Wednesday, June 15, 2011

Markets drop on increased Greek debt worries

Stocks sank at the opening but have recovered some of those losses.  Dow is down 84 (45 above the lows) as it hovers near 12K, decliners over advancers 5-2 & NAZ fell 20.  Bank stocks fell, taking the Financial Index below 200.

S&P 500 Financials

Value 199.66 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -2.63    (-1.3%)

The MLP index fell 1, staying close to 360 & the REIT index dropped 2 to the 234s.  Junk bond funds were slightly higher & Treasuries were lower, taking the yield to its highest in almost a month. Oil pared declines after the Energy Dept said stockpiles fell 3.4M barrels. Gold has not been responding to the Greek debt situation.

JPMorgan Chase Capital XVI (AMJ)

stock chart

The link below shows how the major markets are faring today:

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLN11.NYM....Crude Oil Jul 11...99.22 ...Down 0.15  (0.2%)

GCM11.CMX...Gold Jun 11.....1,526.60 ...Up 2.80  (0.2%)

Demonstrators in Greece
Photo:   Yahoo

Thousands of angry Greeks protested in front of parliament, a sign of rising opposition to austerity & European officials said a new rescue deal for Greece might be delayed until next month.  Rising risks to the Greek budget plans & signs of deep divisions over the role private creditors should play in a new aid package pushed the € to a 2-week low against the dollar (under $1.43) & sent bond yields of peripheral euro states spiraling up.  European banking stocks also sold off, down as much as 7%.  Prime Minister George Papandreou must push through a 5-year deficit reduction & privatization program to continue receiving aid from the European Union & IMF.  The package includes tax hikes & spending cuts totaling €28B through 2015. It also aims to raise €50B through privatizations.  The European Commission said it still expected Greece to receive the €12B aid it needs next month to pay maturing debt.  Uncertainty keeps climbing.

Greece Bailout Prospects Darken as European Bickering Weakens Papandreou

Americans paid more for food, cars & clothing in May but overall consumer prices rose by the smallest percentage in 6 months, slowed by the first drop in energy costs in nearly a year.  The CPI rose 0.2% in May according to the Labor Dept,s down from 0.4% in Apr. Food costs rose 0.4%, while energy costs fell 1%.  "Core" prices rose 0.3%, the most in nearly 3 years.  Autos & apparel drove core consumer prices higher. New car prices rose 1.1% last month, after rising 0.7% in Apr. Auto dealers have fewer popular fuel-efficient models on their lots because of the supply disruptions & are offering fewer deals to boost sales.  Clothing rose 1.2%, a result of higher cotton prices & increasing labor costs overseas.  Consumer prices rose 3.6% from Jun 2010 through May 2011, the biggest one-year gain since Oct 2008 (which compares with a 1.1% as recently as Nov).  Excluding food & energy, which account for about 20%, the index rose 1.5% in that same period, below the Federal Reserve's informal inflation target of about 2%.  Inflation is just high enough that it remains a potential worry. 

Consumer Prices in U.S. Rose in May

Pandora begins trading on NYSE
Photo:   Yahoo

Pandora Media (P) soared more than 50% on its market debut.  The offering price was $16, but the shares opened at $20 & rose as high as $26 valuing P at $4.2B.  That is nearly twice the current value of AOL (AOL) but a fraction of giants such as Google (GOOG) or even Yahoo (YHOO).  Still, not bad considering it has no profits!  P got its start in 2000 as a music recommendation service & changed its name in 2005 when it launched an internet radio service to stream music over the Web, letting users create custom stations based on songs, genres or artists.  It has 94M users & it makes most of its money from advertising. In the most recent fiscal year, P lost $1.8M (before paying divs on preferred stock) & had revenue of $138M.  The stock is about $21 as I write.  A link below is provided for the article I just wrote on IPOs for SeekingAlpha.  IPOs have had a very spotty performance this year.

Pandora Surges After Radio Provider Prices Shares Above Range

Markets continue to flounder at 3 month lows as debt worries grow.  Dow is up only 400+ YTD.  The Greek mess is center stage, but problems raising the debt ceiling in the US are not far behind.  The Greek situation can spin out of control & the outlook for budget cuts to be made before the US debt ceiling can be raised is not good.  Markets are on defense as they have been for weeks.

Dow Industrials (INDU)

stock chart

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