VerySmartInvesting: Markets tumble on European debt worries

Monday, November 29, 2010

Markets tumble on European debt worries

Stocks fell at the opening & have remained under water. Dow is down 143 taking it below the important 11K resistance level, decliners over advancers almost 4-1 & NAZ dropped 27. Bank stocks were essentially even despite the negative news coming from Europe.

S&P 500 FINANCIALS INDEX

Value	194.34
Change	-0.07 (-0.0%)

The Aleriian MLP Index fell 2+ to the 355s, where it was at the start of the month, while the REIT index fell almost 2 the 214s (where it was at the start of Sep). Junk bond funds were mixed with some still yielding less than 9%. Treasuries rose, but not that much. The yield on the 10 year Treasury bond fell only 2 basis points despite the negative news from Europe & the Federal Reserve purchases of Treasuries.

Treasury yields:

U.S. 3-month		0.16%
U.S. 2-year		0.52%
U.S. 10-year		2.84%

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index --- 2 weeks

Oil has a good gain while gold fell for the 3rd straight session as a strengthening dollar eroded the appeal of the precious metal.

CLF11.NYM

...Crude Oil Jan 11

...84.52

...

0.76

(0.9%)

GCZ10.CMX...

Gold Dec 10....

1,359.40

...

3.00

(0.2%)

Gold Super Cycle Link! Click Here

Following are highlights from the Irish gov statement on its bailout loan package with the IMF & European Union. The fund will total 85B €, 17½B € of which will be contributed by Ireland itself.
This will include:
* 50B € to fund Irish budget
* 35B € to recapitalise banks, including 10B € immediately & 25B € as a contingency fund.
The combined annual average interest rate would be of the order of 5.8% per annum & it will vary according to the timing of the drawdown & market conditions. The statement said, "The assistance of our EU partners and the IMF has been required because of the present high yields on Irish bonds, which have curtailed the State's ability to borrow. Without this external support, the State would not be able to raise the funds required to pay for key public services for our citizens and to provide a functioning banking system to support economic activity." In continued, "The funding will be provided in quarterly tranches on the achievement of agreed quarterly targets." "The Programme has two parts -- the first part deals with bank restructuring and reorganisation and the second part deals with fiscal policy and structural reform. The requirement for quarterly progress reports covers both parts of the programme." Stock markets in Europe & here did not take this news well & headed lower. Irish bonds sold off. The € fell a penny & a half to under $1.31, 11¢ below its recent high. There is talk that Portugal is next in line to receive a bailout. Growth may weaken next year as budget cuts to stem a mounting debt crisis hurt consumer demand & faltering global expansion curbs exports, according to a report published by the European Commission. GDP growth in the 16-nation euro region may weaken to 1.5% in 2011 from 1.7% this year. In particular, the economies of Ireland, Greece & Spain are expected to shrink.

Ireland Wins $113 Billion Aid; Germany Drops Threat on Bonds

EU Says Growth to Weaken as Crisis `Shadow' Remains

Photo: Bloomberg

The National Retail Federation said the average shopper in the US spent 6.4% more over Thanksgiving weekend than last year. More people picked up jewelry & toys, encouraged by the economic rebound. 212M shoppers (including me) went to stores & websites over the holiday weekend, on average spending $365. The proportion of sales online rose to more than 1/3 of the total. Retail sales during Thanksgiving weekend totaled about $45B. More people are scouring for deals earlier, with the number of customers shopping on Thanksgiving Day more than doubling over the past 5 years. On Black Friday itself traffic rose 2.2%, ShopperTrak said & sales rose 0.3% to $10.7B. The sales increase would be rated as modest.

Thanksgiving Weekend Sales Rise 6.4% as Shoppers Splurge

European debt worries starting with Ireland dominate the news. North Korea is rattling its swords & that situation has to be watched. Retail sales were maybe good enough, but not great. Today is Cyber Mon which all retailers are using as an excuse for promotions, hoping to generate $1B in sales. Stock markets are on defense Dow is back to where it was at the start of Oct when it was approaching 11K. A close below 11K will be a negative sign, especially with all the economic problems worldwide.

Dow Jones Industrials --- 2 weeks