Markets tumble on more European debt worries

Stocks sank out of the gate & remained on that lower plateau for the rest of the session. Dow fell 107 closing near its lows, decliners over advancers 5-2 & NAZ was off 24. But volume continued very low (above 0.8B shares on the NYSE floor). Banks lost ground with the Financial Index finishing at its lows!

S&P 500 FINANCIALS INDEX

Value	190.56
Change	-4.63 (-2.4%)

The MLP index dropped 1+ to 326 while the REIT index fell 3½ to the 210s. Junk bond funds were a little higher & the VIX gained 10%, 2½ to the 23s on all the nervousness about European debts. The € dropped almost 2 pennies to $1.27.

Alerian MLP Index -- 2 months




Dow Jones REIT Index -- 2 months




VIX -- 2 months




10 Year Treasury Yld Index -- 2 months




Oil remained lower in the PM on the weaker € & worries about European debts. But those worries are helping gold rise to near record levels, risk averse is a key driving force for investors.

CLV10.NYM

..Crude Oil Oct 10

..73.81

.. 0.79 ......(1.1%)

GCU10.CMX

..Gold Sep 10

..1,258.00

.. 8.80 ......(0.7%)

*** Gold Super Cycle ***
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52 Week High Friday Rule!
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GLD (ETF) --- YTD

The $33B 3-year note Treasury auction drew a record low yield as investors renewed concern that Europe’s sovereign-debt crisis will undermine the global economic recovery. The 2-year note yield decreased 3 basis points to 0.49% after touching the all-time low of 0.4542% 2 weeks ago & the 3-year note yield dropped 4 basis points to 0.75%. There are worries that Europe’s recent stress tests of major banks understated some lenders’ holdings of risky debt. Some European banks excluded certain nations’ debt from their totals, while others reduced amounts to account for short positions, according to a report published on the Wall Street Journal. The European Union tested 91 lenders in Jul, giving 84 of them passing grades. The problem for stock markets is that money going into Treasuries is not being used to buy stocks.

Treasuries Rise After Three-Year Auction on Renewed European Bank Concern

Treasury Securities

U.S. 3-month		0.12%
U.S. 2-year		0.49%
U.S. 10-yeao		2.60%

Home Depot (HD), a Dow stock, plans to sell debt for the first time since 2006, joining Burlington Northern Santa Fe, Dell (DELL) & Aon (AON) borrowing long term at low rates. HD may issue $1B of notes as soon as today. The company plans to repay 4.625% senior notes that matured Aug 15. Bloomberg said companies are borrowing $10.3B, the highest levels since Aug 17. Investment-grade bond yields fell to 3.91% yesterday, according to Bank of America Merrill Lynch’s US Corporate Master index, near the record 3.74% on Aug 24 (the lowest dating back to Oct 1986). Investors are willing to accept the risk of holding bonds over the long term in pursuit of higher yields today. HD fell 52¢ in a down market.

Home Depot Plans Debt Sale as Issues Surge on Record-Low Borrowing Costs


Home Depot --- 2 years





With a lack of significant news & low volume, it's difficult to read too much into today's decline. Maybe some traders are still on holiday. There are 2 key points to keep in mind. European debt issues have not gone away even though they have been out of minds for more than a month. Secondly, the Dems are trying to come up with quick fixes to patch the economy so they can keep their jobs. But meddling by DC will increase confusion in the markets. Months ago Dow was hoping to reach 11K, that seems a long way off now.


Dow Jones Industrials -- 2 months

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Markets fall on concerns about European sovereign debt problems

Stocks dropped at the opening and remained lower as European finances are center stage again. Dow fell 82, decliners over advancers 3-1 & NAZ was off 17. Financial stocks were hit hard, the Financial Index dropped more than 3.

S&P 500 FINANCIALS INDEX

Value	191.73
Change	-3.46 (-1.8%)

The Alerian MLP Index fell 2 to the 325s while the REIT index was off almost 2 to the 212s. Junk bond funds were flat to higher. On increased nervousness in the markets the VIX, volatility index, shot up 2+ to the 23s. The € fell almost 2 pennies on increased worries about European bank problems. Treasuries are back in demand. The yield on the 10 year Treasury bond dropped 6 basis points to under 2.65% & may be headed back for the sub 2.50% recent lows.

U.S. 3-month		0.13%
U.S. 2-year		0.49%
U.S. 10-year		2.64%

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks




10-Year Treasury Yld Index --- 2 weeks





Oil was lower related to minimal storm activity in the Gulf (which could disrupt oil production). But gold keeps moving higher, getting with a few dollars of its recent record prices as stock market averages sold off.

CLV10.NYM

...Crude Oil Oct 10

...72.92

... 1.68 .......(2.3%)

Gold

1259.40

+8.30

+0.7%

++ Gold Super Cycle ++ Click Here

Many stocks have yields that exceed bond yields, more than at any time in at least 15 years. Even some Dividend Aristocrat stocks have yields that top the 3.8% yields available in the bond markets. Johnson & Johnson (JNJ), a Dividend Aristocrat, sold bonds last month with a yield of 2.95% while the stock offers a 3.7% yield. The last time the number of S&P 500 companies offered stock yields above the corporate bond rate was in Mar 2003. This makes for a strange combination, stock yields and gold are king.

Dividends Beating Bond Yields by Most in 15 Years



Enterprise Products Partners (EPD), a midstream energy services MLP, wants to buy Enterprise GP Holdings (EPE) for about $8B to reduce its capital costs & simplify its partnership structure. EPE owns the general partner of & limited partner interests in EPD. EPE unitholders would receive 1.5 EPD units in exchange for each EPE unit. EPE jumped 6.10 to 56 while EPD fell 38¢ to 38.07. The merger will lower EPD long-term cost of capital through the permanent elimination of the general partner's incentive distribution rights. Since EPD is the largest MLP, this may be a signal for other MLPs to buy out their general partners that manage the businesses.

