Tuesday, July 12, 2011

US and European debt worries bring on selling into the close

Stocks had been hugging breakeven for most of the day on hopes of a new stimulus plan (which would make the deficit even worse!). But those hopes faded in the last 2 hours. Dow lost 58 & is down 250 in the last 3 days, decliners almost 3-2 ahead of advancers & NAZ fell 20. Bank stocks have been market leaders as they were today. The Financial Index was higher all day but fell almost 3 in the last hour, bringing it into the red.

S&P 500 Financials Sector Index

Value	201.65
Change	-0.57 (-0.3%)

MLPs were slipping & sliding again but the REIT index rose 1 to 248. Junk bond funds were mixed & Treasuries rose slightly offering some of the lowest yields of the year. Oil climbed the most in 2 weeks as European govs worked to halt the region’s credit crisis. Gold rose to a record as Europe's escalating debt crisis boosted demand for the metal as a safe haven.

Alerian MLP Index

Value	371.69
Change	-1.01 (-0.3%)

Click below to get the latest market update:

Treasury yields:

U.S. 3-month	0.025%
U.S. 2-year	0.367%
U.S. 10-year	2.910%

CLQ11.NYM

...Crude Oil Aug 11

...97.23

...

2.08

(2.2%)

Photo: Yahoo

Some Federal Reserve (FED) officials are ready to provide more monetary policy easing if the recovery is too sluggish to cut the lofty unemployment rate & if inflation eases, as expected, according to the minutes of the Jun meeting released today. But others disagreed & said that if recent increases in inflation do not moderate, the FED should consider tightening policy sooner than expected. Policy makers also renewed their pledge to hold interest rates “exceptionally low” for an “extended period” after the FED has kept its target rate in a range of 0-0.25% since Dec 2008. Ben Bernanke in Jun said the FED would be “prepared to take additional action, obviously, if conditions warranted,” including the purchase of more Treasury securities. They're watching conditions develop.

Fed Officials Divided on Further Stimulus

Greece's finance minister said the country wants the EU to conclude a 2nd rescue loan deal by the end of Aug, as volatile intl markets fretted over the vulnerability of other eurozone members to an escalating debt crisis. "The overall program ... must be completed by the end of August," Finance Minister Evangelos Venizelos said. "We, Greece, are ready to enter a new program ... We also want full coverage, not just for the country's fiscal requirements, but for the stability of Greece's financial and banking system." Venizelos said Greece hoped the new program could be approved by European parliaments before Greece gets its next rescue loan installment in mid-Sep but European leaders remain split on the nature of a new bailout agreement & how private holders of Greek bonds could contribute to easing Greece's payout schedule. Credit ratings agencies, which have relegated Greek bonds to junk status, have warned they could consider a voluntary deferment of Greek debt as a form of default. The Greek rescue plan is stuck in the mud & shows no sign of going anywhere.

Greece seeking new bailout deal by late August AP

Wolverine World Wide (WWW) slipped 7% to $39.73, the biggest drop in 10 years after posting Q2 profits that beat estimates (but by the smallest percentage since Q4 2009). Fastenal (FAST), maker of nuts, bolts & other fasteners, reported net income grew 36% in Q2 as sales continued to improve. EPS shot up to 32¢, beating estimates by 2¢, but the stock dropped 1.52. Alcoa (AA) was down 20¢ after reporting not quite good enough earnings. These early returns suggest earnings season could be grim. JPMorgan (JPM), General Electric (GE) & Citi (C) earnings are due this week & will be telling. Greek debt & US debt talks are getting nowhere with a lot of nasty rhetoric coming out of DC. Getting less attention, China has been raising its interest rates in recent months to cool its expanding economy. The effects that will be felt around the world. Jul could be a tough month for stock markets.