Friday, August 19, 2011

Markets extend losses to 4 weeks

Dow tumbled 173, decliners over advancers 3-1 & NAZ fell 38.  Banks stocks led the way lower, as they have been for the decline in recent months.  The Financial Index is pretty much at 2 year lows on bets of a worsening economy in the US & Europe!

S&P 500 Financials Sector Index

Value 163.04 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change     -3.14    (-1.9%)

The Alerian MLP Index sank again today, bringing the 2 day losses to 19 (an enormous 5% drop) & the REIT index lost 4 to 211 in the down market.  Junk bond funds were weak on worries about the health of this debt in a weaker economy.  Oil declined in the last half-hour for a 4th consecutive weekly loss.  But gold is flying high.  One month ago it was at 1600 when the present levels could only have been dreamed about.

Alerian MLP Index

Value 336.85 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change    -7.86     (-2.3%)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU11.NYM...Crude Oil Sep 11...82.20 ...Down 0.16  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

JNK is a classical junk bond fund & its chart below is instructive.  Junk bonds have been having a good year, that is up to Aug.  Bond funds typically have been yielding around 8%.  But This month the realities of a possible slowdown or recession has caught up with them.  Early in Aug, it sank 10%, an unusually large move for the stock.  That money may have gone into Treasuries yielding a lot less or gold as a pure safe haven,  The stock had a bounce last week but this week that enthusiasm is fading, bringing on more selling.  Junk bond prices moves are considered a leading indicator for the market.  Marginal bonds are being viewing as riskier investments then they were just one month ago.

SPDR Barclays Capital High Yield Bond ETF (JNK)

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RIM Gains 100% Sale Value on Google-Motorola

Photo:   Bloomberg

The wave of deals for mobile-phone assets may help RIMM stock double.  After the Google (GOOG) takeover of Motorola Mobility Holdings & Nortel Networks’ patent auction, acquisitions of wireless & telecommunications equipment makers may top $27B in 2011.  It is estimated that RIMM, maker of the BlackBerry, may be worth $25B.  The shares shot up 85¢ to $26.69, although below its high of $27.85, on hopes of a buyout..  RIMM fell 93% through yesterday as competition lured away smartphone customers.  With GOOG gaining Motorola’s handset business, RIMM may now attract interest from Samsung ro Microsoft (MSFT), a Dow stock. 

RIM Gains 100% in Sale Value on Google-Motorola Tie: Real M&A

Research in Motion Limited (RIMM)

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Boeing Said to Win FAA Certification for 747-8

Photo:   Bloomberg

The new 747-8 freighter from Boeing, a Dow stock, won certification from the FAA to enter commercial service, following a 2-year, $2B delay for the company’s biggest plane.  Luxembourg’s Cargolux Airlines International will receive the first the jumbo jets early next month,.  The European Aviation Safety Agency also gave its approval to the new plane.  When development began in 2005, first delivery was targeted for 2009, then engineers were then diverted to the 787 Dreamliner, which set back work & brought additional costs.  BA expects FAA approval of the 787, the world’s first composite-plastic airliner, next week, with a ceremony set for Aug 26.  BA fell 1.39.

Boeing Company (The) (BA)

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Dow sank 450 this week & is down 1330 in Aug.  This is supposed to be a quiet, restful month with not a lot going on.  But in 3 weeks, stock markets are already in bear territory.  The decline for MLPs is serious.  This may be on angst over their preferred tax status which could be called into question along with worries that an economic slowdown might limit distribution increases (which will be announced in late Oct).  Investors are worried as indicated by the spike up in the VIX, volatility index.  I hope the DC politicos & president enjoy their holidays while the economy is sputtering.

Volatility Index (^VIX)

Dow Industrials (INDU)

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