Markets zig, then they zag

Stocks began the day higher, then slipped into the red. Dow is down 2, but advancers are 2-1 ahead of decliners & NAZ is up 11. Bank stocks are also waffling around, the Financial Index is down a fraction, remaining near the psychologically important level of 200.


S&P 500 FINANCIALS INDEX

Value 198.73

Change -0.46

% Change -0.2%

Despite dreary news about the oil spill & a possible increase in federal regulation over energy companies, MLPs were strong. Their index gained 3 to the 294s, highest level in over 2 weeks. The REIT index was flattish in the 199s. Junk bond funds inched up. The VIX, volatility index was down ½ to the 29s on easing investment fears. Treasuries sold off, taking the yield on the 10-year Treasury bond up to 3.38%.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 1 month





Oil & gold were a soft, not meaningful. Oil remains in a sideways trading range (70-75) while gold wants to go higher to new record levels.

CLN10.NYM

...Crude Oil Jul 10

...72.73

... 0.13 .......(0.2%)

GCM10.CMX

...Gold Jun 10

...1,218.60

... 2.00 .......(0.2%)

Gold Super Cycle!!
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Initial jobless claims dropped 10K to 453K, layoffs continue to be a drag on the economy. The number receiving unemployment insurance & those getting extended payments both increased. The job market is viewed as fragile as a recovering economy is not able to bring a significant reduction in the unemployment rate. The weekly numbers have been stuck above 450K all year, but 425K or less is needed to make an impact on reducing the unemployment rate. In a separate report, ADP showed companies added 55K workers in May, the 4th month in a row & followed a revised 65K rise the prior month.

Jobless Claims in U.S. Decreased by 10,000 to 453,000

ADP Says U.S. Companies Added 55,000 Workers in May

Jobless claims - 1 year

Fitch Ratings downgraded BP (BP), reversing its view that the oil spill would have a limited financial impact on the company & was joined by Moody's as fears grow over clean-up & legal costs. Fitch said, "The downgrade of BP's ratings reflects Fitch's opinion that risks to both BP's business and financial profile continue to increase following the Deepwater Horizon accident." Estimates for the total cost to BP range from $5B -$37B. Fitch downgraded its rating on BP debt to AA from AA+ & attached a negative outlook, citing substantial additional risks including clean-up& legal costs. Moody's also cut the group's ratings one notch to Aa2 from Aa1, citing the clean-up & legal costs, & placed the group on review for further possible downgrades. "Moody's expects these costs to weigh significantly on BP's free cash flow generating capacity and to constrain its ability to focus on other key areas of the company's business in the near to intermediate term," it said. BP is up 46¢, largely on hopes of a friendly buyout. Meanwhile, BP keeps trying to plug its big leak.

•BP's Ratings Cut by Moody's, Fitch as Gulf Oil-Spill Costs Set to Increase

•BP Shears Riser Away From Well Under Plan to Divert Leaking Oil With Cap

BP --- 2 months






Very little is going on ahead of the jobs report tomorrow. Dow has been essentially flat over the last 2 weeks, staying near 10¼K. A favorable jobs report should give it a boost, but that may only be a 1 day event. The European financial mess & Gulf oil spills will be around for some time.


Dow Jones Industrials --- 2 weeks

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Dow jumps 225, banks & energies led the way

Stocks started higher & kept rising all day, finishing at their highs with buying into the close. Dow gained 225, advancers over decliners better than 4-1 & NAZ was up 58. Banks had nice gains, they have been leading the rallies & declines this year. The Financial Index could make another assault on 200 which it has already crossed many times (both ways) in recent times.


S&P 500 FINANCIALS INDEX

Value 199.19

Change 5.88

% Change 3.0%

MLPs rebounded, the index was up 5½ to the 291s & recovered much of yesterday's loss. The REIT index added 4¼ to the 199s. But junk bond funds slipped in this rally. The VIX plunged 5¼ to 30, risk fears eased quite a bit. As expected, Treasuries sold off. The yield on the 10-year Treasury bond rose 4 basis points 3.33%.

Alerian MLP Index --- 1 month




Dow Jones REIT Index -- 1 month




VIX --- 1 month




10-Year Treasury Yld Index - 1 month





Oil is benefiting from the stronger stock markets suggesting a recovery which will need more oil. Gold sold off responding to lower fears shown at the VIX.

CLN10.NYM

..Crude Oil Jul 10

..73.31

.. 0.73 ......(1.0%)

GCM10.CMX

..Gold Jun 10

..1,220.50

.. 4.30 ......(0.4%)

Gold Super Cycle!!
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Dem senators (Wyden from OR & Schumer from NY) are telling BP (BP) to stop divs until the mess is cleaned up. Divs cost BP over $10B in cash & it will awkward to pay but this also gives a glimpse of how Congress wants to assign blame & punish somebody else. It would be nice if they spent more time policing the SEC which has 33 lawyers (earning $100-200+K) spending time in their offices watching porn. 8 resigned (under pressure) to avoid further embarrassment, the others are still on the payroll! Taxpayers could have been better served if they spent more time watching Madoff & other bad guys. In the meantime, BP's latest attempt to end the leak hit a snag today. But BP gained 1.14 to 37.66 in the up market.

