Monday, May 16, 2011

Markets nervous about the IMF & European debt problems

Dow dropped 47, decliners over advancers 2-1 & NAZ a very big 46, hurt by weakness in Yahoo (YHOO) & Amazon (AMZN). Banks sold off in the PM. The Financial Index is in the red YTD, not good for what is supposed to be a strong market.

S&P 500 FINANCIALS INDEX

Value	211.82
Change	-0.26 (-0.1%)

The MLP index dropped 4 to below 357. The chart (for the tracking index fund) below was extended to 3 months, because the one month chart looks so ugly. The index is down 33 already this month! The REIT index was up a fraction in the 242s, down from the AM reading. Junk bond funds were mixed (at their relatively lofty levels) & Treasuries rose. The yield on the 10 year Treasury bond fell to under 3.15%, its lowest in months, despite the QE2 bond buying program ending in a few weeks. Oil dropped again & drivers are starting to see a little relief at the gas pump just ahead of the summer driving season. The green line in the chart for gold shows it has been sloshing around the low end of its recent trading range.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.02%
U.S. 2-year		0.52%
U.S. 10-year		3.15%

CLM11.NYM

...Crude Oil Jun 11

...97.03

...

2.62

(2.6%)

IMF Managing Director Dominique Strauss-Kahn

Photo: Bloomberg

Police said the maid picked Dominique Strauss-Kahn (above) out of a lineup as being her molester. The IMF, which plays a key role in efforts to control the European debt crisis, named an acting leader & said it remains "fully functioning and operational" despite the weekend arrest of its managing director. A lawyer for Strauss-Kahnsaid that his client will plead not guilty after a somber-looking Strauss-Kahn was escorted out of the precinct with his arms tied behind his back. "He intends to vigorously defend these charges and he denies any wrongdoing," his lawyer said. But a court just ordered that Strauss-Kahn be held without bail after prosecutors said he presented a flight risk. This case is getting a lot of attention & has major implications for stock markets because IMF has important work in dealing with European debt problems.

IMF’s Strauss-Kahn Ordered Held Without Bail

European finance chiefs endorsed a €78B ($111B) bailout for Portugal & stepped up pressure on Greece to do more to win improved aid terms. Portugal followed Greece & Ireland in seeking emergency loans from the European Union & the IMF, bringing to €256B the aid provided to stamp out the sovereign debt crisis. The backing for Portugal was clouded by the absence of IMF Managing Director Dominique Strauss-Kahn. “Greece also has a huge privatization potential and the Greeks should help themselves before calling for more money,” the Austrian Finance Minister, Maria Fekter, said. Greek bonds fell. Finance ministers said the IMF’s role as the contributor of a 3rd of the bailout money for Greece, Ireland & Portugal won’t be hampered by Strauss-Kahn’s arrest. That's what they are supposed to say!

Greece Pressed by EU to Sell Assets

Morganza Opens Nine Gates as Water Flows to Cajun Country

Photo: Bloomberg

2 more gates on the Louisiana floodway were opened today to ease pressure on the engorged Mississippi River, crests at New Orleans & Baton Rouge will be lower than forecast. The first 11 gates of the 125-gate Morganza were opened starting 2 days ago, sending excess Mississippi water down the Atchafalaya River. The river was threatening to reach levees at Baton Rouge, home to an 229K & industrial areas that include an Exxon Mobil (XOM) refinery, the company’s 2nd-largest US facility. This flooding is very serious & could have a major impact on the US economy, as it affects businesses around the US.

New Orleans Crest To Be Lower Than Forecast

The price of gas at the pump eased back to $3.95½, off the highs but still up substantially YTD.
State's Graph

Source: AAA

The Treasury notified Congress that it reached the debt limit. That means it can not borrow any more until Congress approves an increase in the ceiling of $14T. The Treasury will postpone some retirement payments to buy a few more weeks, but will be in deep trouble by Aug if the ceiling is not raised. At the same time, certain European countries are struggling to refinance their debts. MLPs keep drifting lower, a major difference from 2009 & 2010 when they was the market leaders. Commodities have not rebounded from selling in the last 2 weeks. May is looking like a repeat of last year for stocks.