Thursday, August 4, 2011

Dow plunged more than 500

Stocks had a gut wrenching day, the worst since the period after the Lehman collapse.  Dow sold off 512, decliners over advancers 10-1 & NAZ plummetted 136.  Banks led the way lower with the Financial Index having one of its worst days in history, returning to the lows of last Sep.

S&P 500 Financials Sector Index

Value183.98One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change  -10.05     (-5.2%)

MLPs & REITs tumbled badly from heavy selling.  The Alerian MLP Index crashed thru the 350 support level, very serious, & the REIT index sank 12 to the 219s.  The decline for the MLP index has to be its worst daily decline ever!  Junk bond funds fell around 3%, huge by their standards but Treasuries were strong, seen as the safe haven investment.  The 2 year Treasury yield dropped to a record low while the 10 year yield is challenging the 2.4% low of last year.  Oil wiped out all of its gains for 2011 as concern the global economy is weakening sent raw materials prices tumbling around the world.  Gold  fell from a record $1,684 after some investors sold the metal to cover losses in other markets.

Alerian MLP Index

Value345.30One-Year Chart for Alerian MLP Index (AMZ:IND)
Change  -13.49    (-3.8%)

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CLU11.NYM...Crude Oil Sep 11...86.77 ...Down 5.16  (5.6%)

Live 24 hours gold chart [Kitco Inc.]

Jean-Claude Trichet, European Central Bank (ECB) President  said the ECB has resumed bond purchases & will offer banks more cash to stop the region’s debt crisis from engulfing Italy & Spain.  “I wouldn’t be surprised that before the end of this teleconference you would see something on the market,” Trichet said after the ECB kept its benchmark interest rate at 1.5%. “We were not unanimous but with overwhelming majority with regards to the bond purchases.”  ECB purchases of Irish & Portuguese bonds today haven’t stamped out investor concern on the 21- month crisis spreading to Italy & Spain, whose yields soared to €-era highs this week. Italian & Spanish 10-year bonds declined, pushing the yields as high as 6.23% & 6.33% respectively.  Countries around the world are reacting to protect their economies. Yesterday, the Swiss central bank unexpectedly cut interest rates & said it will take steps to stem the franc’s record- breaking gains against the € & the $. Today, Japan sold ¥ to halt an appreciation, while Turkey's central bank reduced its key rate to a record low of 5.75%. The Bank of England kept its key rate at 0.5%.  Global markets are under pressure.

Cardinal Health profits fell 9% in its fiscal Q4 as greater costs & other issues hurt its medical business.  EPS was 57¢, down from 62¢ last year. Excluding one-time items, the company had EPS of 59¢ from continuing operations ahead of 58¢ expected by analysts. Revenue grew 9% to $26.76B.  The pharmaceutical revenue rose 10% to $24.46B. Sales to non-bulk customers climbed 20% to $13.8B & acquisitions also boosted sales.  Medical revenue rose 7% to $2.31B, but its profit dropped by almost a fourth because of higher commodity costs, weak utilization & inventory charges.  FY2011 EPS was $1.77 & revenue rose 4%, to $102.6B.  The company expects EPS of $3.04-$3.19 in FY2012 (excluding amortization costs of 14¢) & analysts are forecasting $3.02.  The stock dropped 1.89.

Cardinal Health 4Q profit slides 9 percent AP

Cardinal Health, Inc. (CAH)

stock chart

As bad as today was, tomorrow could be worse or maybe sellers will take off early for a long weekend to limit losses.  At the start of the week, all concerns were about raising the debt ceiling.  That went thru (although there will be follow up effects in the coming months).  Stocks should have gotten a lift, but matters went from bad to worse.  Dow is down 760 this week, most coming today, & is down 1400 from its peak earlier this year.  Some look to gov intervention to solve economic problems but that will be difficult after the agreement about reducing the deficits.  Others look to the Federal Reserve, but it has run out of ammunition.  Worries about financial markets overseas are growing.  Then there is the big jobs report tomorrow AM before the market opens.  Aug is shaping up as a bad month.

Dow Industrials (INDU)

stock chart

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