Tuesday, March 15, 2011

Markets plunge as nuclear crisis escalates in Japan

Stocks are having one of their worst days since the financial meltdown period 2 years ago, only now meltdown has a new & ominous meaning.  Dow is off 205, decliners ahead of advancers 7-1 & NAZ fell 45.  Banks also suffered, taking the Financial Index to levels last seen in Dec.


Value 215.84 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -4.53  (-2.1%)

The MLP Index is off 8 to the 358s after reaching the 353s with 350 being considered an important resistance line.  The REIT fell 3 to the 227s, again off its lows in the 225s.  Junk bond funds were weak, falling around 1%.  Oil & gold saw massive selling:

CLJ11.NYM....Crude Oil Apr 11...97.40 ....Down 3.79  (3.8%)

GCH11.CMX...Gold Mar 11.....1,387.80 ...Down 36.80  (2.6%)

JPMorgan Chase Capital XVI (AMJ)

stock chart

Treasuries surged, pushing 10-year note yields to their lowest level this year, as Japan asked for calm while engineers worked to cool nuclear reactors damaged by last week’s earthquake.The benchmark 10-year note yields fell the most in almost 3 months as the Bank of Japan's efforts to provide liquidity & expand an asset-purchase program failed to stem a selloff in stocks, which sent the Nikkei 225 Stock Average down as much as 14%! Yields on 10-year bonds decreased 11 basis points to 3.25%.  10-year yields touched 3.20%, the lowest level in 3 months. 2-year note yields slid as much as 9 basis points to 0.50%, the lowest in more than 3 months while yields on 30-year bonds decreased as much as 12 basis points to 4.41%.  The Bank of Japan added 8T ¥ ($98B) to the banking system after a pledge yesterday to keep pumping cash as needed following the addition of a record 15T ¥ to the economy.

Treasuries Advance as Japan's Reactor Threat Encourages Demand for Refuge

Treasury yields:

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

This is one ugly chart!  Just a couple of weeks ago, the Nikkei was heading for 11K, now it's trying to hold above 8K.  Yesterday's loss would be comparable to the Dow dropping 800.

^N225...Nikkei 225...8,605.15 ...Down 1,015.34  (10.6%)

Nikkei 225 Historical Chart

Nikkei 225 Historical   Chart

Back to business in the US, the homebuilders' pessimistic outlook improved slightly this month, but remains dim amid falling home prices & a weak pace of construction.  The National Association of Home Builders said that its index of industry sentiment for Mar improved slightly to 17, the first gain in 5 months, after 4 straight readings of 16. Any reading below 50 indicates negative sentiment about the market & the index hasn't been above that level for 5 years!  Last year was the worst in more than a decade for sales of previously owned homes & the worst for new-home sales in nearly a half-century.  Home prices are expected to hit bottom this year before a modest recovery takes hold. Large swaths of the hardest hit states, including Arizona, California, Florida & Nevada, continue to struggle with foreclosures & short sales (when a lender allows a borrower to sell their property for less than what is owed). However, the Mar reading is the highest in a year. The upcoming spring season is traditionally the best for home sales.

U.S. Homebuilder Confidence Rises in March to Highest Level in 10 Months

Confusion reigns in markets worldwide bringing the a heavy dose of selling.  There's not much to say besides ride out this storm.  Lower stock prices bring higher yields (for stocks paying divs).  This is the time to prepare lists for attrractive stocks with lower target prices (& higher yields) for future buying.  One ray of hope, after initial selling at the opening (based on gut reactions), buyers are reducing the damage.  Dow is presently 100 above its low.

Dow Industrials (INDU)

stock chart

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