World markets lower on dismal outlook for profits

Dow fell 25, decliners over advancers 3-1 & NAZ was down 20, but off their lows. Banks were also lower.

S&P 500 FINANCIALS INDEX

Value 153.18

Change -0.37

% Change -0.2%

The high yield sector was hurt by the market decline. MLPs & junk bond funds were lower, while REITs inched up. MLPs may be feeling extra pain because of the sell off in oil. The yield on the 10 year Treasury is resting today, only up 3 basis points to 3.53%. The VIX, volatility index, is up a big 2½ going back over 30 on rising fears.

Alerian MLP Index --- 2 months




Dow Jones REIT Index -- 2 months




VIX ---- 2 months




This has been a bad day for markets, stocks & commodities, with a growing awareness that the recovery may be a long drawn out affair.

CLQ09.NYM

...Crude Oil Aug 09

...64.26

... 1.37 .......(2.1%)

Bears are trying to take control. Even if economies have reached bottom, they may not come roaring back as the bulls suggest. The profit declines for the S&P 500 (complied by S&P & Bloomberg) give guidance that more ugly days lie ahead as shown below for the S&P 500 (Q2 & Q3 are estimates).

____profit decline
Q1.... -60%
Q2.... -34%
Q3.... -21%

Q4 could show gains, but that would be off an awful Q4 in 2008, hardly something to brag about.

•Earnings Dropped Worldwide in Second Quarter as Job Losses Hurt Consumers


The US markets are following a global decline in markets, but are behaving better. Stocks have been firmer in the last hour, maybe the PM will bring more buyers.

Dow Jones Industrials --- 2 months

Grim news on jobs sinks stocks

Dow tumbled on the opening & continued to hug the 8.3K level (down over 500 from the interim high 3 weeks ago) all day. Dow fell 223 (closing at the lows), decliners over advancers 4-1 & NAZ fell 49. As market leaders, banks also sold off from the start. While volume was low, the 4% decline was significant:

S&P 500 FINANCIALS INDEX

Value 153.55

Change -6.41

% Change -4.0%

Citigroup (C) used to be a major financial when it was in the Dow & earned profits. Now it's just a call with the gov owning a large portion of all the calls. Back in Mar, it fell to 1 where it was a good buy. It shot up to 4 after the market lows, but since then has pulled back under 3 (today down 9¢ to 2.88).

Citigroup ---- YTD




The high yield sector sold off along with the markets. The Alerian MLP Index was down 2 to 222, The REIT index dropped a big 7.61. Junk bond funds were down while Treasuries rose. The yield on the 10 year Treasury bond dropped 5 basis points to just under 3.50%. The VIX, volatility index, shot up 1.73 to 27.95, an early indication fears may be rising again.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX ---- 1 month




Oil was weak today, but on light trading. The 72 high is getting farther away.

CLQ09.NYM

..Crude Oil Aug 09

..66.70

.. 2.61 ......(3.8%)

The unemployment report sank stocks from the beginning of trading & they never recovered. However volume was very light, one of the lightest days in some time. NYSE floor volume looks to be only .6B+, i.e. very low. Next week, when traders return in full force, we'll see how the unemployment report really plays out. My guess is the markets will be on defense. In the meantime, enjoy the holiday weekend!!

Dow Jones Industrials --- 2 weeks

Happy 4th of July!!

Stocks tumble on dreary unemployment figures

Dow dropped 161, decliners over advancers 6-1 & NAZ was off 41 on a disappointing unemployment report. Banks sold off badly, in line with the markets:

S&P 500 FINANCIALS INDEX

Value 157.36

Change -2.60

% Change -1.6%

MLPs keep bumping along, 10 points under the recent index high (today it's down 1+). The Dow Jones REIT index pulled back 3+. Junk bond funds were soft while the Treasuries found buyers. The 10 year Treasury rose, taking the yield down 4 basis points to 3.50%.

Alerian MLP Index --- 1 month




Dow Jones REIT Index --- 1 month




Gloomy news spread to oil, down 2+.

CLQ09.NYM

...Crude Oil Aug 09

...67.09

... 2.22 .......(3.2%)

467K jobs were lost in Jun, taking the unemployment rate up to a 26-year high of 9.5%. The economy's road to recovery may be bumpy. Job losses were deeper than the 363K expected. In addition, average weekly earnings dropped to the lowest level in nearly a year. However, the rise in the unemployment rate from 9.4% in May to 9.5% in Jun was less bad than feared (9.6%). Many economists still predict the jobless rate will hit 10% in 2009 & keep rising into next year. A total of 14.7M were unemployed in Jun. If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.5%, the highest on records dating from 1994. The average work week fell to 33 hours, the lowest on records dating back to 1964.

•Payrolls in U.S. Decline More Than Forecast; Unemployment Climbs to 9.5%


This is a global recession, dreary unemployment news is not limited to the US. Unemployment in the 16 countries using the euro spiked to a 10 year high in May. Recovery will take time. Eurostat reported the unemployment rate was 9.5% in May, up from April's 9.3%. Over 15M were unemployed in May, up 273K from April's figure.

