Wednesday, July 27, 2011

Debt debate weighs on markets

Stocks were lower all day, but selling accelerated in the PM. Dow dropped 198 (finishing near the lows), decliners over advancers a very big 8-1 & NAZ plunged 75. Banks have a lot riding on the outcome of a rating reduction for the federal debt & the Financial Index fell below 200 again.

S&P 500 Financials Sector Index

Value	199.60
Change	-4.76 (-2.3%)

MLPs & REITs took a major beating. Even on the long term MLP index chart, the decline is apparent. Junk bond funds sold off & Treasuries were a little weaker although the yield on the 2 year Treasury remains near 0.40% & the 10 year bond is near 3%, where they've been for months. Oil fell on an unexpected inventory increase & a decline in durable goods orders bolstered concern that economic growth is slowing. Gold is doing well but was not able to advance today.

Alerian MLP Index

Value	360.74
Change	-6.18 (-1.7%)

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.442%
U.S. 10-year	2.978%

CLU11.NYM

...Crude Oil Sep 11

...97.41

...

2.18

(2.2%)

Click below for the latest market update:

Greece will partially default on its debt once European officials push through a plan that will see bondholders foot part of the bill for a 2nd bailout agreed to last week, according to S&P . S&P cut its ranking for Greece to CC, 2 steps above default (D), from CCC & the outlook on the debt is negative. “The proposed restructuring of Greek government debt would amount to a selective default under our rating methodology,” S&P said. “We view the proposed restructuring as a ‘distressed exchange’ because, based on public statements by European policy makers, it is likely to result in losses for commercial creditors.” While this event is priced into the markets, it will come as a shock when it happens.

Greece Will Default on Debt After EU Plan: S&P

Photo: Yahoo

Since it was founded in 1950, Dunkin' Donuts has become a $6B company & expanded to include more than 9700 Dunkin' Donuts stores across the world, including 6700 in the US. Dunkin' Brands also owns ice-cream giant Baskin-Robbins, with 5800 stores worldwide. The franchise model has kept Dunkin' more insulated from food price fluctuations than its competitors, since individual stores can adjust to changing prices & the availability of ingredients on a local level. Dunkin' Brands sold $423M worth of stock at $19 a share (above the expected range of $16-$18). DNKN shot up $8.88 on its first day of trading.

Dunkin’ Shares Jump on First Day of Trading

Corning slashed its forecast for the glass market & warned that manufacturers including Sony & Samsung are worried about weak TV sales over the holiday season. Jim Flaws, CFO, said consumer electronics manufacturers recognize "that the economies around the world are not growing as fast as people had originally hoped." "What you are seeing is the major TV brands like Sony, Samsung, LG are all reducing their forecasts of what will be sold at retail," Flaws said. Consumers, he said, might be spending discretionary income on products other than TV sets or "perhaps just not spending their money at all." GLW lowered its forecast for worldwide glass demand to 3.3-3.4B square feet this year from 3.5-3.7B square feet. Sales in its display technologies segment, which includes its LCD glass, fell 9% in Q2 & GLW also lowered its forecast for Gorilla Glass (the scratch-free cover glass mostly used in smartphones & tablets). GLW had bet on TV manufacturers buying resistant product to use as a cover glass on TV screens. In Q2, EPS fell to 47¢ from 58¢ last year. Adjusted EPS was 48¢, beating analysts' estimates of 47¢. Sales rose 17% to $2B, topping estimates. The stock dropped 1.25.

Corning warns on TV sales, shares fallat Reuters

Corning Incorporated (GLW)

A Federal Reserve survey showed that growth is slowing around much of the US because of weak home sales & signs of a slowdown in manufacturing. Orders for durable goods have been soft in Q2. But the debate in DC is center stage. Nothing will be decided until Mon at the earliest. There is a lot of name calling & blame to go around. Even the Dow has been feeling selling pressure this week. One bright point is the successful IPO for DNKN, a company with a track record of growing profits over the years, a favorable sign on an otherwise dismal day.