Thursday, June 23, 2011

Markets recover much of early steep losses

Stocks pared early losses on a fall in oil prices & hopes that Greece will be able to fix its debt problems.  Dow fell 59 (175 above its lows & holding above 12K), decliners ahead of advancers 3-2 but NAZ had a good gain - up 17.  Bank stocks led the way down & the rebound in the PM.  The Financial Index held above 200, although that meant little after hovering around that level all month.

S&P 500 Financials Sector Index

Value200.14One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -1.96     (-0.9%)

There was buying in MLPs after the announcement about releasing oil supplies on the world market, although this group should be less affected than others who are directly involved with energy.  The index rebounded 7 off the AM lows, to close in the black for the day.  But the REIT index remained in the dumps, down almost 5 to the 235s.  Junk bond funds were a little higher helped by the rally in Treasuries.  The yield on the 10 year Treasury dropped to a 6 month low.  Oil tumbled, erasing gains for the year, after the IEA said it would release crude from strategic reserves.  Gold plunged the most in 7 weeks (the green line in the chart below) as a slowing economy & a rising dollar eroded the appeal of commodities as an investment.

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Alerian MLP Index

Value362.69One-Year Chart for Alerian MLP Index (AMZ:IND)
Change   0.16 (0.0)%

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLQ11.NYM...Crude Oil Aug 11...91.61 ...Down 3.80  (4.0%)

Live 24 hours gold chart [Kitco Inc.]

The US & 27 allies will release emergency oil stockpiles through the IEA for only the 3rd time in more than 3 decades as the war in Libya chokes global supplies. The release of 60M barrels (2M barrels per day) for 30 days, will be coordinated by the IEA.  The move comes 15 days after the OPEC met &  kept production quotas unchanged as Saudi Arabia didn’t find enough support from other members to boost supply.  Unfortunately, this release may decrease Saudi Aribia's incentive to boost production of roughly 2M barrels a day.  The IEA saud that high oil prices damage the economy of every country (i.e. their excuse).  The Federal Reserve yesterday cut its forecast for growth & employment in 2011, pushing oil prices lower earlier today. The administration in the US is releasing 30M barrels of oil from the emergency reserve as part of a broader intl response to lost oil supplies largely from Libya.  The release from the Strategic Petroleum Reserve will be the largest ever, (half of the 60M-barrel international infusion).

IEA Announces Emergency Oil Stockpile Release; Crude Plunges

Obama releasing 30M barrels from US oil reserves AP

Red Hat, sells support services for open-source business software that's distributed for free, posted better-than-expected results for its fiscal Q1.  EPS was 17¢ in the qtr ended May 31, on revenue of $264.7M.  Excluding stock-based compensation & other expenses, RHT earned 24¢, ahead of the 22¢ on revenue of $253.7M that was expected.  Results were boosted by solid demand for the company's software services (which I use) & prompted at least 1 analyst upgrade.  The stock had a good day, up 1.61, while others were declining.

Red Hat shares jump after strong 1Q results AP

Red Hat, Inc. (RHT)

stock chart

Measures proposed by the Greek Finance Minister to complete a €78 B ($111B) austerity package required to win a bailout were endorsed by officials from the EU & IMF. A “solidarity levy” of between 1-5% would apply to all Greek wage earners (with members of parliament paying the top rate).  Self-employed Greeks will have to pay a separate charge estimated at around 300€ a year on average. The levy is included in measures worth €5.5B that had still be sketched out as part of the program. Other changes include reducing the threshold for paying income tax to €8K from €12K, with people under the age of 30 exempt from the lower threshold. A small increase in heating-oil taxes will also be imposed.  Now the people have to agree to these tax hikes.  I don't know.

Greece’s Additional Budget Cuts Backed by EU-IMF

Pump prices ($3.61 yesterday) will be coming down after more oil supply was thrown on the markets.  This move clearly has political motivations behind it.  Of course, the big election is still more than a year away.  The Pres will likely step into the final stages of talks to break a deadlock over a plan to cut budget deficits (led by VP Joe Biden),  the Reps cited an “impasse” over tax increases.  This must be worked out before an increase in the debt ceiling is approved by early Aug.  Sources said Greece had won the consent of inspectors from the EU & IMF for a new 5-year austerity plan. All this spells a fair amount of confusion to me on major issues affecting the markets. 

Dow Industrials (INDU)

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