•BP Should Reconsider Shareholder Dividend Amid Cleanup, U.S. Senators Say


BP --- 1 month






Oils snapped back nicely today. The 2 big ones in the Dow: Exxon Mobil (XOM & also a Dividend Aristocrat) & Chevron (CVX), were each more than 1½, but they're coming off depressed levels near 3-4 year lows.

Exxon Mobil --- 1 month




Chevron --- 1 month





Detroit automakers Ford (F), General Motors & Chrysler had double-digit sales gains over last May. However, May 2009 was a terrible time when GM was headed into bankruptcy protection & Chrysler was already there. Foreign car makers also saw 20+% sales gains, again not saying all that much considering how dreary May was last year. Today's markets were anticipating good news from the jobs report on Fri. Expectations are for a gain in jobs of (maybe) ½M. Good news, if it comes, but the details will tell how many are from private employers versus federal (which is always hiring) jobs. The € rose a little, settling at 1.22½. Dow had a nice gain, but a longer view shown in the chart below shows it's been bumping along a little above 10K for a couple of weeks. MLPs & REITs did well today, but junk bonds (stocks with high yields) disappointed after a dreary May.

Dow Jones Industrials -- 1 month

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Markets rise on favorable pending home sales report

Dow gained 76 advancers over decliners 2-1 & NAZ was up 23. Bank stocks are rebounding after yesterday's big drop.

S&P 500 FINANCIALS INDEX

Value 195.58

Change 2.27

% Change 1.2%

The Alerian MLP Index rose 1 to the 286s after yesterday's sell-off while the REIT index fell a fraction. Junk bond funds were fractionally higher. The VIX, volatility index, dropped 2 to the 33s on easing fears. The yield on the 10-year Treasury bond was 1 basis point lower to 3.29%, still very low relative to its yield over the last year.


Alerian MLP Index -- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks




10-Year Treasury Yld Index - 1 year





Oil is sloshing around the middle of its longer term 70-75 trading range while gold is seeing some profit taking. As long as gold holds the 1200 support level, gold bulls feel good.

CLN10.NYM

...Crude Oil Jul 10

...72.95

... 0.37 .......(0.5%)

GCM10.CMX

...Gold Jun 10

...1,218.40

... 6.40 .......(0.5%)

Gold Super Cycle!!!
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The index of pending home resales rose 6% in Apr following a revised 7.1% gain in Mar & above a projected gain of 5%. The gauge reached the highest level since Oct. Compared with Apr 2009, pending sales were up 25%. Pending home resales are considered a leading indicator because they track contract signings. Closings, which typically occur a month or 2 later, are tallied in the existing-home sales report.

•Pending Sales of Existing U.S. Homes Jumped 6% in Last Month of Tax Credit


Pending home sales - 1 year






No corp bonds were issued in the US yesterday, compared with $2.2B on the corresponding day last year. In Europe, €1.35B ($1.66B) was raised in 2 sales, compared with €6.5B last year. The global new issue market failed to revive after declining to only $70B in May (less than ½ of the Apr figure & the lowest since Aug 2003). Now the European Central Bank (ECB) forecasts €195B of bad debts will have to be written off by 2011. Bond traders are very cautious about the outlook for corp debts, not good for the high yield securities sectors.

Bond New Issues Shut as Bank Default Swaps Rise: Credit Markets



BP (BP) inched up 46¢ trying to get back to 33. Traders are attracted by the 9% yield & hopes for a lucrative takeout offer. Meanwhile the justice dept announced they are looking over BP's shoulders, trying to find wrongdoing. BP is an easy target to beat up on.


BP --- 2 weeks





General Motors reported May sales rose 17% on new product sales & a big gov fleet contract following a dismal May last year. Its 4 brands, Chevrolet, Buick, GMC & Cadillac, rose 32% (largely ongoing businesses). Other car companies should report later today.

• GM says its new car and truck sales rose 17 pct- AP

Other than monthly sales reports from the car companies, there is not a lot going on. The pending home sales report does not represent a long term trend, at least not yet. The € settled to $1.22, flirting with its 4 year lows. Greece is selling stakes in its railroad & water companies, trying to put its financial house in order. But it will take a lot more than that. The bulls are hoping markets can maintain their positive momentum for the rest of the day.


Dow Jones Industrials --- 2 weeks

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Late day selling sinks stock markets

Stocks were higher for much of the day, but there was little conviction behind the buying. By the PM, selling came on with heavy selling in the last hour. Dow finished down 112, decliners over advancers 3-1 & NAZ fell 34. Bank stocks were also slipping & sliding during the day. The Financial Index is only about 7 above its lows (mid 180s) in Feb.

S&P 500 FINANCIALS INDEX

Value 193.31

Change -4.11

% Change -2.1%

The Alerian MLP Index dropped 6¾ to the 185s (back to break-even YTD). The REIT index fell 4 to the 195s. Junk bond funds were mixed to a little lower. The VIX added 3½ to the 35s on more nervousness from goings on in Europe & the oil spill which is getting worse day by day. It hit the mid 40's last month, far above prior levels near 16! The yield on the 10-year Treasury bond fell a tad, just below 3.30%. There was no encouragement for buyers to jump back in today.

