Higher stocks after Bernanke nominated for 2nd term

The Dow jumped over 9600 (another high for 2009) at the opening on news that Ben Bernanke is being renominated to the Federal Reserve for a 2nd term. Dow is up 72, advancers over decliners 2-1 & NAZ rose 10. Banks liked the news, the Financial Index gained & is trying to top 200.


S&P 500 FINANCIALS INDEX

Value 196.87

Change 2.87

% Change 1.5%

The Alerian MLP Index has been stuck in a rut after soaring over 250 at the start of the month. Today it pulled back 1+ to the 241s. REITs found buyers, their index was up over 1 & junk bond funds were mixed. The yield on the 10 year Treasury bond was even at 3.49% & little changed from its general levels over the last 3 months.


Alerian MLP Index --- 2 weeks





Oil slipped but remains in yearly high territory.

CLV09.NYM

...Crude Oil Oct 09

...73.56

... 0.81 .......(1.1%)

Ben Bernanke was renominated for a 2nd term to run the Federal Reserve. This was hardly controversial, difficult to imagine another candidate doing much more. But markets like to see stability.

•Bernanke Named to Second Term at Fed After Keeping U.S. Out of Depression


The White House budget office forecasted a cumulative $9T (that's T as in trillion) deficit over the next 10 years, $2T (again, that's T as in trillion) more than estimated in May. Moreover, the figures show the public debt doubling over 10 years, reaching three-quarters the size of the entire national economy. Pres Obama's economic adviser, Christina Romer, predicted unemployment could reach 10% this year before beginning a slow decline next year. The idea behind rushing the stimulus package thru without anybody reading or understanding it was to keep unemployment below 8%! That was 6 months ago. Romer said, "This recession was simply worse than the information that we and other forecasters had back in last fall and early this winter." Now these same people are telling us to rush thru a health care plan costing $Ts. Huh???

White House Sees $9 Trillion in Deficits Over Decade


The realization of an even larger deficit which will require the Treasury to sell even more debt is not phasing the markets. China will be required to purchase at least 1/3 of the new debt. More debt helps make investors feel better today, but the long term implications are unfavorable especially for higher inflation.


Dow Jones Industrials --- 2 weeks

After a strong start, markets end mixed

Dow ran up 70 in the opening hour of trading, following the lead of foreign markets. But that was not meant to last, negative news stories prompted selling in the PM. Dow ended with gain of only 3, advancers were about equal to decliners & NAZ dropped 3. Banks led the way up & then led the way down. The Financial index came ever so close to 200, but then backed off to a significant loss. However Citigroup (C) ended up 12¢ to 4.82, another impressive gain.

S&P 500 FINANCIALS INDEX

Value 194.00

Change -1.80

% Change -0.9%

S5FINL:IND





The Alerian MLP index was up 1.18 taking it to the 242s while the REIT Index slipped .88. Junk bonds were mixed to higher as Treasuries rose. The yield on the 10-year Treasury bond dropped 6 basis points to 3.49%.

Alerian MLP Index --- 6 months




Dow Jones REIT Index --- 6 months





Oil remained over 74, a 10 month high.

CLV09.NYM

..Crude Oil Oct 09

..74.09

.. 0.20 ......(0.3%)

Israel became the first country to raise interest rate, by 25 basis points to an annual rate of ¾%. As economies show signs of repairing this becomes the next logical step, bring interest rates back to where they belong in normal times. They said:

The decision “strikes a balance between the need to moderate inflation and the need to continue to support the recent recovery in economic activity,” the bank said. “Setting the interest rate at the low level of 0.75 percent continues to represent an expansionary monetary policy.”

•Israel Raises Key Interest Rate, Becoming First to Act as Recession Eases


This is a quote from "Dr Doom" who correctly predicted the credit crisis. At question is the shape off the economic recovery, will it be be fast or slow?

Nouriel Roubini, the New York University professor who predicted the financial crisis, said the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.

