Wednesday, March 23, 2011

Lower markets on greater worries about European debts

Dow fell 20 taking it just below 12K, decliners ahead of advancers 5-2 & NAZ dropped a bigger 15.  Bank stocks were weak again.  The Financial Index is 14 below its recent interim high, proving to be a rough ceiling to crack thru.


Value 217.11 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change    -2.07  (-0.9%)

After its recent run, the Alerian MLP Index fell 1+ to the 373s while the Dow Jones REIT Index was down 3½ to the 227s.  Junk bond funds were little changed but Treasuries rose on rising fears in stock markets.  The yield on the 10 year Treasury bond fell 5 basis points to 3.29% (still above its recent lows around 3.2%).  Oil extended gains after the Energy Dept said stockpiles of gasoline fell more than forecast.  Gold gained to near a record on unrest in Libya, the Mideast & increased concerns about Europe's debt crisis spurred demand for an alternative investment.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

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

CLK11.NYM...Crude Oil May 11...105.45....Up 0.48  (0.5%)

GCH11.CMX...Gold Mar 11........1,436.90 ...Up 9.40  (0.7%)

Buyers of new homes plunged in Feb to the fewest on records dating back nearly half a century  New-home sales fell 16.9% last month to an annual rate of just 250K homes according to the Commerce Dept, the 3rd straight monthly decline & far below the 700K pace that is view as healthy.  The median price of a new home dropped nearly 14% to $202K, the lowest in over 7 years. New home prices are 30% higher than of those being resold, twice the markup in healthy housing markets.  Builders have struggled to compete with a wave of foreclosures that has lowered the price of previously occupied homes.  Last year was the 5th consecutive year of declines for new-home sales after they reached record highs during the housing boom.This impacts the recovery in unemployment.  Each new home creates an average of 3 jobs for a year & $90K in taxes, according to the National Association of Home Builders.  The housing news keeps going from bad to worse.  

New-Home Sales Plunged in February to Record Low- AP

Dallas Fed President Richard W. Fisher

Richard Fisher
Photo:   Bloomberg

Richard W. Fisher, President of the Federal Reserve Bank of Dallas, said he sees “extraordinary speculative activity” in the US after the central bank pumped record amounts of stimulus into the economy. “There is an enormous amount of liquidity sloshing around,” the regional bank chief said in a speech today in Berlin. “There is abundant liquidity in the machine we know as the United States economy.”  He reiterated his view that no further monetary stimulus will be needed after the Fed finishes its planned $600 billion of Treasury purchases through Jun   Fisher has criticized the plan, which policy makers voted to keep in place after their Mar 15 meeting.  “We have done our job,” Fisher said at a forum in Berlin. “We are certainly at risk of doing too much now.”  Fisher repeated remarks he made yesterday in Frankfurt that he’s seeing signs of excess evidenced in the surge of so-called covenant-lite loans & the return of payouts by private equity firms.  Maybe these words will haunt the markets, as did Alan Greenspan's years ago. 

Fed’s Fisher Sees ‘Extraordinary Speculative Activity’ in U.S

The gov in Portugal could collapse after opposition parties withdrew their support for another round of austerity policies aimed at averting a financial bailout.  The expected defeat of the latest spending plans by the minority will likely force its fall which could stall efforts to deal with the continent's protracted debt crisis.  The vote comes on the eve of a 2-day European Union summit where policymakers are hoping to take new steps to restore investor faith in the fiscal soundness of the 17-nation eurozone, including Portugal. The political tensions fueled a rise in borrowing rates. The yield on the country's 10-year bond was up to 7.57% yesterday, just shy of its euro-era record level. The interest rate has been above 7% for several weeks despite the austerity measures that failed to quell investor fears.  Uncertainty is rising, a major negative for stock markets.

Portugal Faces Lawmaker Vote Threatening to Push Toward Election, Bailout

Stock markets were not able to keep momentum going after an impressive 3 day rally.  Reality is global in nature, not good.  Europe debts, Libyan mess, problems in the rest of the region, Japan's disaster & a recovery that is only sputtering in the US are giving investors reasons to pause before committing more funds to stocks.  The pres is visit Latin America, the only region that has been spared ugly stories (aside from all the killings in northern Mexico). Dow went over 12K but holding that line is proving to be touchy.  It looks like its next move will be heading south.

Dow Industrials (INDU)

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