Tuesday, June 28, 2011

Markets extend gains on Greece debt hopes

Stocks are strong on hopes for the best with European finances.  Dow rose 110, advancers ahead of decliners 3-1 & NAZ was up 28.  However, bank stocks, traditional market leaders, are lower, having to deal with a host of problems, including earnings downgrades.

S&P 500 Financials Sector Index

Value 200.80 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -0.22     (-0.1%)

The MLP index rose 1½ to the 366s but the REIT index slipped a fraction in the 236s.  Junk bond funds were weak & Treasuries were lower ahead of an auction at lunch time. Oil rose from a 4-month low amid speculation that Greek lawmakers will approve austerity measures to prevent a default & on forecasts US fuel demand will rise before the Jul 4 holiday. Gold gained for the first time in 4 days as concern about Greece’s debt crisis spurred demand for the metal.

JPMorgan Chase Capital XVI (AMJ)

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CLQ11.NYM....Crude Oil Aug 11...91.88 ...Up 1.27 (1.4%)

GCM11.CMX...Gold Jun 11.......1,499.50 ...Up 3.50  (0.2%)

The Conference Board's Consumer Confidence Index slipped to 58.5 in Jun, down from a revised 61.7 in May.  Expectations were for the figure to edge up to 61.  The results follow an almost 6-point drop from May to Apr, which had marked a 6-month low as job worries increased.. A reading of 90 indicates a healthy economy on the index which measures how Americans feel about business conditions, the job market & the next 6 months.

Greek Unions Strike as Papandreou Seeks Support

Photo:   Bloomberg

Greek police fired tear gas to disperse protesters in the center of Athens as labor unions shut down gov services ahead of a vote on austerity measures to determine if the nation can avoid a default. Unions began their 4th general strike of the year at midnight, protesting a 5- year plan of budget cuts & asset sales. Police estimated about 12K joined marches on the first day of the 48-hour walkout.  The Prime Minister faces his 2nd survival test in a week with a vote on the package that’s needed before Greece can tap a 5th loan payment from last year’s €110B ($157B) rescue. Failure to pass would lead to the euro area’s first sovereign default.  “Voting for the medium-term plan means we can close this chapter of uncertainty for the Greek people,” Papandreou told lawmakers at the start of a 3-day debate late yesterday. “From the brink of catastrophe we are securing, colleagues, the great opportunity to change our country.”  Clearly, the situation remains tense. 

Enbridge Energy Partners (EEP) sold 8.05M units for $30 a share in part to help reduce its debts.  The units were priced at a 2.9% discount to their closing price of $30.89 on Mon.  The units fell 1.03 to 29.86 & are a drag on the MLP index today.  EEP will receive more than $200M in net proceeds, used to repay debts & finance a portion of capital expansion projects.

Enbridge Energy to offer up to 8.07M common units AP

Enbridge Energy, L.P. (EEP)

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The week is starting out on the right for for the bulls.  Stocks have moved ahead solidly, largely encouraged by a French plan to refinance Greek debts with 30 year bonds.  Of course, this all assumes that Greece will vote for the austerity measures & asset sales even though its people are not supporting this plan.  That's called a disconnect which is being ignored by the markets.  In the meantime, a plan to raise the debt ceiling for the US Treasury looks to be dead in the water.  The Reps are digging in their heals, demanding budget cuts, while the Dems want to raise taxes (while the economy is sputtering). .Uncertainty is on the rise, a negative for stock markets. 

Dow Industrials (INDU)

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