Tuesday, August 30, 2011

Markets fall on weaker consumer confidence data

Stocks have recovered much of the early AM losses.  Dow is down 33, decliners over advancers 3-2 & NAZ slipped 5.  Bank stocks, market leaders, fell on more dreary news at Bank of America (see below).

S&P 500 Financials Sector Index

Value 176.96 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -2.03     (-1.1%)

The MLP index was up 1+ to the 351s, taking it above the important 350 ceiling, while the REIT index fell 3 to the 223s.  Junk bond funds were mixed & Treasuries were strong.  The graph for the yield on the 10 year Treasury below shows it has been holding above 2% in Aug.  Oil advanced for a 4th day, reaching the highest level in almost 2 weeks.  Gold rose on speculation that the Federal Reserve will ease monetary policy further to stimulate the economy, boosting the appeal of gold as an alternative asset.

Ten Year Treasury (^TNX)


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CLV11.NYM....Crude Oil Oct 11...87.30..... Up 0.03  (0.0%)

GCU11.CMX...Gold Sep 11.....1,830.50 ...Up 42.00  (2.4%)

Consumer Confidence in U.S. Falls

Photo:   Bloomberg

Consumer confidence crumbled in Aug to its lowest level in more than 2 years as the fallout from political wrangling over a budget deal took its toll.  The Conference Board said its index sank to 44.5 from a downwardly revised 59.2 in Jul.  The index was far below a forecast of 52.0 &  was at the lowest level since Apr 2009.  Today’s confidence report is in line with other figures. The Thomson Reuters/University of Michigan final index of consumer sentiment dropped this month to the lowest level since Nov 2008.  The Bloomberg Consumer Comfort Index has been hovering at levels previously consistent with recessions.  The stock market rally in the last week was overdone.

U.S. Consumer Confidence Falls to Two-Year Low

Finland’s demand for collateral on new Greek loans is leaving European leaders with 2 choices: accept the AAA rated nation’s terms & risk the rescue plan or reject collateral & help bring Finnish euro-skeptics to power.  Prime Minister Jyrki Katainen can’t back down on the collateral demand as his gov would likely collapse. Luxembourg Prime Minister Jean-Claude Juncker, chair the euro-area finance meetings, said he was “confident” an agreement could be reached by mid-Sep, while criticizing the call for collateral.  “I don’t like this mechanism and I don’t like the bilateral arrangements,” he said.  The matter may take just days to resolve, Katainen said today.  The collateral flap reflects the bailout fatigue that is spreading in the more fiscally prudent countries of northern Europe, fueling support for political parties opposed to bailout aid.  National politics is increasingly at odds with efforts to forge European unity, complicating a comprehensive response to the debt crisis that now threatens Spain, Italy & France.  European sovereign debts remain a major problem for the weaker countries.

Finland’s Collateral Demand Leaves EU Faced With Rewarding Bailout Fatigue

FDIC Objects to BofA’s $8.5 Billion Mortgage-Bond Accord

Photo:   Bloomberg

The FDIC is objecting to Bank of America, a Dow stock, $8.5B settlement of Countrywide mortgage putback claims.  This could put the final nail in the coffin for the settlement after the  bank arrived at the settlement in Jun.  Andrew Gray, the director of the FDIC's Office of Public Affairs, said the agency's court filing was "simply a formal notice to preserve our right to make claims as a part of the settlement and seeks additional information to evaluate those potential claims," & that the filing was "not an evaluation or opinion on the settlement itself."  The filing is a "Notice of Intention to Appear of Object," & the agency is objecting to the agreement because it's holding Countrywide mortgage paper "covered by the proposed settlement" inherited from "numerous" failed banks, because it "does not have enough information to evaluate the Settlement." The FDIC joins various other parties objecting to the Countrywide settlement.  Another dark cloud for BAC that is not going away.  The stock has been trying to make a comeback, but fell 21¢ today.

FDIC Objects to BofA $8.5B Mortgage-Bond Deal

Bank of America Corporation (BAC)

stock chart

The recovery by the markets in the last hour is more a reflection of not a lot going on rather than real conviction.  The MLP index wants to rise above 350 which has been a key support, then ceiling level this summer.  The consumer confidence data & dreary news on restructuring European debts are not encouraging as markets get ready to begin the worst month of the year.

Dow Industrials (INDU)

stock chart

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