Monday, November 29, 2010

Markets trimmed morning losses even with Euro debt worries

Stocks recovered much of the AM losses.  Dow finished down 39 (allowing it to remain above 11K), decliners ahead of advancers a more mild 3-2 & NAZ fell 9.  Bank stocks had a good day.  After trading about even in the AM, they rose in the PM giving the Financial Index a decent gain.


Value195.52One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   1.11  (0.6%)

MLPs rebounded in the PM reducing the loss on its index to 0.83 at 357 while the REIT index rose pocket change in the 216s.  Junk bond funds were mixed to higher.  Treasuries rose, with 10-year bonds up for a 3rd day in a row, on concern the rescue for Ireland will fail to contain Europe’s sovereign-debt crisis.  The yield on the 10-Year Treasury bond fell 3 basis points to 2.83%.  The Federal Reserve bought $9.4B of Treasuries as part of its plan to pump $600B into the economy.

Good news for MLPs, Kinder Morgan (KMP) just announced it plans to distribute $4.60 per unit in 2011, a 4.5% increase over its 2010 budget target of $4.40 per unit.  The units rose 11¢ to 70.14

Kinder Morgan Energy Partners Expects to Distribute $4.60 Per Unit for 2011 Business Wire

Treasury yields:

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

Alerian MLP Index   ---   2 months

Dow Jones REIT Index   ---   2 months

10-Years Treasury Yield Index   ---   2 months

Oil rose to a 2-week high as US consumers spent more over the Thanksgiving weekend than last year, a sign confidence in the economy is strengthening.  Gold rose for the first time in 3 sessions on speculation that Europe’s sovereign-debt crisis will boost demand for gold.

CLF11.NYM...Crude Oil Jan 11...85.73 .....Up 1.97  (2.4%)

GCZ10.CMX...Gold Dec 10.....1,368.40 ...Up 6.00  (0.4%)

$$$ Gold Super Cycle $$$  

Defaults on commercial property mortgages held at US banks rose in Q3, extending a pattern begun in late 2006 when real estate prices were close to a peak.  $604M of loans on office buildings, malls, hotels & other commercial properties went into default in Q3, pushing the default rate to 4.36% of outstanding loan balances, from 3.41% last year & 4.27% in Q2. The record default rate was 4.55% in 1992.  The global credit crunch & plunge in property values have prevented borrowers from refinancing while job losses have reduced rental demand. But property prices are starting to recover in many markets, easing the strain on banks. Commercial property prices rose 4.3% in Sep from the previous month as demand rose for the best office buildings in major markets such as New York & Washington, Moody’s Investors Service said last week (after the Moody’s/REAL Commercial Property Price Index had fallen to an 8-year low in Aug). Renewed sales of commercial mortgage-backed securities are helping banks clear loans from their books as they reduced their commercial-mortgage holdings by $8.8B in Q3 & $18.5B YTD. Banks hold $1.07T of commercial mortgages & $216B of apartment mortgages.  A total of $46.8B of commercial mortgages & $10.1B of apartment mortgages are now in default (past due by 90 days or more or in non-accrual status, meaning the bank doesn’t expect to make a full recovery on it).  This is one more reason bank stocks have been trudging along for much of this year.

Defaults on U.S. Commercial Mortgages Held by Banks Rose in Third Quarter

The 85B € ($113B) bailout package for Ireland failed to quench the market turmoil menacing the € (down more than a penny today in the $1.31s).  Irish 10-year bonds slid after an early advance, Spanish bonds slid by the most since the launch of the € & European shares sank.  6 months after the Greek rescue exposed flaws in the euro’s makeup & fueled doubts, policy makers again found themselves meeting in Brussels to calm markets. In addition to Ireland’s rescue package, finance chiefs also endorsed a Franco-German compromise on post-2013 rescues that means investors won’t automatically take losses to share the cost with taxpayers. And Greece was told it could have an extra 4½ years to repay emergency loans to match the 7-year term in the Irish deal.  While Greece let its budget get out of hand & Ireland fell prey to a housing bust, Portugal suffers from a lack of competitiveness that kept average economic growth below 1% in the past decade. Its gov has also been slower to cut its deficit than others.  European loan problems are not going away soon.

EU's Irish Rescue Fails to Stem Contagion; Spain Bonds Drop

Buying in the PM enabled markets to recover most of their losses, Dow closed 123 above its lows (below 11K).  Late day buying was encouraging for the bulls but Dow remains stuck where it was 2 months ago while bank stocks have hardly moved for months.  The 11K support held today but pressure is building to take it lower. 

Dow Jones Industrials   ---   2 months

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