•Roubini Says Risk of Double-Dip Global Recession Rising on Exit Strategies


Dow recovered 3K from its Mar low in less than 6 months. The first time it accomplished that run (1997-9) was about 2 years & that was with a booming economy & a very strong bull market. When markets pull back, I view that as absorbing a dose of reality. The next 2 weeks are expected to be quiet with modest amount of semi-holiday trading. Then Sep will begin in earnest, traditionally the worst month of the year (even before last year).

Dow Jones Industrials --- 6 months

Bank stocks lead markets to new 2009 highs

Following strong Asian & European markets, US continued in a rally mode. The Dow is up 78, advancers over decliners 3-1 & NAZ gained 14. All indices are at 2009 highs. Bank stocks, leading the way, keep charging ahead. The Financial Index is at another 2009 high, but still far the below the record high above 500. An example of how far banks have risen in just the last 2 weeks is Citigroup (C). The graph below shows a 1+ gain in less than 2 weeks, not bad for a low priced stock!

S&P 500 FINANCIALS INDEX

Value 198.86

Change 3.05

% Change 1.5%

Citigroup --- 2 weeks




The high yield sector is up mildly today. The MLP Index & REIT Index are each up 1+ while junk bond funds are higher. Treasuries are off, the yield on the 10-year Treasury bond is up 2 basis points to 3.58%. Treasury bond yields have been waffling around 3½% for 3 months.


Alerian MLP Index --- 1 month





Oil reached a 10 monthly high getting into the 74s. The graph below for the ETF doesn't spell the high that clearly, but it shows the trend of its run up in recent weeks & months. Buyers are betting on strong rebounding economies, especially in China.

CLV09.NYM

...Crude Oil Oct 09

...74.50

.. 0.61 .......(0.83%)

• Oil sets 10-month high on recovery hopes- AP

OIL (ETF) --- YTD





It's hard to believe how far & how fast markets have come in less than 6 months. The last month is more difficult to understand. Coming off a long run up, it would seem markets would need time to rest, but buyers have not gone on vacation even though economic worries (high unemployment, a housing depression, lousy retail sales, etc.) persist.

Dow Jones Industrials --- 1 month

Markets advance to new 2009 highs

Stocks had another outstanding day, reaching new highs again for 2009. Dow rose 155, advancers over decliners 4-1 & NAZ shot up 31 breaking thru 2K again. After a decline on Mon, Dow gained 184 this week (back to where it was in Oct). Banks led the way higher, the Financial Index hit another high for 2009.

S&P 500 FINANCIALS INDEX

Value 195.77

Change 4.07

% Change 2.1%

The Alerian MLP Index rose 2+ to the 241s (still 10 below its recent high) & the REIT Index was up 4. Junk bonds were higher (bringing lower yields) while the yield on the 10-year Treasury bond soared 12 basis points to 3.56%. Oil gained 1 bringing it near 74, record territory for 2009

Alerian MLP Index --- 6 months




I went to an annual meeting for a junk bond fund. They said the ugly days of Q4 last year were driven by fear, not higher defaults. At that time, junk bonds were extremely oversold with yields around 25%. The very brave bought to lock up those extraordinary yields. Since then high yield securities have roared back bringing their yields closer to where they traditionally have been. Their projection is for the economy to grow 3½% next year (more optimistic than my view) which implies the present yields going forward may prove to be attractive. They are not forecasting default rates on junk bonds to rise from present levels. Their analysis could also be applied to other high yield securities, such as MLPs.


Bulls have complete command of the markets. The S&P 500 is up 50% (pretty much non stop) from its lows in early Mar. That track record would be excellent for 3-4 years, only they accomplished it in 5 months. Let's see how long the bulls can keep control as the one year anniversary of the financial meltdown in Sep approaches.

S&P 500 --- 6 months

Dow jumps to new 2009 high

Encouraging words from Federal Reserve chief Ben Bernanke that the economy was ready to recover along with news that housing sales rose to 2 year highs brought strong gains for stocks. Dow advanced 145, advancers over decliners 4-1 & NAZ rose 27 taking it above 2K again. Banks (along with techs & high yield securities), market leaders, had nice gains. The Financial Index is at a new 2009 high.

