Friday, July 16, 2010

Markets tumble on weak revenue growth at major banks

Stocks dropped at the open & kept sinking all day. The Dow fell 261 (closing near the lows), decliners over advancers 4-1 & NAZ fell 70. Selling was led by banks as early earnings reports are getting poor grades. The Financial Index closed near its daily low, any daily move over 5 is notable.


Value189.91One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change-8.69 (-4.4%)

MLPs were hardly touched by selling in the stock markets. The index fell only a fraction to the 324s, remaining close to its all-time record of 342 made in Jul 2007. Meanwhile the REIT index dropped 7½ to just under 190. Junk bond funds were up fractionally. The VIX jumped 2 to 27 signaling higher fear levels. Treasuries were strong as the yield on the 10-year Treasury bond dropped 4 basis points to 2.94%. The € continued strong at $1.29¼.

Alerian MLP Index -- YTD

Dow Jones REIT Index -- YTD


10-Year Treasury Yld Index -- YTD

Oil held in there fairly well given the decline in the stock markets but gold felt more selling pressure.

CLQ10.NYM..Crude Oil Aug 10..75.85 ..Down 0.77
GCN10.CMX..Gold Jul 10..1,188.00 ..Down 20.10

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The Thomson Reuters/University of Michigan preliminary index of consumer sentiment decreased to 66.5, the lowest since Aug & less than all forecasts. Another report showed inflation cooled last month. The sentiment figures showed a record-low percentage of Americans expected their incomes will rise in the next 12 months, adding to the growing pessimism over employment prospects. Additionally, the Labor Dept said consumer prices fell 0.1% in Jun, a 3rd consecutive decrease. The decrease brought the gain in the cost of living over the past 12 months down to 1.1% from 2% in the year ended May. Costs of goods & services excluding food & energy were up 0.2%, more than forecast & the biggest gain since October. More dreary data to mull over.

Consumer sentiment - 1 year

One-Year Chart for Sentiment (CONSSENT:IND)

CPI less food & services - year

One-Year Chart for MoM % SA (CPUPXCHG:IND)

Bloomberg TV was all over the Apple (AAPL) story about problems with the antenna on the new iPhone 4. It rates as much ado about nothing, at least so far. They could have spent more time on the S&P Financial Index (shown above) which plunged today after 3 big banks (plus GE which is a semi bank) reported only earnings that were not good enough, higher divs are a long way off. The Bloomberg website then reported that rules in the financial industry overhaul, including the Durbin amendment’s curbs on debit-card fees, may prompt the charge & trim annual revenue by $2.3B according to Bank of America (BAC).

BofA's `Brutal Honesty' on Cost of Rules Pushes Banks Lower

Bank earnings reports are being given very bad marks. The cautious attitude going forward along with a reluctance to raise divs is making them unpopular. Dow had an 800 rally in little more than a week, so profit taking was to be expected. But today's selling looks to have more serious roots.

Dow Jones Industrials -- YTD

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