Wednesday, June 1, 2011

Markets plunge on gloomy economic data

Dow tumbled 279, decliners over advancers 4-1 & NAZ sank 66. Financials led the way down. A 5 point swing for the Financial Index is a very large move & today there was broad selling in bank stocks. The chart looks grim, especially for the group that is supposed to lead markets.

S&P 500 FINANCIALS INDEX

Value	205.67
Change	-7.42 (-3.5%)

The MLP index had a bad day, bringing it back to even YTD & down 17 in Q2. The REIT index sank a very big 7+ to below 243 but junk bond funds were only down a tad. Treasuries were in heavy demand, bringing the yield on the benchmark Treasury bonds solidly below 3%. Oil fell on the dismal thoughts coming from the stock markets but gold was strong, within 32 of its record high shown in the 60 day chart.

ALERIAN MLP INDEX

Value	363.45
Change	-4.19 (-1.1%)

Treasury yields:

U.S. 3-month	0.041%
U.S. 2-year	0.441%
U.S. 10-year	2.964%

CLN11.NYM

...Crude Oil Jul 11

...100.29

...

2.41

(2.4%)

GM Sales Fall 1.2% as Higher Gasoline Prices Deter Buyers

Photo: Bloomberg

US auto sales cooled off in May as buyers dealt with shortages on dealer lots, higher gas prices & sharply lower incentives. Sales were expected to be around 1M cars & trucks, down 8% from Apr & 4% from last May. General Motors (GM) sales fell 1.2% & the same story at Ford (F) where sales fell 2.4%. Pickup sales fell more than 10% at both companies. Don Johnson, GM's VP of sales, said consumers are taking a wait-and-see approach as gas prices fluctuate around $4 per gallon. Even so, he feels consumer confidence over the long term remains strong & sees pent-up demand among drivers who kept their vehicles longer than usual during the recession. GM is keeping its full-year sales forecast in place, & expects sales & incentive spending to rise toward the end of the summer & continued, "All things considered, we continue to believe the recovery remains on track." I have my doubts, but we'll see.

GM, Ford Sales Fall as Higher Gas Prices Hit Buyers GM, Ford Sales Fall as Higher Gas Prices Hit Buyers

Toyota Motor (TM) said US car & truck sales in May fell 33% from last year as it was hit by earthquake-related shortages. Sales declined for all of its vehicles except 2: The Scion tC sedan & the Toyota Tacoma small pickup. Sales of the Prius hybrid dropped 51%, while sales of the Corolla sedan, a perennial best-seller in the U.S, fell 37%. Sales were 108K vehicles, down from 163K last year. TM fell 1.79 to 81.50.

Toyota's US May sales down 33 percent AP

Cans Of Coca-Cola Move Along A Production Line

Photo: Bloomberg

Coca-Cola, the world's largest soft-drink company, is exploring a possible listing in Shanghai, joining other global firms in testing the waters for a China listing (along with its increasing presence in China). KO will commit $2B in investment in China & last Oct opened 3 new plants in Inner Mongolia. The stock fell a nickel to 66.76.

Coca-Cola in Talks With China Government as It Considers Shanghai Listing

Coca-Cola Company (The) (KO)

Moody's downgraded Greece's local & foreign currency bond ratings deeper into junk status, citing an increased risk that the country will not be able to handle its debt problems without an eventual restructuring. Greek debts were downgraded to Caa1 from B1. Apart from the increased risk of restructuring, the agency also cited "highly uncertain" growth prospects & missed targets in budget reforms. Meanwhile Greece's Prime Minister George Papandreou will hold emergency talks with a top eurozone official on Fri as a review of the country's finances is expected to usher in more drastic cuts needed in exchange for new rescue loans. The Greek debt problems are getting serious & it looks like it will take more then bailout II to solve these problems!

Moody's downgrades Greece again AP

The average price at the pump for gas inched down, but its descent won't go much further.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.775	$3.917	$4.045	$4.008	$3.240	$4.264
Yesterday Avg.	$3.780	$3.923	$4.049	$4.012	$3.231	$4.251
Week Ago Avg.	$3.814	$3.958	$4.085	$4.041	$3.270	$4.303
Month Ago Avg.	$3.952	$4.092	$4.218	$4.155	$3.331	$4.384
Year Ago Avg.	$2.727	$2.896	$3.000	$2.997	$2.198	$2.893

Source: AAA

Dow is heading for its 5th consecutive weekly decline & Q2 looks very gloomy. 6 months ago, analysts were so bullish on the markets & had to revise their forecasts upwards because 2011 was going to be that good of a year! Not so far & more dark clouds are gathering. Apple (AAPL), darling of many analysts, is up YTD but fell 2.32 today. Since Feb it has been merely treading water. Watch their big PR meeting next Mon to see if that moves the stock as it has done so many times in the past. If the stock fails to respond, the markets could be in for big trouble. Of course, the big jobs report is due on Fri & that looks to be iffy at best.