• Euro zone unemployment hits 10-year high in May- AP

Unemployment news continued ugly. This was no great surprise, but when the data hits it still hurts. However, volume is extremely light. Next week's reaction will be more meaningful.


Dow Jones Industrials --- 1 month

Early gains trimmed on first day of new quarter

Stocks began Q3 very strong, Dow gained more than 130 at its high. But selling throughout the day dragged it lower to a close of plus 57, advancers were over decliners 5-2 (far less than in the AM) & NAZ was up 10. Banks were strong in the AM but also gave way to selling pressure in the PM, turning green into red.

S&P 500 FINANCIALS INDEX

Value 159.96

Change -0.80

% Change -0.5%

MLPs posted a gain of 1+ to the 224s. The 1 year chart shows how far they've come & how how much they need to reach new 12 month highs. The Dow Jones REIT Index was up 1+, remaining in its sideways trading range of the last few months. REITs have had a tougher go of it in the last year. If the recovery is less than rapid, I fear that type of chart may become relevant for other high yield sectors (like MLPs). Junk bond funds were firm & the VIX slipped fractionally still in the 26s. The yield on the 10 year Treasury bond rose 2 basis points to 3.54%.

Alerian MLP Index --- 1 year




Dow Jones REIT Index --- 1 year




AM gains for oil were lost, it closed below 70 again. Bulls have been having a difficult time cracking thru 72 resistance.

CLQ09.NYM

..Crude Oil Aug 09

..69.30

..0.59 ......(0.84%)

The gov said it won't continue to bail out General Motors after Jul 10. The assets of GM are supposed to be sold to a new GM, but there are numerous objections. Reports of Jun auto sales are in & the industry continues to slug it out in the trenches. Ford (F), the relative winner, says the annualized sales rate is under 10M cars, far below the numbers in previous years. Ford sales were down "only" 11% from the prior year versus Toyota down 32%, GM down 34%, Nissan down 26%, Honda down 32% & Chrysler down 42%. And prior year's numbers were already beaten down.

• Gov't won't fund GM after July 10, official says- AP

•Ford, Honda, Nissan U.S. Sales Beat Estimates in Sign Auto Slump Is Easing


The first day of trading in the new qtr provided little excitement. Early gains were pared with selling in the PM. Volume continues low with (the more successful) traders taking this week off. There is a lot of talk about how the recovery will take shape. There may be modest growth in Q3 & Q4 with slower rates of growth next year. Slow growth rates can hurt. Among other problems, unemployment can climb further (from already high levels) in that environment.

Dow Jones Industrials --- 1 year

New qtr begins with gains

Dow rose 116, advancers ahead of decliners almost 5-1 & NAZ was up 20, all done in light trading. Banks joined the party, but are not leading the way up.

S&P 500 FINANCIALS INDEX

Value 161.77

Change 1.01

% Change 0.6%

The Alerian MLP Index & Dow Jones REIT Index are each up 1+ while junk bond funds are generally higher. Rising stocks are bringing lower bond prices, the yield on the 10 year Treasury climbed 7 basis points to 3.59%. High yield securities are benefiting from easing fears. The VIX, volatility or fear index, reached another 2009 low, back to the levels before Lehman's collapse.


Alerian MLP index --- 3 months




VIX ---- 2 weeks




Oil is pushing for new highs above 72.

CLQ09.NYM

...Crude Oil Aug 09

...71.04

... 1.15 .......(1.7%)

The housing news while mushy is basically negative. Mortgage applications dropped to another interim low while pending home sales were up. Unfortunately the increase was only 0.1%, essentially even. Mortgages rates continue low, in the low 5% area but depressed conditions for housing are not going away soon.

• Pending home sales up 4th straight month in May- AP
• Mortgage applications fall to 7-month low- Reuters

U.S. manufacturing activity contracted less than expected in Jun & at the slowest pace since Aug. The Institute for Supply Management said its manufacturing index read 44.8 in Jun, up from 42.8 in May. However, a reading below 50 indicates contraction. This was the 17th straight month of deterioration in manufacturing.

•Manufacturing in U.S. Shrinks at Slower Pace in Sign Recession Is Easing


Dow had a great qtr as did the other indices. But the chart shows that it had a strong month in Apr followed by sideways trading. California (the 8th largest economy in the world) is in the midst of budget chaos. As a result, they are going to pay debts with IOUs. Can you spell, "Duh?"

Dow Jones Industrials --- 3 months

Strong second quarter, sold off on last day

The 2nd quarter closed on a sour note. Some of the selling could be related to fund managers trying to make their results look better. But it was still a down day nevertheless, stock dropped on the opening & remained at low levels for the rest of the day. Dow slumped 82, decliners over advancers 3-2 & NAZ was off 9. Banks led the markets down.

