Wednesday, June 22, 2011

Markets fall following FOMC meeting

Stocks wanted to go higher, but did not hear encouraging words from the Federal Reserve. Dow dropped 80 (all after the FOMC meeting), decliners over advancers 5-4 & NAZ fell 18. After being higher in the AM, banks stocks also sold off.

S&P 500 Financials Sector Index

Value	202.10
Change	-1.34 (-0.7%)

The MLP & REIT index each were fractionally changed after strong gains in the AM. But junk bond funds were higher.& Treasuries were flattish at their recent high levels with correspondingly low yields. Oil rose after an assessment by the Federal Reserve on a sluggish economic recovery. Meanwhile gold is trending higher, shown in its chart below:

Alerian MLP Index

Value	362.53
Change	0.59 (0.2%)

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.370%
U.S. 10-year	2.985%

CLQ11.NYM

...Crude Oil Aug 11

...95.17

...

1.00

(1.1%)

View today's Market Update video below:

Federal Reserve (FED) officials said they will maintain record monetary stimulus after completing a $600B bond-purchase program this month. The economic recovery is continuing at a moderate pace, though somewhat more slowly than had been expected, the FOMC said. FED policy makers reduced their economic-growth projections while raising forecasts for the jobless rate this year & next. Ben Bernanke said record-low interest rates are still needed to spur a recovery that remains “frustratingly slow” 2 years after the recession ended. Consumer spending has been held back by falling home values, accelerating inflation & an unemployment rate that rose to 9.1% last month. At the same time, Bernanke said growth is likely to pick up as commodity costs recede & factories overcome disruptions of supplies from Japan. “Recent labor market indicators have been weaker than anticipated,” he said. “The slower pace of the recovery reflects in part factors that are likely to be temporary,” such as supply chain disruptions stemming from the earthquake in Japan.

Fed to Maintain Stimulus as Bond Buying Ends

Photo: Bloomberg

Ben Bernanke says some problems that are slowing the economy could persist into next year. The slowdown could be due, in part, to the troubled housing market & other factors that will continue to depress growth in 2012. He addes "maybe some of the headwinds that are concerning us, like the weakness in financial sector, problems in the housing sector -- some may be stronger and more persistent than we thought." Can you spell, uh-oh?

Bernanke Says Low-Rate Extended Period Means at Least Two, Three Meetings

Photo: Bloomberg

Apple plans to launch a new iPhone with a faster chip for data processing & a more advanced camera in Sep. The new iPhone will include the A5 processor along with an 8-MP camera. A faster chip will enable speedier loading of programs & help the device compete with handsets being introduced by rivals (such as Samsung that are powered by Android software from Google (GOOG)). This year, the iPhone is projected to account for 18.2% of the global market, compared with 38.9% for devices running Android. AAPL is also testing a new version of the iPad that has a higher resolution screen & a cheaper version of the iPhone aimed at developing countries is also in the works. The stock fell 2.69 & is up only 2 pennies YTD.

Apple Preparing Faster IPhone for September

Apple Inc. (AAPL)

Protesters vs policemen in Athens, June 22
Photo: Yahoo

The pressure remains on Greece to adopt the austerity measures demanded by other European countries, key for its bailout next month. But the picture above indicates belt tightening is not going down well. Thousands of demonstrators were chanting insults outside gov officies after the Prime Minister survived a confidence vote. Greek bailout II is far from a done deal & this is weighing on the stock markets around the world.

Pressure stays on Greeks to avoid default- Reuters

A good portion of yesterday's gains & the 300 point rally in the last 4 days was lost in the last hour of trading, following the announcement by the FED. Repairing the finances of Greece is a top priority, primarily because nobody wants to imagine the alternative. However, domestic problems related to a slowing economic recovery are getting more attention. On the domestic front, & not far behind, is raising the debt ceiling, with a deadline only about 5 weeks away. The Dow chart, down 200 in Q2, does not look pretty.