Markets tumble on even greater European worries

Dow started lower & kept sinking to a loss of 144, decliners over advancers 7-1 & NAZ fell 39. Banks were also hit as the news for them goes from bad to worse. The Financial Index has fallen almost 30 from its recent highs.


S&P 500 FINANCIALS INDEX

Value 197.58

Change -3.11

% Change -1.6%

The Alerian MLP Index plunged 8½ to the 283s (down an amazing 22 since Thurs!) & also down YTD. The index is 11% below its highs in late Apr. 300 was a tough ceiling to crack, but it managed, now it has to do that again. All high yielders are getting hit. The REIT index dropped 5½ to the 194s (down 11% from recent highs). Junk bond funds are down 1-3% & off 10% from recent highs. Treasuries are hot again. The yield on the 10-year Treasury bond was down another 5 basis points to 3.33%. Fears are rising taking the VIX, volatility index, up 3 to the 36s. Its chart below is bleak to say the least.


Alerian MLP Index --- 1 week




Dow Jones REIT Index -- 2 weeks




VIX --- 1 month





Oil fell to 68 (8 month low) on European fears. Even gold was hit by selling in these gloomy markets.

CLM10.NYM

...Crude Oil Jun 10

...68.72

... 0.69 .......(1.0%)

GCK10.CMX

...Gold May 10

...1,1197.20

..., 17.10 .......(1.4%)

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Homeowners who missed at least 1 mortgage payment surged to a record in Q1, the foreclosure crisis is far from over. More than 10% missed at least one payment in Q1, up from 9.5% in Q4 of l2009 & 9.1% a year earlier. These figures are adjusted for seasonal factors (heating bills & holiday expenses) which push up mortgage delinquencies near the end of the year. Many of those borrowers become current on their loans again by spring. Without adjusting for seasonal factors, the delinquency numbers dropped, as is normal going from winter to spring. More than 4.6% of homeowners were in foreclosure, another record. The foreclosure crisis appears to be stabilizing, seasonal adjustments may be exaggerating the change from the previous quarter. But it remains a bad situation, which, at least, is not getting worse. Making matters worse, purchase applications for mortgages plummeted 27% & have declined almost 20% over the past month, despite relatively low interest rates. This data suggests that the tax credit pulled sales into Apr at the expense of the remainder of the spring season. This drop occurred even as rates on 30-year mortgages continued to fall to 4.83% (lowest level in 6 months).

•Mortgage Foreclosures in U.S. Rise to Record as Job Losses Strain Budgets


Foreclosures - 1 year






Hewlett-Packard (HPQ), Dow stock, said quarterly results beat expectations & it raised full-year earnings guidance on strong demand for personal computers & servers as well as a resurgence in its printing business. HPQ reported an 8% jump in FY Q2 revenue (ending Apr 30) from its printing division, double the growth in Q1 (accounting for about 20% of HP's revenue & 1/3 of operating profits). The company is forecasting EPS of $4.45 - $4.50 in FY 2010, up from a previous target of $4.37 - $4.44 (& in line to slightly stronger than the average forecast for $4.45). Growth in corporate-oriented businesses should help offset some of the impact from a weakening European currency. HPQ had EPS of 91¢ in Q2, up from 71¢ last year. Excluding items, EPS was $1.09 versus forecasts of $1.05. Net revenue rose 13% to $30.8B. The stock rose 44¢ but $1 below its earlier highs.

Hewlett-Packard raises outlook
Reuters

Hewlett-Packard --- 2 years

Credit-default swaps soared as Germany put into effect a curb on using the contracts to speculate on European sovereign debt sparked concern among investors about increasing gov regulation. This will stop traders buying default protection on gov bonds they don’t own (naked swaps) as lawmakers debate a bill authorizing their contribution to a $1T bailout to support the €. The unexpected ban, done independently of the European Union, came after the rescue package failed to stop the € from weakening to a 4-year low ($1.22) & as banks became increasingly reluctant to lend to one another. In later trading the € rebounded to $1.23¼.

•Default Swaps Soar Following Merkel's `Act of Desperation': Credit Markets



Financial markets are becoming increasingly confused! The Europe mess just keeps droning on. But don't forget the banking regulation bill, oil spill in the Gulf, housing industry stilled bogged down in the dumps, high unemployment that is not going away soon, etc. It's surprising that gold is taking such a big hit today. Dow is testing the 10,380 close a couple of weeks ago. Bets are it will set a new low today.


Dow Jones Industrials -- 2 weeks

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