Auto Loans


This is the pause that refreshes.

Dow Jones Industrials --- 2 weeks

S&P 500 tops 1000 & NAZDAQ tops 2000

Popular averages reached new 10 month (whatever) highs today. S&P 500 topped 1K & NAZDAQ topped 2K while Dow "only" went over 9¼K. Dow rose 114, advancers ahead of decliners 4-1 & NAZ was up 30. Banks led (joined) in the rally as the Financial Index set an 8 month high. But Citigroup (C), former heavy weight, was up 1 penny to 3.18, a long way from any of its highs.


S&P 500 FINANCIALS INDEX

Value 179.55

Change 4.67

% Change 2.7%

S5FINL:IND




The Alerian MLP Index gained another 3½ to the 251s & nearing a 52 week high! In contrast, the Dow Jones REIT Index keeps struggling to get back to its starting value (151) for this year. Today's gain was 2+ to the 143s (still 100 below where it was at the Lehman collapse). It's interesting how 2 high yield sectors behaved so differently this year, MLPs are strong while REITs are muddling along. Junk bond funds continue to zoom (by their standards) back to levels at the Lehman collapse. Safe investments are being sold to buy risky investments. Risky investments that could not be given away late last year are being aggressively sought out now. Treasuries dropped again today, taking the yield on the 10-year Treasury up 14 basis points to 3.64%, in the area where the yield was at the time of the Lehman collapse.

Alerian MLP Index --- 1 year




Dow Jones REIT Index --- 1 year




Commodities were strong with oil being the highlight, up 2. It's near the highs reached last month & at the start of the year.

CLU09.NYM

..Crude Oil Sep 09

..71.43

.. 1.98 ......(2.9%)

Autos sales in Jul weren't too bad as expected. The cash-for clunkers program was a big boost for sales in the last week & the comparisons with last year's anemic numbers help make this year look good. However compared to the "good old days," sales are in depressed territory.

•Ford's U.S. Sales Rise 2.3% as GM, Toyota Pare Declines on `Clunkers' Cash


The popular averages have following winds behind them (i.e., momentum is up). S&P 500 & NAZ passed important milestones. The averages are up a dazzling 14% in less than a month. Next will be for Dow to go thru 10K which could be soon. Dismal economic numbers are not of concern to buyers.

Dow Jones Industrials --- 1 year




NAZDAQ --- 1 year




S&P 500 --- 1 year

S&P 500 tops 1000, first time since November

Markets were higher on favorable news about improvement in US manufacturing, the Jul rally is being extended into Aug. Dow rose 87, advancers over decliners 3-1 & NAZ was up 16 (but still short of 2K). The S&P 500 rose above 1K (the first time in 9 months), then slipped back taking it below that important resistance level. Banks are doing well as the Financial Index reached a new 2009 high (but still far below the "good old days" when it topped 500). In the last 3 weeks, it has shot up from 150 to 178 for an impressive 19% gain.


S&P 500 FINANCIALS INDEX

Value 178.58

Change 3.70

% Change 2.1%

After slipping last week, the Alerian MLP Index is back on its winning streak taking it to a new 2009 high of 251. REITs have been left behind in this year's rally, but did better in the last 2 weeks (up fractionally today). Junk bond funds continue strong, reaching new highs for 2009. Treasuries sold off badly, taking the yield on the 10 year Treasury bond up 14 basis points top 3.64%.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil has fought its way back from the lows 3 weeks ago when it was in the low 60s. Now it's breathing on its yearly high of 73. Higher oil prices can damage global economic recovery.

CLU09.NYM

...Crude Oil Sep 09

...71.58

... 2.13 .......(3.1%)

U.S. manufacturing activity declined last month at the slowest rate in a year as production rose to its highest level in more than 2 years. Manufacturers were working to restock customers' bare shelves. The Institute for Supply Management's manufacturing index rose to 48.9 in Jul, up from 44.8 in the prior month. It has to rise above 50 to signify growth (last happened in Jan 2008). Moderating decline in U.S. manufacturing mirrors improvements in the industrial sectors in China & Europe.

•U.S. Manufacturing Shrinks at Slowest Pace in 11 Months as Recession Eases


Bulls are in charge of the markets for stocks & commodities (i.e. oil). Risk is being pushed aside in pursuit of gains. Aug has the potential for being another up month which could take the Dow back over 10K as dreary low levels of economic activity & massive gov borrowing are being pushed aside.

Dow Jones Industrials --- 2 weeks