Monday, May 23, 2011

Lower markets on European debt worries

Stocks sank at the opening & remained deeply in the red for the rest of the trading session.  Dow finished down 130, decliners over advancers 4-1 & NAZ fell 44.  Bank stocks led the way down with the Financial Index closing near its lows for the day (& 5 months).


Value208.55One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -2.81    (-1.3%)

The 3 day winning streak for the MLP index ended today while the REIT index fell 2½ to 240 (10 off its recent highs).  Junk bond funds slid off their yearly highs but Treasuries rose, pushing 10-year note yields to the lowest this year, on concern the European debt-crisis is worsening & reports this week will show the US recovery is losing momentum.  Oil declined on worries that economic growth will slow & fuel consumption decline.  Gold rose to the highest in more than a week as the debt crisis spurred demand for the precious metal as a haven.


Value362.72One-Year Chart for ALERIAN MLP INDEX (AMZ:IND)
Change  -3.18    (-0.9%)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLN11.NYM...Crude Oil Jul 11...97.63 ...Down 2.47  (2.5%)

Live 24 hours gold chart [Kitco Inc.]

Photo:  Yahoo

IBM surged past Microsoft (both Dow stocks) in market value for the first time in 15 years, marking the latest twist in the fluctuating fortunes for technology companies.  "Big Blue" has refashioned itself as a specialist in business software, servers & consulting, jettisoning its PC business along the way.  An investment of $100K in both stocks 10 years ago would now have risen to $143K in IBM & dropped to $69K for MSFT.  Apple (AAPL) passed MSFT in market value last year, making it the world's biggest tech company.  AAPL market value is $308B, IBM is $203B & MSFT is $201B. 

International Business Machines Corporation (IBM)

stock chart

Microsoft Corporation (MSFT)

stock chart

LinkedIn declined again after more than doubling in its IPO on Thurs.  The shares dropped $4.79, or 5%, to $88.30. LNKD market value is $9B, about 23 times 2011 revenue, assuming Q1 sales are matched the rest of the year.  Its market value can be compared with the industry giants above.

LinkedIn Shares Fall After Doubling in IPO Week

LinkedIn Corporation (LNKD)

stock chart

More trouble with European debts.  Belgium had the outlook on its debt rating lowered to negative at Fitch which joined S&P saying that political deadlock complicates efforts to cut the euro area’s 3rd-highest debt load.  Fitch may cut Belgium’s AA+ rating, the second-highest investment grade, should the country fail to adhere to its deficit targets. Belgium needs to reduce its budget deficit to less than 3% of GDP next year & balance its books by 2015, as agreed with the European Commission.  A caretaker administration has ruled Belgium since elections last Jun as north-south tensions in the divided nation led to the longest postwar political stalemate in Western Europe. A strengthening economic recovery has helped shrink the deficit to an estimated 3.6% of GDP this year from 5.9% in 2009, though reducing the debt will require political resolve, Fitch said.  Problems are not as serious as with Greece, but even the strongest have to control excessive spending.

Belgium’s Debt Outlook Revised to Negative by Fitch on Political Stalemate

The price for gas at the pump keeps slipping, down 15¢ from its highs, but remains at troubling levels for the economic recovery.

National Unleaded Average
Current Avg.$3.843$3.984$4.110$4.057$3.285$4.323
Yesterday Avg.$3.852$3.994$4.120$4.062$3.276$4.311
Week Ago Avg. $3.955$4.096$4.221$4.123$3.334$4.388
Month Ago Avg. $3.856$3.991$4.121$4.136$3.267$4.299
Year Ago Avg. $2.801$2.974$3.082$3.058$2.232$2.93

Source:   AAA

Stocks keep drifting lower in May as per the chart below.  The strong dollar is just another excuse for the market slide.  The € had been up to $1.49 at the start of this month, now it's at $1.40½.  A stronger dollar will be hard on multi nationals which translate foreign earnings back to the US.  Also there are concerns that a slowing of growth in emerging markets will hurt the big boys which are getting much of their growth in these markets.  The IMF needs a new leader to deal with European debt problems & that could get political with emerging countries pushing for one of theirs to take over rather than another European.  It all spells stuck in the mud, not good for stock markets.

Dow Industrials (INDU)
stock chart

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