Yesterday's monster rally faded as reality started sinking in.
Dow pulled back to a 77 loss. While off the lows it started the trading day up 300. Advancers were ahead of decliners by 20% & NAZ pulled back 65 on worries about a recession hurting business. S&P 500 FINANCIALS INDEX rose 14 to 231, but off earlier highs at 239. The Alerian MLP Index pulled back from earlier highs to settle up 8½ at 207. Junk bond funds rallied with their extraordinary high yields but REITs pulled back sharply. The Dow Jones REIT Index fell 14 to 192. That's the kind of day it was after yesterday's monster rally. Even oil pulled back from early gains as reality of earnings reports started to weigh on the markets.
Crude Oil Nov 08
| ...79.09 |
... 2.20 (2.6%) |
The euphoria over more help for banks is slipping. Sadly, nobody is quite sure how it will all work out. The Federal Reserve is pumping money into the system & everybody hopes it does some good. The problem is they're making it up as they go along!
•Paulson Tells Banks to `Deploy' Capital Under $250 Billion Investment Plan
Early earnings are starting to grab headlines. Pepsi was hammered on earnings below forecasts, laying off 3,300 & guiding downward the annual estimate by a few cents, down 7.70. This may be a warning that ugly news will be dealt with harshly.
Johnson & Johnson (JNJ), a Dow company, reported excellent earnings. The stock gained 4 early in the the day, but that fell back to a 2¼ gain at the close (after a late day rally from near break even).
Johnson & Johnson tops estimates, shares rise- AP
The VIX,volatility index or what some call the fear index, remains in heavenly levels not imaginable a couple of weeks ago. 20 was considered a very high number, the 54-75 range was not on any body's radar screen. At 55, it's down 20 from yesterday's peak but still off any chart made just last month. Note prior peaks around 30 in Jan, Mar & Jul 15 lows. Emotions are running high driving a lot of the trades.
Volatility Index (VIX) -- 2008 YTD
It looks like little was resolved in today's trading. There was a lot of back & forth producing only modest changes as confusion is behind many of the trades.
My latest update on MLPs was just posted at SeekingAlpha in the last hour. Loyal fans will find nothing new. I still like them as solid long term investments with their high yields:
