Friday, June 10, 2011

Dow tumbles below 12,000

Dow dropped 153, decliners ahead of advancers 4-1 & NAZ fell 38.  Bank stocks led the way down bringing the Financial Index to another 6 month low

S&P 500 Financials

Value 196.89 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -3.74    (-1.9%)

The MLP index continued strong, up 1 to the 362s but the REIT index fell 4 to 232s.  Junk bond funds sold off but Treasuries rose on the stronger dollar from increased worries over Greek debts.  Oil fell for the first time in 4 days on concern the global economic recovery is slowing & as the € dropped against the dollar.  Gold also fell back.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLN11.NYM....Crude Oil Jul 11...99.03 .....Down 2.90  (2.9%)

GCM11.CMX...Gold Jun 11.....1,528.70 ...Down 13.40  (0.9%)

Greece's finance minister said the country hopes to secure a 2nd bailout deal this month, & indicated that European Union countries may back calls to get the private sector involved.  George Papaconstantinou defended a new austerity program through 2015 to be voted on in Parliament, saying it was essential to keep Greece solvent.  The measures, worth €28B ($41B), will slap new taxes on austerity-weary Greeks to avoid more blanket tax hikes & cut public sector staff by a further 20%.  "We have a choice between a difficult path and a path of destruction," Papaconstantinou said. "We must fix what's wrong or this country has no future." With yields on its 10-year bonds at near 17%, Greece is highly unlikely to return to markets next year & is negotiating an additional rescue deal to avoid potential default so it can meet its debt obligations for the years through 2014.  But Germany stepped up demands that investors share the cost of a 2nd Greek rescue after Jean- Claude Trichet rejected direct involvement by the European Central Bank.  “We have to insist on the participation of the private sector,” said German Finance Minister Wolfgang Schaeuble, ignoring warnings from credit-rating firms that his proposal to extend Greek debt maturities 7 years would be deemed a default. A working group set up this week is charged with identifying “a good solution for the involvement of the private sector that can and has to be supported by the European Central Bank,” he said. The Greek debt problem is not close to being resolved.

Germany Digs In on Greek Debt Extensions

Toyota Forecasts 31% Drop in Full-Year Profit After Quake

Photo:   Bloomberg

Toyota forecasted a larger-than-expected fall in annual profit & warned that the strong ¥ was making it difficult to justify keeping production in Japan.  TM has struggled to restore output after the earthquake in Mar rocked northeastern Japan & forced automakers to slash output. Ensuing nuclear disaster & power shortages have compounded their woes.  TM reiterated its plan to restore output to pre-quake levels by Nov, helped by a recovery in the supply chain for key parts, & expressed confidence it could claw back market share lost as a result of the quake.  "Once our product supply is back to normal, we can compete with no problem. We have the resources and are fully charged," Toyota Chief Financial Officer Satoshi Ozawa said.  But he warned that TM was getting hammered by the strong ¥.  The Japanese currency hit a one-month high against the dollar this week & is now about 5 ¥ stronger than the 85 per dollar level that TM sees as the break-even point for profiting on production in Japan.
Toyota expects operating profit to fall 35% to $3.7B in the financial year to Mar 2012, well short of the consensus expectations. Global sales are expected to fall 1% to 7.24M vehicles in this fiscal year & is expected to place TM behind General Motors (GM) & possibly Volkswagen in the global vehicle sales rankings this year.

Toyota forecasts 35 pct profit slide after quakeat Reuters

Toyota Motor Corp Ltd Ord (TM)

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This is another dreary day, like most in the last 6 weeks, which has taken the Dow to its lowest level since Mar 18.  Groupon & Pandora have strong demand for their IPOs & are raising the size of their offerings.  However, Ally Financial, which finances GM vehicles among other durables, has postponeded its mult $B offering because of unsettled markets.  There is a lot going on around the world & much of it is negative.  High expectations for growth rates are being reduced.  If sub 12K for the Dow holds at the close, the markets could have a tough time this summer which starts in 11 days.

Dow Industrials (INDU)

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