After a sharp fall in the first hours, when Dow plunged 275, the Dow had a major rally bringing it near break even. But sellers took over in the PM, Dow ended with a loss of 105, decliners 3-1 over advancers & NAZ fell 41.
The 8K floor for the Dow has been quite strong under a lot of pressure in recent weeks. The chart below shows that the Dow held above 11K during the spring-summer period, before the Sep crash. Since then the 8K floor held, with one exception which didn't last long. Bulls point to this a base building. However, if it gives way there probably will not be support for some time as seen when the floor was lowered from 11K to 8K.
Dow Jones Industrials --- 6 months
Banks continue under all kinds of selling pressure. Bank of America (BAC) after the nice pop yesterday dropped almost 1 into the 5s. US Bancorp (USB) dropped 2 bringing it into the 13s with a yield of 14%. There is a lot of talk that banks may not survive this mess, just take a look at Citigroup (C) & Bank of America, etc. The S&P 500 FINANCIALS INDEX recovered from its lows but was still weighted down by some of the biggest banks:
Value
116.90 |
Change
-7.26 |
% Change
-5.8% |
The Alerian MLP Index continues to hold up well under selling, closing at 192 down only 1½. The Dow Jones REIT Index didn't do as well, down 7. Junk bond funds were flattish, the news about 2 forthcoming offerings may have helped. VIX rose 1+, but well off its highs, & oil fell 50¢.
Junk bonds have rallied sharply from overly depressed lows in mid Dec. Crown Castle plans to raise $900M selling B rated debt costing over 11% & Petrohawk Energy is raising $500+M in debt costing around 13%. Merrill Lynch said the average rate on junk debt has fallen 5 percentage points since the high last month, making these offerings possible. Those who bought junk bond funds at their lows made nice gains. However, their immediate future is cloudy. Rates are still at extraordinary levels as they price in a terrible default rate.
•Junk Bond Offerings Reach Most Since June on Crown Castle, Petrohawk Sales
Congress is stuck in the mud trying to get out an enormous stimulus package. Maybe that's to be expected. Now the talk is it will be approved in a few weeks. I hope the economy & stock markets can hold out until then.
