Wednesday, June 9, 2010

Stocks fall on worries about BP's survival

Early gains did not last, selling began at midday on worries about the economic recovery & fears that BP (BP) might have been dealt a mortal blow with its oil spill in the Gulf. Dow fell 40 (near its lows), advancers were slightly ahead of decliners while NAZ lost 11. Banks & energy led the retreat. The Financial Index had a rally off its 186 lows but may have to test it again.


% Change

The Alerian MLP Index was up 1 to the 292s after reaching 295 earlier. The REIT index had the same kind of story, up a 1¼ to 191 after reaching 196 earlier. Junk bond funds were mixed to higher. The VIX was flat at 33¾. The yield on the 10-year Treasury bond rose 2 basis points to 3.17% after a successful auction at lunchtime (see below).

Alerian MLP Index --- YTD

Dow Jones REIT Index --- YTD


10-Year Treasury Yld Index - YTD

Oil prices rose to near $75 a barrel Wednesday, after FED Chairman Ben Bernanke said European debt problems should not have a major impact on the US economy. Oil slipped back in the PM, but still had a good day while remaining in its 70-75 trading zone. Gold needed to take a rest but it's having an excellent year while stocks aren't.

CLN10.NYM..Crude Oil Jul 10..74.09 ..Up 2.10

GCM10.CMX..Gold Jun 10..1,228.90 ..Down 12.70

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Ben Bernanke said the Federal Reserve will act as needed to aid financial stability & economic growth after restarting emergency currency-swaps to help contain Europe’s debt crisis. "Our ongoing international cooperation sends an important signal to global financial markets that we will take the actions necessary to ensure stability and continued economic recovery," he said today. The impact of the crisis on US growth is "likely to be modest” if financial markets “continue to stabilize." He also reiterated that the US recovery is being restrained by the housing & commercial real-estate markets & repeated his call for Congress to come up with a long-term deficit reduction plan.

Bernanke Says Federal Reserve Will Take `Necessary' Steps to Aid Recovery

The Treasury had an auction for $21B in 10-year bonds today which got little attention. The auction went well, but it had good demand & a high percentage were bought by indirect bidders (including central foreign banks). The size of these auctions are down from a few months ago. Because of an improving economy, the Treasury needs less money to finance the deficits. In addition, the interest rate was one of the lowest in the last year. Unfortunately the other side of the coin is that $1+T deficits are not going away anytime soon.

Rumors surfaceed that BP (BP) could be forced to seek bankruptcy protection in about a month. The stock plunged 5.48 (16%) to 29.20.

BP --- YTD

The € slipped below $1.20 as Europe struggles to get its fiscal finances in order. Stocks lost early gains when financial & energy companies turned lower after the FED said economic growth in many parts of the country was subdued. The threat of BP going under would unsettle any market. Dow continues to slug it out in the trenches essentially at its 9 month lows. NAZ, which had been a lot better, has a similar story!

Dow Jones Industrials --- YTD

Nasdaq --- YTD

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