Stocks remained depressed all day

Dow remained weak all day. It tumbled in the first hour & then just kept drifting lower, closing down 289, decliners ahead of advancers 7-1 & NAZ fell 64. 18 Dow stocks fell 3+% including 4 which fell more than 10% each (AXP, BAC, C & GM).

This is today's bleak picture of the Dow (courtesy of Bloomberg):

DOW JONES INDUS. AVG MEMBERS

					Time
3M CO	51.96	-1.85	-3.44	4,225,322	15:57
ALCOA INC	8.35	-0.91	-9.83	33,119,032	15:57
AMERICAN EXPRESS	18.96	-2.84	-13.04	35,390,611	15:57
AT&T INC	25.33	-0.62	-2.39	23,964,596	15:57
BANK OF AMERICA	8.04	-2.56	-24.15	761,560,418	15:57
BOEING CO	36.53	-1.79	-4.67	6,445,650	15:57
CATERPILLAR INC	30.51	-1.78	-5.51	13,341,261	15:57
CHEVRON CORP	63.89	-2.12	-3.21	9,848,334	15:57
CITIGROUP INC	2.95	-0.70	-19.18	796,155,685	15:57
COCA-COLA CO	44.43	-0.59	-1.31	12,360,057	15:58
DU PONT (EI)	26.79	-1.63	-5.74	14,480,323	15:57
EXXON MOBIL CORP	65.21	-1.54	-2.31	27,101,277	15:57
GENERAL ELECTRIC	11.33	-1.06	-8.56	136,419,847	15:57
GENERAL MOTORS	1.67	-0.19	-10.22	26,951,171	15:57
HEWLETT-PACKARD	34.68	-1.62	-4.46	14,483,610	15:57
HOME DEPOT INC	25.18	-0.92	-3.52	16,307,086	15:57
IBM	100.58	-0.69	-0.68	9,578,843	15:57
INTEL CORP	15.12	-0.48	-3.08	56,752,484	15:57
JOHNSON&JOHNSON	52.50	-0.55	-1.04	13,863,636	15:57
JPMORGAN CHASE	29.79	-3.47	-10.43	95,070,036	15:57
KRAFT FOODS INC	22.50	-0.16	-0.73	9,813,838	15:57
MCDONALDS CORP	55.31	-0.78	-1.39	6,459,274	15:57
MERCK & CO	25.23	-0.50	-1.95	11,636,501	15:57
MICROSOFT CORP	18.68	-0.52	-2.71	52,293,901	15:57
PFIZER INC	13.58	-0.58	-4.10	48,155,770	15:58
PROCTER & GAMBLE	50.66	-1.00	-1.94	13,658,351	15:57
UNITED TECH CORP	45.79	-1.53	-3.23	5,212,017	15:58
VERIZON COMMUNIC	30.95	-0.83	-2.61	12,185,590	15:57
WAL-MART STORES	49.31	-0.89	-1.77	18,703,859	15:57
WALT DISNEY CO	19.44	-0.94	-4.61	13,033,985	15:57

Banks were the biggest drag following BAC reporting that it boosted reserves for loan losses. S&P 500 FINANCIALS INDEX had one of its largest losses ever, with many prominent banks falling around 20% each. BAC fell almost 25%.

Value 132.15

Change -17.03

% Change -11.4%

MLPs, REITs & junk bond funds all sold off. The 4+ drop for the Alerian MLP Index brought it back to the 200 line. Now it has to decide again whether to keep it as a floor or make it a ceiling as it has been for most of 2009. The Dow Jones REIT Index fell a very big 14 & junk bond funds sold off badly. On increased fears, the VIX shot up 5:


VIX ---- 2 weeks





Oil had one of its worst days in a long time resulting from a strong dollar & weak stock market.

