Stocks fall on UK credit worries

Stock have been weak all morning. Dow fell 139, decliners over advancers 4-1 & NAZ is down 34. But banks are not leading the decline, they're getting a break. As the index shows, banks are mixed with little changes.

S&P 500 FINANCIALS INDEX

Value 157.98

Change 0.52

% Change 0.3%

The Alerian MLP index dropped 3 to 216, probably from lower oil prices. The REIT index dropped only 1 while junk bond funds were weak. The VIX, volatility index, jumped 2, pushing for 31. It had been dropping all year, to 27, on easing fears.


VIX ---- 1 week




Oil backed off the 62 ceiling as markets are trying to assess how badly higher gas prices will affect demand over the first holiday weekend. Gas at the pump was 2.36 yesterday, up 30¢ in the last month.

CLN09.NYM

...Crude Oil Jul 09

...60.28

... 1.76 .......(2.8%)

The number of new jobless claims dropped slightly last week after increasing due to auto layoffs, continuing jobless claims approached 7M. The labor market likely will remain weak into 2010. Initial claims for jobless benefits fell to 631K, down 10K from the previous week. More auto shutdowns will be lifting claims in the coming months.

•Jobless Claims in U.S. Are Higher Than Estimated; Benefit Rolls at Record


Standard & Poor's revised the outlook for Great Britain's credit rating to negative from stable. The rating agency reaffirmed the country's long-term credit rating at "AAA" and its short-term rating at "A-1+," but said the outlook had deteriorated because of massive borrowing to deal with the recession & the banking crisis. The FTSE share index fell more than 120 points (2.7%). A lower credit rating would require the government to pay higher interest rates for borrowings. S&P said 37% of its negative outlooks were followed by a downgrade. Such concern raises doubts about the ability of the UK to raise record amounts of money by issuing more debt

•U.K. May Lose AAA Rating at S&P as Government Debt Approaches 100% of GDP


The Treasury Department will lend GMAC $7B, making GMAC a sort of federal entity which offers low-interest loans to buyers of GM & Chrysler cars. This follows GMAC failing the "stress test" a few weeks ago. The Treasury mandated that GMAC must raise $11½B within 6 months (after receiving $5B from TARP in Dec). In exchange for that funding, the gov received 5M GMAC shares, giving the Treasury more control over GMAC. This includes telling GMAC that it must extend financing services to bankrupt Chrysler LLC. The big picture is the gov is telling this business what to do. Expanded authority may be used at other companies where the gov is also a major shareholder. The banking arm of GMAC changed its name to Ally Bank last week, in an effort to repair its tarnished image & attract customers.

•GMAC Said to Get More Than $7 Billion in Aid to Fund Chrysler, GM Lending

After the Dow cracked the 8K ceiling, it's still having a difficult time trying to make headway.

Dow Jones Industrials --- 1 month