S&P 500 FINANCIALS INDEX

Value 195.41

Change 3.71

% Change 1.9%

MLPs are underperforming securities, a new experience for 2009. The Alerian MLP Index was up only 1+ to the 240s & the Dow Jones REIT was up another 4½ bringing it close to its 2009 high. Junk bond funds participated in the strong market while Treasuries sold off. The yield on the 10-year Treasury bond rose 9 basis points to 3.53%.

Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil continues strong as the new (Oct) contract is flirting with 2009 highs.

CLV09.NYM

...Crude Oil Oct 09

...73.33

... 0.42 .......(0.58%)

Good news abounds, bringing out more stock buyers. Ben Bernanke said the economy is on the cusp of recovery. He also said, "the prospects for a return to growth in the near term appear good." Home sales jumped 7.2% to a 5¼M annual rate, the highest in almost 2 years. But the median price fell by 15%. Foreclosures & credits for first time buyers are helping increase sales.

•Bernanke Says Global Economy Starting to Emerge From Recession on Stimulus
•U.S. Existing Home Sales Surge 7.2% to Highest Level in Almost Two Years


The volatile Shanghai market continued in its recovery mode, up 1.7% overnight. US stock markets are ready to go higher. Dow is at levels not seen since Oct.

Dow Jones Industrials --- 2 weeks

Financials lead markets higher again

Stocks rose at the start & continued to climb during the day ending near their highs at the close. Dow was up 70, advancers over decliners 5-2 & NAZ was up 20. The S&P 500 gained 11 taking it thru 1K again, to 1007. Banks led the way, bringing the Financial Index with a couple of points of its recent high (shown below). The financials were helped by AIG (AIG) saying it would pay back gov loans, stock up 25%. Citigroup (C), another very troubled whopper size financial, rose 35¢ to 4.38 on optimism that it would become profitable after selling troubled assets. The very brave who bought it at 1 earlier in the year are very happy campers!

S&P 500 FINANCIALS INDEX

Value 191.70

Change 4.85

% Change 2.6%

S5FINL:IND






MLPs struggled all day while REITs took off. The Alerian MLP Index was up ½ still in the 238s while the REIT index roared ahead 6. Junk bond funds were mixed as the yield on the 10-year Treasury bond fell 3 basis points bringing the yield down to 3.44% . Bulls are in charge of the Treasury bond market, but their movements tend to be modest day by day.

Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




Oil was up, bleeding over from higher stock markets. It's near its 2009 highs & looks like it wants take them out.

CLU09.NYM

..Crude Oil Sep 09

..72.54

.. 0.12 ......(0.17%)

The Shanghai market has had a wild week with daily moves of 4-5% being common. Yesterday it rebounded 4½% but is still down 7% for the week. It's longer term track record illustrates the meaning of the word volatility.

Shanghai Composite Index --- 5 years





JD Powers is predicting that more than 1M autos will be sold in Aug, largely because of the success of the Cash for Clunker program. This was written prior to the earlier story that gov is VERY slow in sending rebates to the dealers causing them to pull ads. They trimmed their forecast slightly for auto sales in 2010 to 11½M (still below the "good old days" in the past).

• J.D. Power predicts boost in August auto sales- AP

Stocks have been absorbing punches very well. The Dow started the week with a big sell-off but has climbed back to a tiny gain for the week. The S&P 500 going thru 1K is helpful but it has been lingering around the resistance line all month.

Dow Jones Industrials --- 2 months

Markets higher after weak unemployment data

Stocks gained out of the gate but were not able to make significant headway in the face of fairly negative news. Dow is up 35, advancers almost 3-1 over decliners & NAZ was up 13. Banks are having a very good day, remaining near their 193 recent high.