CLK09.NYM

..Crude Oil May 09

..45.77

.. 4.56 ......(9.1%)

The rate on Treasury 90 day bills is falling, heading for zero (if not negative as in late 2008). China is now the biggest lending to the US gov, but they recently expressed their concern (dissatisfaction) with excessive gov borrowing. When buying gov paper, they are switching to shorter maturities with the lowest rates. Not sure how all this will play out (the big boys probably don't know much more), but worth keeping an eye on the 90 day rate which is only 12 basis points (annualized). Data courtesy of Bloomberg:

U.S. Treasuries

	COUPON	MATURITY DATE	CURRENT PRICE/YIELD	PRICE/YIELD CHANGE
3-Month	0.000	07/16/2009	0.12 / .12	-0.008 / -.008

•Zero Percent on Treasury Bills as China Demand Converges With Fed Policies


A leading economic indicator published by the Conference Board points to the recession lasting until later this year. Then the rebound may be slow, something recent stock market enthusiasm has not been counting on.

• U.S. recession seen likely to go through summer- Reuters

Dreary Mon is pointing to a very bad week for a very tired market. Dow has made virtually no progress in the last 3 weeks:


Dow Jones Industrials --- 1 month

Stocks fall after Bank of America earnings

Stocks took a beating on more worries about the banking sector, every Dow stock is down. Dow dropped 227, decliners over advancers 7-1 & NAZ fell 55. Banks led the way down, the S&P 500 FINANCIALS INDEX is having a very bad day:

Value 139.91

Change -9.27

% Change -6.2%

Financials were weighed down by Bank of America (BAC), a Dow stock. BAC reported earnings which beat dreary estimates & ahead of last year's awful earnings number, but there is a growing awareness that bad loans are hurting them. They had to take a $13+B provision for losses. The purchases of Countrywide & Merrill Lynch last year don't leave a good legacy. The stock fell 1½ to the low 9s. The stock has had a nice run from its lows but has given back a lot in just the last week:


Bank of America --- 2 weeks




•Bank of America Drops After Adding $6.4 Billion to Reserves for Bad Loans


In sympathy, other groups I follow are selling off. The Alerian MLP Index is down 3 to the 201's. the Dow Jones REIT Index is down 7 & junk bonds are lower. However, the VIX is having one of its biggest gains this year, up 4 to 38.


Alerian MLP Index --- 2 months




Oil had one of its biggest declines this year, down almost $4. This market is being driven by falling stock prices & the strong dollar.

CLK09.NYM

..Crude Oil May 09

...46.61

... 3.72 .......(7.39%)

•Oil Falls Most in Seven Weeks as Dollar Rises, Demand Drops Amid Recession


Oracle (ORCL) is buying Sun Microsystems (JAVA) after IBM's attempt recently fell thru. As is typical in acquisitions, JAVA is up almost 2½ while ORCL is down ½. It's disappointing that this buyout news is not bleeding to other stocks (raising their stock prices).

•Oracle Will Buy Sun Microsystems for $7.4 Billion After IBM Deal Collapsed


Dow is back down to 7.9K. Reality about the quality of loan portfolios is starting to bite hard after the BAC report. This will be the biggest week for earnings. If today is any indication, this could be a rough week for stocks.


Dow Jones Industrials --- 2 months

Strong Dow faces earnings challenges this week

After a 6 week winning streak, markets are overdo for a rest. The last 2 weeks have shown the strain on the markets. During this time, the Dow has only managed to add 114 points. It still has more points to recover before getting back to 8776, starting point for 2009.


Dow Jones Industrials --- 6 months





MLPs have had a winning year, coming off their lows made late last year. In Apr, they have been attempting to change the status of 200 from a ceiling to a floor. Base building in the 190-200 range for much of this year may be paying off if the markets remain strong.


Alerian MLP Index --- 6 months





REITs have found new friends, largely in Apr. This is especially impressive after General Growth Properties (GGWPQ), 2nd largest mall & shopping center REIT, filed for bankruptcy last week. Double digits yields are attracting risk takers (as with MLPs & junk bonds) .


Dow Jones REIT Index --- 6 months




The rising stock market will be tested this week, when many prominent companies report earnings. Of the 52 companies in the S&P 500 issuing earnings reports so far, 2/3 beat expectations while the remainder did not. Dow has risen 24% from its March low, with 22 points coming in the first 4 weeks. More earnings disappointments this week could bring on profit selling, taking the Dow back below 8K.

