Tuesday, March 22, 2011

Markets slide on increasing European debt worries

Stocks withered after a 3 day rally. Dow dropped 17, decliners ahead of advancers 4-3 & NAZ fell 8. Bank stocks had a dreary day after excitement receded from easing restrictions by the Federal Reserve.

S&P 500 FINANCIALS INDEX

Value	219.17
Change	-1.17 (-0.5%)

MLPs had another good day, taking the index up another 1+ to the 374s, 9 short of the record set in early Mar. But the REIT index fell 1+ to 231 (10 below its recent high) while junk bond funds were mixed remaining at or near interim high evels. Oil pushed above $105 per as traders focused on a series of intl crises that could tighten global supplies at a time when consumption is expected to increase. Gold rose for the 5th straight session when tensions in the Mideast & Libya boosted demand for an investment haven.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.09%
U.S. 2-year		0.65%
U.S. 10-year		3.33%

CLJ11.NYM

....Crude Oil Apr 11

...104.46

...

2.13

(2.1%)

GCH11.CMX

...Gold Mar 11

.......1,427.50

...

1.30

(0.1%)

Irish notes slid, leading bonds in Europe's most indebted nations lower, & the € fell on concerns the region’s leaders are struggling to fix the gov finance crisis. Yields on Irish 2-year notes surged 62 basis points to 9.87% after rising as high as 10.18%. Yields on similar Portuguese & Greek debt climbed at least 26 basis points. The € weakened against 12 of 16 major peers. The slump in Irish notes came after EU finance chiefs settled yesterday on how to enable a permanent rescue fund to lend € 500B ($712B) as of 2013, while remaining divided over how to get the current stopgap fund to its full capacity. Portugal forecast that its economy will contract this year as investment declines & it cuts spending to narrow the budget deficit. Analysts believe Portugal’s gov may collapse tomorrow as the country’s parliament votes on a plan for fiscal austerity measures. Meanwhile, Ireland said its bailout program is capable of handling any outcomes from next month’s stress tests on banks. Allied Irish Banks, a gov controlled lender, responded to speculation by saying it has “no plans” to miss interest payments on its bonds. European uncertainties are on the rise, not good for stock markets (as was the case last May).

Irish, Portuguese Bonds Sink on Debt Concern; Stocks Retreat

Wells Fargo (WFC), the largest US home lender, is marketing 10-year notes for the first time in over 3 years after announcing a special Q1 div & a share buyback program. WFC could offer $2.5B in notes that yield 130 basis points more than similar-maturity Treasuries. Proceeds will be used for general corp purposes. WFC said last week that it will pay a 7¢ per share special (extra) dividend in Q1 & buy back an additional 200M shares after the Federal Reserve approved its capital plan. The bank last sold 10-year notes in Dec 2007, issuing $3B of 5.625% notes. The new notes may be rated A1 by Moody’s & AA- by Standard & Poor's. The stock fell 37¢ in lackluster trading.

Wells Fargo May Sell $2.5 Billion of Debt After Raising Lender's Dividend

Wells Fargo & Company (WFC)

Gas at the pump was up a penny to $3.55. Another wave of price hikes is expected based on crude oil trading over $100 per barrel.
State's Graph

Source: AAA

Little was accomplished in trading, but worries are on the rise. The Japanese nuclear mess may be getting better, difficult to tell what's happening there. Factories at Sony & Toyota, among others, have had to shut because of a shortage of supplies. Libya is an ongoing, low level war with a fuzzy mission. Now European debt concerns are on the rise. The US economy is sort of improving, but housing data this AM was a vivid reminder that all is not well. These conditions bring out buyers for gold which is just below the records reached 2 weeks ago.