Tuesday, April 27, 2010

Dow tumbles below 11,000 on European debt downgrades

Dow had a triple digit drop, down 213 & closing at its lows. The decliners led advancers more than 4-1 & NAZ dropped 51. This was the ugliest day in the stock market in 10 weeks. Caterpillar had a big gain yesterday after reporting earnings, followed by a $3.12 drop today. Banks have been leading the way up in recent months & led the way down today. Any 5 point drop in the Financial Index is a major drop. This was a biggie!


% Change

MLPs were hit by the wave of selling in the markets. Their index fell 5+ to the 312s. The Dow Jones REIT index plunged over 7 to the 208s. When stocks sell off, junk bonds should follow & junk bond funds were lower. But Treasuries were hot. The yield on the 10-year Treasury bond fell off a cliff, dropping 12½ basis points to 3.69%.

Alerian MLP Index --- 1 month

Dow Jones REIT Index - 1 year

10-year Treasury Yld Index - 1 month

Oil fell as traders were anxious to find out if the Federal Reserve would keep interest rates low. Meanwhile gold took off, as money flowed out of Europe (among other places) into gold. Gold has been doing well in the last month & may be ready for another attempt on its record highs above 1200.

CLM10.NYM..Crude Oil Jun 10..82.19 ..Down 2.01

GCJ10.CMX..Gold Apr 10..1,161.40 ..Up 7.90

GLD (ETF) --- 1 month

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The debt crisis that has shaken Europe's currency (€) widened & intensified as Portugal saw its credit rating cut while Greece's was reduced to junk status causing stocks to slide around the world. Standard & Poor's downgraded the debt of the 2 countries & warned that holders of Greek debt could take large losses in any restructuring! That's not a huge surprise, the markets had been expecting Greece's debt would be restructured at some stage even after a €45B rescue package from its 15 partners in the eurozone & the IMF. The real worry is that Greece's debt crisis is mushrooming to other debt-laden members of the eurozone. One bailout can be dealt with but 2 would be stretching it. The downgrade of Portugal raised those fears. The crisis threatens to undermine the € & make it harder & more expensive for all govs to borrow money. Following the downgrades, the € slid over 1% to $1.3207, essentially an 8 month low.

Greece Cut to Junk at S&P, Portugal Lowered as Debt Woes Spread in Europe

Enterprise Products Partners (EPD), the largest MLP, reported net income attributable to Enterprise for the Q1 was 50¢ per unit on a fully diluted basis versus 41¢ per unit last year. "Enterprise reported strong operating and financial results for the first quarter of 2010," said Michael A. Creel, president & CEO. “During the first quarter of 2010, NGL, crude oil, refined products & petrochemical pipeline volumes averaged more than 4M barrels per day, while NGL fractionation volumes were a near record 473K barrels per day, equity NGL production was a record 122K barrels per day & propylene fractionation volumes were a record 80K barrels per day. The natural gas pipeline systems reported record volumes of 12.1T Btus per day. Driven by strong volumes and performance by the NGL, petrochemical services and offshore businesses, Enterprise posted an 11% increase in gross operating margin to $795M & earned record distributable cash flow of $580M in the first quarter of 2010.” Distributable cash flow funds are used for the distribution which was just raised to an annual rate of $2.27. Despite the excellent report, EPD fell 56¢ to 36.09 on a bad day in all markets

Enterprise Announces Results for First Quarter 2010; Reports Record Distributable Cash FlowBusiness Wire

Enterprise Products - 2 years

The Goldman Sachs (GS) execs were grilled, but did not give an inch & the stock gained 1. These multi millionaires said they were sorry the financial system took a dive but they did nothing wrong because they didn't know anything. OK!! Then they went (with their lawyers) back home in their limos & private jets. But European debt problems trumped their testimony. This is getting serious as shown by increased demand for gold & Treasuries (flight to safety). Selling in stocks was mild. But if these conditions persist & spread, the impact on the stock markets could get brutal.

Dow Jones Industrials - 1 year

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