S&P 500 FINANCIALS INDEX

Value 160.76

Change -1.82

% Change -1.1%

S5FINL:IND




The high yield sectors had a quiet day, inching up by the close, in a down market. But the qtr & first 6 months have been an exciting time. High yield sectors started from depressed levels last year, offering extraordinary yields at the same time Treasuries had soared offering minimal yields. In 2009 Treasuries were sold bringing their yields closer to traditional levels while yields in the high yield sector plunged from high double digits. The VIX chart shows the reasons. It began at astronomical levels, fears were high. Nerves calmed down, allowing buyers to return the to high yield sectors. The VIX is back to levels last seen prior to Lehman's collapse.


Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD

Barclays Capital Hi Yld Bond - YTD




10-Year Treasury Yield Index - YTD




VIX ---- YTD




Oil fell today but is still up 55% YTD, not good for future inflation.

CLQ09.NYM

..Crude Oil Aug 09

..70.12

.. 1.37 ......(2.0%)

Going forward may bring a much different scenario. The recession appears to have bottomed, with the help of money thrown at it by the stimulus package. But the next 6 months will be influenced by the recovery & that is being debated. A huge problem is unemployment which probably has not hit bottom. Jun numbers will be posted on Thurs & are expected to show the rate jumping again, this time to 9.6%. Housing is mired in a 3 year depression with no signs of recovery. Recovery for autos will be off very depressed levels as 2 major companies try to emerge from bankruptcy. And California is running out of time, their clock keeps ticking. The reversal of buying enthusiasm from Treasuries to high yield securities in 2009 was dramatic & can not be expected to continue. I feel a greater sense of reality about a slow recovery may dominate trading for the balance of the year.

Dow Jones Industrials --- YTD

Stocks lower on weak consumer confidence data

Dow is down 106, decliners over advancers 5-2 & NAZ fell 11. The financial index joined in today's decline. It had a good run in Q2, but most of the gains came in the first 5 weeks. It started Q2 at 119 & shot up to 150 by early Apr. Since then it has been in a sideways band above 150.

S&P 500 FINANCIALS INDEX

Value 160.36

Change -2.22

% Change -1.4%

The Alerian MLP index pulled back 1+ taking it below 221. MLPs have had an outstanding qtr & 6 months, but their excitement may be dimming. REITs are flat while junk bond funds are down today.

Alerian MLP Index --- 2 weeks




The yield on the 30 year Treasury dropped 3 basis points to 3.52% as the rate of decline for housing prices declined at 18% in Apr. The chart shows the plunge in yields during Q4 2008 & the sharp rise in H1 for 2009. Since bond prices are the mirror image of yields, bonds soared in Q4 from the flight to safety & then plunged this year when investors switched to high yield bonds. The plunge in bond prices made this the worst H1 for Treasuries in 3 decades.

10-Year Treasury Yield Index - 1 year




Oil is off today, but up sharply from 45 at the start of 2009. The bulls seem to be in charge of this market, whatever the reasons.

CLQ09.NYM

...Crude Oil Aug 09

...69.37

... 2.12 .......(3.0%)

The index of consumer attitudes, from the Conference Board, dropped to 49.3 in Jun from 54.8 in May (but double the depressed levels back in Feb). Those saying jobs are "hard to get" increased to 44.8% from 43.9% in May, while those saying jobs are "plentiful" slid to 4.5% from May's 5.8%. These figures suggest that economic conditions, while not as weak as earlier, are still weak.

•Consumer Confidence in U.S. Unexpectedly Drops, Reflecting Weak Job Market

Q2 has been a great time for the markets (aside from Treasuries). However, the best days were early on, followed by a sluggish market. The latest reading on consumer confidences indicates more sluggish (at best) times are ahead.

Dow Jones Industrials --- 3 months

Stocks higher on light volume

Dow climbed 91, advancers over decliners 3-2 & NAZ was up only 5. Dow remained near plus 80 for most of the day & had only had two losers, Alcoa (AA) & General Electric (GE). Volume continues light, partially with some (the more successful) away for a long holiday. Banks were eager to join in the rally.

S&P 500 FINANCIALS INDEX

Value 162.58

Change 2.23

% Change 1.4%

MLPs held their AM gains, up 1+ to the 222s. REITs were even & junk bond funds continued mixed. The yield on the 10 year Treasury ticked down another basis point to 3.49%. The VIX was down ½ to the 25s, far away from the highs in the 80s early this year. But 20 used to be considered elevated in the old days (more than a year ago).

Alerian MLP Index --- YTD




Dow Jones REIT Index --- YTD




Oil remained strong in the PM pushing to get back to its 72 high.

CLQ09.NYM

..Crude Oil Aug 09

..71.48

.. 2.32 ......(3.4%)

The S&P 500 is having it's best qtr in 11 years, up 16% coming off the very low levels 3 months ago. Dow "only" has a 12% gain. For both much of the gains came in Apr.

Dow Jones Industrials --- 3 months




S&P 500 --- 3 months