6th straight weekly gain for stocks

Stocks started mixed on earnings reports by GE & Citi. Buyers returned later in the day bidding up stocks. Unfortunately for the Dow, buyers could only manage a meager gain after selling at the close. Dow was up 6, advancers ahead of decliners 2-1 & NAZ rose 2. Financials (banks) also had a mild gain. It looks like the index is trying to get back to the 169 starting point for 2009.


S&P 500 FINANCIALS INDEX

Value 149.17

Change 1.89

% Change 1.3%

The Alerian MLP Index was up 2½ to the 204s, a level not seen in 2 months:

Alerian MLP Index --- 2 months




Even beaten up REITs are making a come back as they've returned to levels last seen 3 months ago:

Dow Jones REIT Index --- 3 months




Barclays Capital High Yield Bond ETF is back to levels not seen in 3 months:


Barclays Cap Hi Yld Bond - 3 months





Risk friendly investors are coming back to the markets. I bought an REIT for my IRA over 10 years ago. Thanks to reinvestment of divs & the recent rebound in the stock, I'm only down 1/3, not bad with a stock at a dismal price. They own shopping centers & malls (smaller version of General Growth Properties which filed for bankruptcy yesterday). This stock was on death's door at 1 just a couple of months ago but has rebounded to 3.10. They just cut the div sharply again, but at least they are paying at a 40¢ annualized rate. They're working with lenders to extend debts. By declaring the div, they're planning on surviving (see link below):

• Glimcher Realty Trust Board of Trustees Declares Quarterly DividendPR Newswire(Thu, Mar 12)

Glimcher Realty Trust --- 1 year




An MLP I've been watching for a couple of years is Constellation Energy (CEP). It primarily develops natural gas wells in AL, OK & KS. This has been a rough time for them, so they cut the distribution 75% in Q1 to a 52¢ annualized rate & the units have taken a beating. But it's bounced off the recent low of 1½, almost doubling to its present price of 2.77.


Constellation Energy --- 1 year




Then there's Citigroup (C), which I called a couple of months ago. It was mentioned as a long term call selling at 1, available for risk takers. Those who were brave & bought have seen the call shoot up to 3.69.


Citigroup ---- 2 months




Risky investments are attracting buyers. The markets are on a streak. The only question is how long it will last. For the moment, it looks like Dow is struggling but enjoys being above 8K.

Stocks hestitate after GE & Citigroup earnings

Markets found little reason to continue their recent rally. Dow slipped 13, advancers & decliners were equal while NAZ fell 13. MLPs were up, the index gained 1 while the REITs index was down 1. Junk bonds were strong & oil was up modestly. Just another mixed day.

The big news continues with financials & that was mushy at best. Banks are even:

S&P 500 FINANCIALS INDEX

Value 147.40

Change 0.12

% Change 0.1%

Citigroup (C), Dow stock, reported the smallest loss since 2007, their version of good news. Citi lost 18¢ in Q1, beating the street estimate of 34¢. The loss came from massive loan losses & paying divs on preferred stock. However, Citi made $1.6B before preferred divs, again, their version of good news. The big story following their earnings was not looking at company businesses, but Citi announced it's delaying exchanging $B worth of preferred shares into common shares until its "stress test" is completed in early May. The stock is down pennies at 3½, far from the 25 price one year ago.

•Citigroup $1.6 Billion Earnings Beat Estimates on Trading, Accounting Rule
•Citigroup Delays Preferred Stock Swap Until After Government Stress Test


General Electric (GE), another Dow stocks which is really a whopper size financial company, saw its profits fall 36% due to its troubled financial business. Fortunately it has a major industrial business to help it get thru these uneasy times. Like Citi, it's down pennies on the news. Earnings at GE Capital were 1.1B (at least it was profitable), down 58% from last year. GE Capital's real estate business, including lending & holdings in commercial real estate, was especially hard hit. The unit posted a $173M loss compared to a $476M profit last year. Jeff Immelt, CEO, said GE believes it won't have to raise new capital to prop up GE Capital.

