S&P 500 FINANCIALS INDEX
| Value 201.04 | Change 0.35 | % Change 0.2% |
MLPs had another very ugly day. Their index closed down 6½ to the 285s (but sharply above the 279 low). REITs had a more mild day, their index fell 2 to 198 (it had been down 7 at its lows). Junk bond funds were off a minimum of 2% & are typically off a good 10% from recent highs. Clearly they lost some sex appeal as investors are demanding higher returns on risky debt. The yield on the 10-year Treasury bond was off only 2 basis points. The VIX chart shows how nervous investors have become in just the last 2 weeks. This nervousness has to be behind the selling in higher yielding securities. Today it was up 1.77 to the 35s.
Alerian MLP Index --- YTD
Dow Jones REIT Index -- YTD
VIX --- 2 weeks
Oil ended a 16 day slump which took it below the important 70 support line. But traders may have closed out short positions today. Gold took another nasty spill & has backed off 50 from its record prices reached last week. As a commodity, it is very volatile, but the long term fundamentals are strong, especially at a time Europe has so many financial problems.
| CLM10.NYM | ..Crude Oil Jun 10 | ..71.13 | .. 1.72 ......(2.5%) |
| GCK10.CMX | ..Gold May 10 | ..1,191.20 | .. 23.10 ......(1.9%) |
Germany said that the "€ is in danger" and warned that if the "€ fails, Europe fails." So Germany banned naked short selling of German bank stocks, euro-zone bonds & credit default swaps. This comes after its decision to back a multi-billion € rescue package for the euro zone bond market & offer support for Greece. Traders viewed this move as turning off the financial lights in Europe. The German gov has a conservative leaning, but this move of more gov regulation caused markets to sell off. There are worries that several other countries might follow suit later this week. The sudden focus on short selling means policymakers are taking their eye off the ball, namely the structural imbalances that led to the debt crisis in the first place. The Greek (European) drama plays on & markets suffer.
•Merkel's `Moralistic Hysteria' Ban Unsettles Trading in Debt, Currencies
The Senate will take a crucial test vote on financial reform in a few hours. The Dems control the Senate & it looks like they will be able to pass this legislation. When passed, bank stocks will feel the pressure.
- Wall Street reform faces last hurdle- CNNMoney
Target (TGT), Dividend Aristocrat, reported Q1 EPS of 90¢ up from 69¢ last year (analysts had expected 86¢). Revenues rose 5% to $15.6B. The important sames store sales figure rose 2.8% in Q1. TGT will open 13 new stores this year. Officials said revenue at stores open at least a year are flat for the first 2 weeks in May, falling behind the company's growth forecast for a low to mid-single-digit increase. However, it still expects to post an increase of 2-4% in this qtr. Target also said forecasts for EPS of 91¢ in Q2 & $3.81 per share for this year are "reasonable." The stock lost 19¢ to 54.03.
Target's 1Q earnings at a glanceAP
Target --- 2 years
Increased regulation for the financials is approaching, with a final final vote probably coming in a couple of days. European financial markets are a mess, it's that simple. Germany tried to bring discipline with more controls, not what markets wanted to hear. It will get worse if more European countries join Germany. There is talk that European central banks will support the €. If that happens, there will be a short term rally, but it will not cure fundamental problems which run deep. Even after rebounding 100 off its lows, it was still an ugly day for the Dow. The best that can be said is it did not close below its low close 2 week ago. But that floor is not far away & market momentum is working against it holding out much longer.
Dow Jones Industrials -- YTD
Nasdaq --- YTD
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