Alerian MLP Index --- YTD




Dow Jones REIT Index -- YTD




Selling spread to commodities, & oil felt it. However, gold rose as traders had time to digest the downgrade of Spain's debt from AAA to AA on Fri. Israel's attack on the flotilla of aid relief ships to Gaza was another factor. Gold rises when global tensions increase. Its record price is 1249, not far away!

CLN10.NYM

..Crude Oil Jul 10

..72.57

.. 1.40 ......(1.9%)

Gold Super Cycle!!
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Hewlett-Packard (HPQ), a Dow stock, & Hershey (HSY) announced plans to lay off workers to modernize. This is another reminder that high unemployment rates, necessary for a robust recovery, are some time away. HPQ fell 43¢ & HSY gained 1.20.

HP to Cut 9,000 Jobs and Take $1 Billion in Costs
Hershey May Cut Up to 600 Jobs at Historic Factory


Hewlett-Packard -- 2 years




Hershey --- 2 years






The € is back to $1.22½, near 4 year lows & probably headed lower. Markets look like they are extending May's miserable results. Almost all the selling was in the last hour when Dow dropped 100 & it's banging on the 10K floor, trying to see if it will hold. This performance has to be very discouraging for the bulls!


Dow Jones Industrials -- YTD

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Stocks wobble while looking for direction

Dow is up 40 (but off its highs), decliners slightly ahead of advancers & NAZ is up 4. There is little happening in markets today. Bank stocks slipped bringing the Financial Index down a fraction.

S&P 500 FINANCIALS INDEX

Value 196.92

Change -0.50

% Change -0.3%

The Alerian MLP Index dropped 1+ taking it below 291. The REIT index fell 2 to the 196s. Junk bond funds were a tad higher. The yield on the 10-year Treasury bond was down 1 basis point to 3.29%. The VIX, volatility index, has been flattish in the 32s. Fears are steady as she goes reflected in little change in high yielders.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Oil is doing better, traders could be encouraged by the potential for smaller oil shipments resulting from the mess in the Gulf. Gold is shooting up, flirting with its record highs. May was a very bad month for stocks while gold has been charging forward (shown in its chart). It continues to be an excellent defensive play & also has good growth potential for the long term.

CLN10.NYM

...Crude Oil Jul 10

...74.68

... 0.71 .......(1.0%)

GCM10.CMX

...Gold Jun 10

...1,225.10

... 12.90 .......(1.1%)

Gold Super Cycle!!
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GLD (ETF) --- 6 months






BP (BP) is turning to yet another unproven technology to try & contain the gusher, while it's stock plunged to one its lowest prices in the last 10 years. BP has lost more than a 1/3 of its value since the explosion at the Deepwater Horizon oil rig 6 weeks ago. So far BP has spent almost $1B on fighting & cleaning the spill, with multiple lawsuits for damages yet to be filed. After the ambitious "top kill" failed over the weekend, a relief well being drilled is at least 2 months away. BP is turning to another temp fix, an effort to saw through the pipe leaking the oil & cap it that could be tried as soon as tomorrow. In the meantime, more than 125 miles of coastline already have been hit with oil, including the resort of Grand Isle near Port Fourchon. Adding to the problems in the Gulf is this is the start of hurricane season. With the stock falling 5 to the 38s, the yield is up to 9% (& probably headed much higher). In the midst of chaos, there can be opportunity - but only for the very brave.

•BP Needs Equivalent of Lottery Win in August to Seal Leak at First Attempt


BP --- 10 years






Canada became the first Group of 7 nation to raise interest rates since the global financial crisis & said further hikes would depend on global economic conditions. The Bank of Canada increased its key interest rate by 25 basis points to 0.50% from a record-low rate 0.25%. The bank said thus far the impact of Europe's sovereign debt crisis in Canada has largely been limited to a modest fall in commodity prices. The decision to raise rates still leaves considerable monetary stimulus in place. Canada withstood the global economic crisis better than most developed countries. It has not experienced the failure of any major financial institution & there has been no crippling mortgage meltdown or banking crisis due to greater regulation.

•Canada Becomes First G-7 Member to Raise Key Interest Rate Since Recession



Prudential's, Britain's largest insurer, bid for rival AIG's Asian unit was close to collapse after it failed to secure a price cut, raising questions over the insurer's own future. Once again, can you spell "uh, oh?" They faced rising shareholder pressure about the hefty $36B price for American International Assurance (AIA), forcing last-minute talks to lower price by $5B. But AIG's sticking to the original terms! European financial markets already have a lot of commotion, more is not needed.

•Prudential Fails in Bid to Reduce Price of AIA Takeover, Jeopardizing Deal



Markets, after its wost months in a year & a half, started Jun groping around, looking for direction. High yielders are doing so-so. Dow is above 10K but the S&P 500 is below 1100, considered an important support level. The € is below $1.23, not a good sign for the markets, at 4 year lows.


Dow Jones Industrials --- 2 weeks

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