•GE Profit Tops Estimates as Engine, Energy Sales Offset Real Estate Losses


The global recession is biting hard in Japan, the 2nd largest economy in the world. Toshiba, maker of my 3 notebooks, last night estimated their loss for the year would be 350B ¥ ($3½B), higher than the previous estimate of 280B ¥. They will cut back their workforce again, after a reduction last month.

Toshiba expects bigger loss, contract job cuts

- AP - Fri 4:43 am ET

Dow made it above 8K, but its still struggling to put distance between it & the new floor. Citi & GE had wishy-washy earnings, not the kind of reports to build confidence.


Dow Jones Industrials --- YTD

Broad base advance for stocks

In the afternoon Dow soared, taking it well above 8000. But profit taking in the final hour reduced the gain to 95 (42 below the high), advancers over decliners almost 4 to 1 & NAZ jumped 43 on very strong computer news (really less bad than expected). Banks had only liimited gains on the heels of JPMorgan earnings.


S&P 500 FINANCIALS INDEX

Value 147.28

Change 0.92

% Change 0.6%

..........Close____Change___%_Change______Volume

BAC		10.34	0.10	0.96%	380,016,325
C		4.01	0.04	1.01%	722,624,941
JPM		33.24	0.68	2.09%	131,328,340
WFC		19.45	0.10	0.51%	128,916,129
GS		121.19	0.00	0.00%	23,433,368

At the same time Dow went over 8K, the Alerian MLP Index rose 0.92 to 202. It also has the challenge of holding above 200 former floor. The Dow Jones REIT Index shot up 5 to 127, new levels not since in over 2 months. Junk bonds rose today while the VIX, volatility index, dropped to the lows of the year. Even oil was up 71¢ on expectation of higher demand for oil.


Dow Jones REIT Index -- 3 months




VIX ---- 3 months




2 distribution increases were a plus for MLPs, although Enterprises Products Partners (EPD) & Duncan Energy Partners (DEP) each slipped pennies in trading.

• Enterprise Announces 19th Consecutive Quarterly Cash Distribution IncreaseBusiness Wire(Wed 3:33pm)
• Duncan Energy board raises cash distributionAP(Wed 4:42pm)

After JPMorgan (JPM) announced what was considered a favorable Q1 report this AM, JPM made more news today. They want to pay off their TARP loan, partially with funds from a $3B bond offering which will not have gov backing. This is the first such bond offering from them since Aug. The yield is expected to be 350 basis point more than a comparable 10 year Treasury bond. JPM wants to show independence & get the gov off its back. Obviously other major banks not able to pay off TARP loans will increasingly be seen as weak.

•JPMorgan Will Sell 10-Year Notes Without U.S. Backing, First Since August
•Dimon Says He's Eager to Repay $25 Billion in `Scarlet Letter' TARP Funds


Stocks, led by Hewlett-Packard (HPQ), Dow stock, advanced 1.77 on news that computer industry sales fell less than expected in Q1. Global shipments dropped 7%, sales, aided by the growing popularity of the new low priced netbooks. Worldwide & in the US, HPQ topped Dell (DELL), becoming the clear #1 computer company.

•PC shipments slide in 1Q, HP tops Dell in US
AP (Wed 7:22pm)


General Motors (GM), still in the Dow, will make an offer to bondholders next week to swap debt for equity. Bondholders will be paid money for accrued interest & will swap their bonds for GM stock. Their ticking time bomb keeps ticking.

•General Motors Is Said to Plan All-Stock Offer for Bondholders by April 27


Rosetta Stone (RST), closing at 25.12, had a successful initial public offering, the first in a year. Buyers are returning to the markets.

• Rosetta Stone soars 42 percent in debut- Reuters

Markets had a very good day. Dow asserted strength, clearly taking it above the 8K barrier. The Alerian MLP Index is flexing its muscles above 200. Citi, a call which shot up from its low of 1 last month, now at 4, reports tomorrow. Chances are their report will be similar to JPM's, earnings beating lowered estimates & a lot of very soggy assets (loans).

JPMorgan news doesn't help stocks

Dow keeps flirting with the 8000 line, just can't make up its mind whether it will be a ceiling or a floor. Dow is down 38, advancers over decliners are about equal & NAZ up is 7. JPMorgan reported their version of good earnings but banking in general was not helped, the index fell.

