Friday, June 10, 2011

Markets fall for 6 straight weeks

Dow sank at the opening & never recovered.  It fell 172 to below 12K (closing at the lows), decliners over advancers 4-1 & NAZ fell 41 to its lowest level this year (mirroring a flattish perfomrance by Apple (AAPL)).  Bank stocks led the way down although they made an attempt for a rally at midday.

S&P 500 Financials

Value 199.20 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -1.42    (-0.7%)

The MLP index had its 2nd big day of gains but REITs were under pressure with the index dropping a very big 6 to the 232s.  Junk bond funds were weak, as they have been in the last couple of weeks.  But Treasuries were stronger taking the yield on the 10 year Treasury bond essentially to its lowest level in 2011.  Oil tumbled the most in 4 weeks after it was reported that Saudi Arabia will raise oil production to 10M barrels a day next month on concern the global economic recovery is slowing.  Gold continued slipping but is above $1500, encouraging for its bulls.

Alerian MLP Index

Value 363.63 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change    2.68    (0.7%)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLN11.NYM...Crude Oil Jul 11...99.35 ...Down 2.58  (2.5%)

Live 24 hours gold chart [Kitco Inc.]

In May the gov posted a budget deficit of $57.6B, narrower than a year earlier, reflecting increasing tax revenue & a reduction in the estimated cost of the financial industry bailout.  The economy has been adding jobs & corp profits have climbed, leading to higher personal income & business tax collections. At the same time, the annual shortfall is projected to tie a record with increased spending.  This year’s budget gap is projected to reach $1.4T, according to the CBO, matching the previous record in FY 2009 (last year, the deficit totaled $1.3T, the 2nd largest).  CBO’s latest estimate for the FY2012 budget deficit is $1.2T.  That over $5T in just 4 years under the present administration.  Now Congress has to increase the debt ceiling of $14.1T. 

U.S. May Budget Deficit Narrows to $57.6 Billion on Increasing Tax Revenue

Flooding Hurts Corn Crop

Photo:   Bloomberg

Corn surged to a record price, approaching $8 a bushel on signs that global inventories will drop as adverse weather slashes acreage in the US, the world’s top producer.  Worldwide stockpiles will be 111.89 metric million tons before the 2012 harvest in the Northern Hemisphere, down from 129.14 million forecast in May & 117.44 million that will be in storage by Oct 1. US supplies before the 2012 harvest were estimated at the lowest since 1996.  Prices have more than doubled in the past year as wet weather limited the size of the 2010 harvest. Flooding in the past 2 months delayed planting & threatened this year’s crop prospects. The rally is boosting expenses for meat producers & makers of grain-based ethanol.  Corn is a major ingredient in food costs, this will be felt on the inflation front.  

Corn Hits Record on U.S. Weather, Demand

The price for gas at the pump keeps inching down a penny a day.

National Unleaded Average
Regular Mid Premium Diesel 85 **E85
Current Avg. $3.723 $3.866 $3.993 $3.986 $3.225 $4.244
Yesterday Avg. $3.734 $3.879 $4.006 $3.988 $3.219 $4.236
Week Ago Avg. $3.789 $3.933 $4.061 $4.005 $3.244 $4.269
Month Ago Avg. $3.962 $4.098 $4.226 $4.144 $3.337 $4.391
Year Ago Avg. $2.706 $2.873 $2.977 $2.975 $2.187 $2.878

Source:   AAA

Dow fell another 200 this week from a dreary level last week.  There were attempts to take the markets higher, but selling came in the last hour.  Today there was also selling in the last hour, but markets were already at depressed levels.  Dow is 100 above where it was on Mar 18, so much for the predictions about another great year for stocks.  To show how bad it is, even darling AAPL is having a bad year.  Today it fell 5+ to below 326 & is only up 3 YTD.   MLPs had a 2 day bounce, but that may not last with the gloomy sentiment in the rest of the stock market. Treasuries have been doing well, to be expected in declining markets, as has gold (although it's been slipping this week).  SA just published my latest article, this one on the IPO market which is also having a tough year.

Dow Industrials (INDU)

stock chart

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