Monday, November 22, 2010

Euro debt concerns cause markets to slip

Dow fell 75, decliners ahead of advancers 2-1 but NAZ was even as money was flowing into Treasuries.  Bank stocks sold off bringing the Financial Index solidly below 200 (where it has been for months).


Value 196.43 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -3.03  (-1.5%)

The MLP index fell ½ to the 357s while the REIT index was flat in the 214s.  Junk bond funds were little changed, not sure what to make of the Irish bailout proposal.  Treasuries were strong as investors wee seeking safety with the European debt issues.  The yield on the 10 year Treasury bond fell a very large 6 basis points to 2.81%.

Treausry yields:

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10 Year Treasury Yield Index   ---   2 weeks

Oil fell after Ireland’s bailout failed to ease concern that the region’s debt crisis may spread, hindering economic growth & reducing fuel demand while gold was essentially even.

BRENT CRUDE     84.09  -0.25  -0.3%
Gold 1355.20 +2.90 +0.2%

Gold Super Cycle Link! Click Here

Irish bonds climbed after the gov requested financial aid from the European Union & International Monetary Fund. Moody’s said it would likely downgrade Ireland’s credit rating by several levels & the Irish Green Party said it would quit the gov after the next budget & seek a new election. Ireland becomes the 2nd euro nation to seek a rescue after Greece. The nation will pass some of the money to its banks, with the rest helping the gov avoid having to sell bonds.  The yield on Irish 10-year bonds fell 3 basis points to 8.31% (not a vote of confidence) & European stocks fell.  The bailout may total 95B €s (about $130B). Ireland needs 65B €s to fund itself for the next 3 years & 30B €s for the banks.  Other peripheral bonds were mixed. Portuguese bonds advanced while Greek & Spanish 10-year bonds sold off.  The ongoing drama is making stock markets nervous. 

Irish Bonds Jump as Government Requests EU-IMF Bailout; Portugal Rallies

The General Motors (GM) IPO last week may help the company get consideration from car & truck buyers.  That buzz in the media could make it more likely that consumers will consider buying a GM vehicle.  Moody's assigned GM a Ba2 rating (the second level below investment grade) on Oct. 11 with a stable outlook, a far cry form bankruptcy last year. At the movies this weekend, we saw an ad from Chevrolet, part of an increase in ads to promote GM cars.  It conveys that GM is a serious contender in the auto market & the Volt car is creating excitement as a car of the future which will be available soon.  The stock is essentially even today, but up $1 from its IPO last week in an uncertain market.

GM Stock Offering May Boost Consideration From Auto Shoppers, Moody's Says

General Motors   ---   3 days

Novell (NOVL), the maker of Linux operating-system software, agreed to be bought by Attachmate for $2.2B in cash, ending 8 months of bidding. NOVL investors will get $6.10 per share, 9% more than NOVL closing price on Nov 19.  The hope is to reshape the company under private ownership so it can have an IPO in a few years.  NOVL has reported 8 qtrs of revenue declines with the recession hurting customer orders. The stock spiked up early this year on hopes of a buyout & has been trading in the 5s since then.  Today, it's up 36¢ to 5.95.

Novell to Be Bought by Attachmate for $2.2 Billion

Novell   ---   YTD

Markets are back to floundering.  Last week Harrah's Entertainment canceled its IPO.  It was hoping to raise more than $½B but was crowded out of the market by the GM IPO along with business fundamentals that weren't strong.  IPOs are having a mediocre year at best, this shouldn't happen in a strong market.  Treasuries are back in demand with the uncertainty over European debts.  This should be a quiet, holiday week but I have a feeling there will be excitement with a downward bias.

Dow Jones Industrials   ---   2 weeks

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