S&P 500 FINANCIALS INDEX

Value 144.15

Change- 2.21

% Change -1.5%

MLPs are a little lower & the Dow Jones REIT Index held up well on the major bankruptcy news (see below), falling only 4. Junk bonds are inching up.


General Growth Properties (GGP), the 2nd largest mall owner, filed for Chapter 11. The stock can be bought for 1.05. Even in bankruptcy, properties have value. Their stock, after sinking in the middle of 2008, totally collapsed in the Sep-Oct sell off. Since then it's been trading on hopes they could avoid bankruptcy. Simon Property (SPG), the largest shopping center-mall owner was down only 27¢ in the 43s on the news. When selecting REIT investments care is needed, now more than ever.

• General Growth Properties files for bankruptcy protectionat MarketWatch(Thu 10:27am)

JPMorgan (JPM), a Dow stock, reported better than expect earnings for Q1. Traders were happy to hear that the bank wasn't dead. After dropping on the gut reaction following release of the news in pretrading, the stock has risen & is currently about even. The news wasn't all good. EPS still dropped 40% from last year's Q1. Earnings came from strong trading activity & banking to average consumers. But JPM anticipates losses will keep rising on credit cards, home equity loans, mortgages & commercial real estate loans. Loan defaults increased. The credit costs amounted to $10B ($6B from loan losses & $4 billion to build up reserves). Problems related to bad loans linger.

•JPMorgan Net Beats Estimates on Record $8 Billion Investment-Bank Revenue


New jobless claims fell to 610K last week from 663K in the prior week, the 2nd straight weekly decline. The four week average of claims, a lagging indicator, fell 8½K to 651K. The number continuing to receive unemployment insurance benefits rose above 6M for the first time. The ugliest news comes from lagging indicators, so we may have seen the bottom. But the large number collecting benefits shows how deep the recession has become.

Initial Jobless Claims in U.S. Unexpectedly Fall; Benefit Rolls Top Record


Dow keeps trying & trying but can't crack thru the 8K ceiling, now it's just below. Interesting that the Alerian MLP Index has a similar relationship with its 200 ceiling. In its defense, at least major MLPs have been working their way higher to interim highs.


Dow Jones Industrials --- 1 month

Dividend increases

Good news has been hard to come by this year but there is some. Tanger Factory Outlet Centers (SKT), an REIT which owns malls, increased the distribution for the 16th consecutive year (since going public). OK, the annual increase was only a penny to 1.53. But an increase is an increase, especially for a mall owner.

• Tanger Increases Dividend For 16th Consecutive YearPR Newswire(Thu, Apr 9)

In all fairness, Simon Property (SPG), the largest shopping center & mall REIT has held theirs flat, at least in Q1. They may increase the 3.60 rate later in the year, if they feel they afford it, to extend their streak of higher annual divs.


Plains All American Pipeline (PAA), a healthy MLP, increased their distribution in Q2 to an annualized rate of 3.62, 1.4% above the prior distribution & 4.6% above last year. They also gave guidance that their financials are very healthy.

• Plains All American Pipeline, L.P. Declares Increased Distribution on Limited Partner Units; Comments on Favorable Liquidity Position and First-Quarter GuidanceBusiness Wire(Wed, Apr 8)

Kinder Morgan (KMP), the largest MLP, declared a 1.05 distribution for Q2, matching the Q1 payment but above the distribution last year. In Q1, their guidance was for a annual distribution of 4.20 in 2009 which implies keeping the quarterly payments at 1.05. Their Q2 guidance was favorable although they announced they are facing headwinds. But KMP reaffirmed they intend to pay a 4.20 distribution in 2009.

• Kinder Morgan Energy Partners First Quarter Distribution $1.05 Per Unit; 9 Percent Higher Than First Quarter 2008Business Wire(Wed 4:05pm)

It's nice to know there is some good news in the midst of all the dreary news coming out. Other REITs & MLPs may give gloomier reports & some may have to cut divs. But the 2 sectors are stronger than many give them credit for & offer extremely high yields.