S&P 500 FINANCIALS INDEX

Value 191.08

Change 4.23

% Change 2.3%

The Alerian MLP Index is up pennies while The Dow Jones REIT Index rose almost 4. Junk bond funds were off a little & the yield on the 10-year Treasury bond was essentially even at 3.46%


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




Oil hovers near its high for the year.

CLU09.NYM

...Crude Oil Sep 09

..72.59

... 0.17 .......(0.2%)

Claims for unemployment benefits rose 15K to 576K last week, up from 561K in the prior week. Analysts forecasted new claims slipping to 550K. The number collecting long-term unemployment benefits edged up to 6.24M in the week ended August 8. However, the 4-week moving average declined slightly to 6.27M.

• New jobless claims unexpectedly rise last week- Reuters

Homeowner delinquencies on mortgages reached a record 9.24% in Q2. The problem has expanded beyond sub-prime to include prime mortgages. This is the aftermath of higher unemployment, people lose jobs forcing them to miss payments. Housing problems will be a drag on the economy for years.

•Mortgage Delinquencies Rise to Record as U.S. Home Prices Fall in Slowdown



Sears (SHLD) was down 8.56 on a dreary earnings report. They lost money vs an expected profit & same-store-sales were down a very big 13%. Sears is the biggest department store chain in the US.

•Sears Falls After Posting Unexpected Loss as Demand for Appliances Drops

Sears --- 1 year




Heinz (HNZ), in a more stable business, reported a profit decline of 7% partially due to a stronger dollar. However EPS of 67¢ beat estimates by a nickel, stock up 60¢. That's the key driver for higher stocks prices in 2009, lower earnings that beat expectations bringing out buyers.

• Heinz 1Q profit drops, but tops analysts' estimates- AP

Heinz --- 1 year




Negative news is not bothering the markets very much. Cash-for-Clunkers program hit a snag, dealers aren't getting rebate checks form the gov. What a surprise! They are cutting back ads, another kick in the head the auto makers don't need.

Dow Jones Industrials --- 2 weeks

Energy stocks lead markets higher

Stocks opened weaker but picked steam by midday & remained in the black for the rest of the day, closing near the highs. Dow gained 61, advancers over decliners 3-2 & NAZ was up 13. Leading gainers in the Dow were Chevron (CVX) & Exxon Mobil (XOM) aided by higher oil prices. IBM (IBM) & Merck (MRK) also had a good day. In this mixed kind of day, banks were essentially even.

S&P 500 FINANCIALS INDEX

Value 186.85

Change -0.10

% Change -0.1%

S5FINL:IND




The Alerian MLP Index was up .60 to the 238s while the REIT index fell 1+. Junk bond funds were fractionally lower but remain near their yearly highs. Money is flowing into Treasuries. The yield on the 10-year Treasury fell another 6 basis points to 3.46%.

Alerian MLP Index --- 2 months




Dow Jones REIT Index --- 2 months




Oil had a very big day, everything is breaking right for the bulls. Last week crude oil inventories fell 8.4M barrels, very bullish. The Sep contract expires on Thurs when the contract for Oct will become the near term contract. It almost touched 74 today, a new yearly high if it holds. Bulls are back in charge.

CLU09.NYM

..Crude Oil Sep 09

..72.23

.. 3.04 ......(4.4%)

• Oil prices jump on suprise draw down of US supply- AP

Bloomberg TV reported that analysts did not do a good job of calling market lows in early Mar. They were scared, like everybody else, so they were pushing defensive stocks (i.e., foods, utilities, etc.). Thus they missed a time to be venturesome & make calls for the weaker performers which turned out to have done exceptionally well in the last 5 months. Oh well.

Following the big drop on Mon, US markets have be able to digest the weak Shanghai stock market & run up in oil prices. The chart below shows Dow has been flattish for the last month, not a bad performance after after enormous gains off the lows in Mar. The S&P 500 has been sneaking its way back to the magical 1K line, only 4 points away. Volume on the floor at NYSE was just over 1B & should remain light thru Labor Day.

Dow Jones Industrials --- 2 months




S&P 500 --- 2 months