Monday, July 25, 2011

Nervous markets on inability to raise debt celing

Stock markets are taking the impasse over raising the debt ceiling fairly well. Dow is down 61, but decliners over advancers almost 4-1 & NAZ fell 14. Bank stocks are leading the way down.

S&P 500 Financials Sector Index

Value	204.33
Change	-2.12 (-1.0%)

The MLP index dropped 3+ to 370 & the REIT index fell 2+ to 250. Junk bond funds were weak but Treasurries were strong on the flight to safety. The yield on the 10 yearTreasury bond is back below 3%. Oil fell for the first time in 5 days after the failure to agree on raising the debt ceiling, boosting concern of a default. But gold climbed to a record on increased demand for the metal as a protection of wealth.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.035%
U.S. 2-year	0.403%
U.S. 10-year	3.015%

CLU11.NYM

...Crude Oil Sep 11

...99.03

.....

0.84

(0.8%)

GCN11.CMX

...Gold Jul 11

.......1,617.60

...

16.30

(1.0%)

The latest daily market update below:

Moody's downgraded Greece's bond ratings by a further 3 notches & warned that it's almost inevitable the country will be considered to be in default following last week's new bailout package. The new EU package of measures implies "substantial" losses for private creditors & as a result, it cut its rating on Greece to Ca -- one above what it considers a default rating! Though Moody's said a Greek debt default is "virtually certain," it noted that the new measures will increase the likelihood that Greece will be able to stabilize & eventually reduce its overall debt burden. It also said the package benefits other eurozone countries by "containing the near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt." Eurozone countries & the IMF agreed to give Greece a 2nd bailout worth €109B ($155B), on top of last year's bailout. If all goes to plan, banks & other private investors will contribute €50B ($71B) to the rescue package until 2014 by swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value, or selling the bonds back to Greece at a low price. This means bondholders will lose money on their Greek debt holdings!

Greece Rating Cut to Second-Lowest Level by Moody’s on ‘Orderly Default’

Reps & Dems prepared dueling plans for raising the US debt ceiling, unable to break a partisan stalemate over how to tackle the $14.3T debt & quell market concerns about a potential default Aug 2. John Boehner told fellow Reps he was determined to force action on a 2-step debt-limit extension that would provide a roughly $1T, a shorter-term increase than president has requested, defying a veto threat & the administration’s warnings of dire economic consequences. The president canceled fundraising appearances, the debt crisis is that serious! Spending cuts by the gov will crimp the economic recovery.

Republicans, Democrats Prepare Rival Debt Plans

Photo: Yahoo

Kimberly-Clark, a Dividend Aristocrat, profits fell 18%, dragged down by higher commodity costs & an increased tax rate. It now expects 2011 adjusted earnings will likely be in the lower half of its previous range, but raised its full-year revenue guidance. CEO Thomas Falk said that the commodity cost environment has gotten worse over the past 3 months, but that the company was keeping its full-year outlook because it planned to lower overhead costs & should benefit from favorable currency exchange rates. But Falk said if input costs don't moderate, it's likely KMP 2011 adjusted earnings will be in the lower half of its range. Q2 EPS was $1.03, down from $1.20 last year. Adjusted EPS was $1.18, beating $1.14 analysts forecasted. Revenue rose 8% to $5.26B on higher sales volumes & increased prices. KMB maintained full-year guidance for adjusted earnings of $4.80-$5.05 & revenue is now expected to climb 5-7%. The prior forecast called for revenue to rise 4-6%. The stock fell 59¢.

Kimberly-Clark 2Q profit falls on higher costsAP

Kimberly-Clark Corporation (KMB)

Sec of State Hillary Clinton reassured China, the top holder of American Treasuries, that the US will resolve its impasse over the debt ceiling & improve the country’s long-term fiscal outlook. This is just another sign of how serious the debt ceiling impasse its. Of course, even the pres is skipping fund raising events! Nobody knows where this is going or how it will turn out. But using Scotch Tape at the last minute to fix fundamental problems shows how badly this crisis is being handled. The Chinese are worried about their massive investment in the US. Stock markets have been hardly disturbed, at least so far. Given the sloppy way US financial affairs have been handled in recent years, don't expect the crisis ending until the last hour on Aug 1, maybe even later!