Enterprise Products to Buy Pipeline Partnership for More Than $8 Billion

Enterprise GP Holdings (EPE) -- 2 years




Enterprise Products (EPD) --- 2 years






After markets close in Aug, they had a mini rally in early Sep. But volume was low. Now traders are back & today's sell-off may be a better indicator about where stocks will go in Sep.

Dow Jones Industrials --- 2 weeks

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Dow has second straight triple digit gain

Stocks gave up some of the early advance but gained strength in the PM. Dow finished up 127 & closed near its highs, advancers ahead of decliner 3-1 & NAZ added 33. Banks had a good day, but the Financial Index is only working its way back to the middle of its year long trading range (around 200).

S&P 500 FINANCIALS INDEX

Value	195.18
Change	4.10 (2.1%)

The Alerian MLP Index rose 1¾ to the 327s (only 8 below its yearly highs) & the REIT index was up 2½ to the 214s (5 below its yearly highs). Junk bond funds did little (at their lofty levels) & the VIX dropped 1+ to the 21s, not seen since the stock markets sold off in early May. The € rose more than ½ a penny to near $1.29, a one month high. Treasuries continued weak with the yield on the 10 year Treasury bond rising 8 basis points to 2.70%.

Treasury Securities

U.S. 3-month		0.12%
U.S. 2-year		0.51%
U.S. 10-year		2.70%

Alerian MLP Index -- YTD




Dow Jones REIT Index -- YTD




VIX -- YTD




10-Year Treasury Yld Index -- YTD





Oil & gold slipped while the stock markets were trying to make up their minds where to go.

BRENT CRUDE	76.52	-0.41	-0.53%
Gold	1249.70	-3.70	-0.30%

$$ Gold Super Cycle $$
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The Institute for Supply Management’s index of non-manufacturing businesses, about 90% of the economy, fell to 51.5 in Aug from 54.3 in Jul. This was the weakest pace in 7 months, indicating the U.S. economy may be slow to strengthen in the 2nd half of the year. The index averaged 53.7 from its inception in 1997 through July. Readings above 50 signal growth. This is another reminder that the US is in a fragile recovery.

Service Companies in U.S. Expand Less Than Forecast

Index of service businesses - 1 year

This was another light volume day going into a long weekend when small orders can have a big impact on the close. The jobs report did not give new insights into a strong recovery & other measures (like the important service sector) are struggling. Next week, serious trading will resume & we will see where that takes us.

Dow Jones Industrials -- YTD

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Happy Holiday to All!!!

Markets advance after jobs report

The jobless report brought out buyers but markets are slipping after the first hour of trading. Dow is up 52 (& almost 100 off its early highs), advancers head of decliners 5-2 & NAZ gained 17. Banks advanced, the Financial Index is at a 2 week high.


S&P 500 FINANCIALS INDEX

Value	193.73
Change	2.65 (1.4%)

The Alerian MLP Index rose 1 to the 325s but is 2 below its earlier highs. The REIT index was up 1½ to the 213s. Junk bond funds gained & the € was up ½ a penny to $1.28½. Treasuries sank again, taking the yield on the 10 year Treasury bond up 8 basis points to 2.70%. Its chart shows an astounding 25 basis point gain in less than 2 weeks (when stock markets were rising).

Treasury Securities

U.S. 3-month		0.13%
U.S. 2-year		0.51%
U.S. 10-year		2.70%

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks




10-Year Treasury Yld Index --- 2 week





Oil fell after an index of U.S. non-manufacturing business declined more than projected, bolstering concern that the economic rebound will slow. Gold was lower responding to higher stock markets.

CLV10.NYM

...Crude Oil Oct 10

...74.25

... 0.75 .......(1.0%)

GCU10.CMX

...Gold Sep 10

...1,240.80

... 10.70 .......(0.9%)

**Gold Super Cycle** Click Here

Employers hired more workers over the past 3 months than first thought, lifting hopes for the weak economy. But the unemployment rate rose in Aug for the first time in 4 months as more people entered the market looking for work. Companies added 67K new jobs last month & both Jul & Jun private-sector job figures were upwardly revised according to the Labor Dept. The economy lost 54K jobs as 114K temporary census positions came to an end. For the first time this year the manufacturing sector lost jobs, down 27K for the month with the auto industry accounted for 22K of those lost jobs (largely due to a shift in the timing of the industry's summer layoffs). State & local govs shed 10K positions & have had net jobs losses in every month but one this year. The jobless rate rose to 9.6% from 9.5% in Jul as more than a ½M Americans resumed their job searches in Aug. While these figures are slightly encouraging, they remain depressing for the millions looking for work.

Companies in U.S. Added 67,000 Jobs in August

Photo: Bloomberg


The blaze aboard the Mariner Energey (ME) oil platform yesterday added calls for maintaining the drilling ban imposed after the BP (BP) disaster. The fire came after an explosion, it was put out & all 13 crew were rescued unhurt. This will give regulators a new reason to slow permits even though the ME platform in 340 feet (104 meters) of water wasn’t covered by the moratorium. ME stock rebounded 51¢ & has returned to trading levels prior to yesterday's announcement.

Mariner Gulf Fire Sparks Calls to Keep Drilling Ban


Mariner Energey - 2 weeks





Markets are having a good week in what is supposed to be quiet time, prior to Labor Day. The gut reaction on the jobs report was overrated. Perhaps it shows that traders were relieved it wasn't as bad as they expected. High unemployment rates are not going away anytime soon & will be a major issue in the coming elections.

Dow Jones Industrials --- 2 weeks

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