Increased sovereign debt concerns weigh down stocks

Dow sold off from the opening bell. It's down 181, decliners over advancers 8-1 & NAZ fell an even bigger 61 (2½%). European debt problems are getting very serious for the markets. Banks are leading the way down. The Financial Index fell 6 & is down 20 from its interim peak last month. Banks are also looking towards DC to learn more about increased gov regulation which could be announced next week.

S&P 500 FINANCIALS INDEX

Value 206.18

Change -6.07

% Change -2.9%

European debt problems are a big drag for all high yield instruments. The Alerian MLP Index dropped 5 (big by its standards) to the 296s. While 260 was the absolute low last week, around 280 represents the post plunge & more realistic low. The REIT index fell almost 6 to the 206s (& off 13 from its highs 2 weeks ago). Junk bond funds sold off on the order of 2%. Investors in junk bonds want higher yields after observing the confusion in Europe. But Treasuries soared! The yield on the 10-year Treasury bond plummeted 13 basis points to 3.43%. Meanwhile the VIX, volatility index, shotup 6+ to the 32s shown in its chart below.

Alerian MLP Index --- 1 week




Dow Jones REIT Index -- 2 weeks




10-Year Treasury Yld Index - 1 month




VIX --- 1 month






Oil dropped to 73, breaking thru a key support level, 75, making the guys who watch technical indicators very nervous. Worries are that slowing economies will require less oil. But gold is strong, just off its record highs reached this week. Investors bought gold to protect against sovereign debt risk in the euro zone & instability in foreign exchange markets.

Oil	...73.14	__-1.26	__-1.7%
Gold	...1,233.80	__4.60	__0.4%

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GLD (ETF) --- 2 weeks





A preliminary index of consumer sentiment rose to 73.3 from 72.2 in Apr. In Apr employers added the most workers in 4 years, indicating an improving job market. In addition retail sales in Apr rose 0.4% following a 2.1% jump in Mar, for the 7th consecutive monthly gain. Both graphs weren't updated for Apr data. This data signals the biggest part of the economy is helping strengthen expansion.

•Confidence of U.S. Consumers Rises in Sign Shoppers to Strengthen Recovery


Index of consumer sentiment - 1 year




Growth in retail sales - 1 year





The Euro zone group is losing it fast! German taxpayers are be asked to foot the bill for permissiveness to bail out divergent economies lashed to a single currency with little control over national taxes & spending. The consequences are the €860B ($1T+) bill for a debt binge led by Greece, sagging confidence in the European Central Bank’s independence & mounting speculation that a currency might break apart. The € sank to another 3 year low, below $1.24. The Greek drama is far from over!! And keep in mind, the US gov is part of the bailout package.

•Euro Breakup Talk Increases as Germany Sees Greece Becoming Currency Proxy


Euro --- 5 years



This is another dreary Fri. Markets are paying a lot more attention to the goings on in Europe & it's getting very ugly once again. The negative thinking about sovereign debts are bleeding over to high yield securities in the US. Dow's 10,380 close last Fri is a key support level & the way markets are acting it could be tested today or by Mon. Without a quick solution to the European debt mess, markets may see a lot more selling into next week. But gold & Treasuries should benefit with all this financial confusion.

Dow Jones Industrials -- 2 weeks

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