Monday, August 8, 2011

Markets tumble after US credit downgrade

Dow plunged 348 (its lowest since last Oct), decliners ahead of advancers 12-1 & NAZ dropped 100.   The Financial Index is having one of its worst day in history, a common theme today.

S&P 500 Financials Sector Index

Value 171.00 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -9.79    (-5.4%)

The higher yield sectors plunged along with stocks.  The MLP index is having one of its worst days in history while the REIT index sank 8 to the 206s.  Junk bond funds were down over 5% (huge by their standards) but Treasuries rose modestly.  The yield on the 10 year Treasury is at the 2010 low & one of the lowest levels in history.  Oil prices are at their lowest level of the year.  Gold streaked past $1700 for the first time as investors, beset by worries about the US debt downgrade, Europe's financial crisis & slowing global growth, sought safety in gold.

Alerian MLP Index

Value 324.24 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change   -15.51   (-4.6%)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU11.NYM....Crude Oil Sep 11...83.62 ...Down 3.26  (3.8%)

GCQ11.CMX...Gold Aug 11.....1,706.70 ....Up 57.90 (3.5%)

Click below to get the latest market update:

Greece banned short selling on stocks for 2 months, after shares plunged to their lowest level in 14 years.  The bourse's general index sank below the 1,000 mark, closing down 6% at 998, the lowest level since Jan 1997.  Shortly after the stock exchange closed, the Capital Market Commission imposed the ban on short-selling, which goes into effect on Tues.  The commission said it took the decision "after taking into account the exceptional circumstances prevailing in the Greek market."  It had imposed another 2-month suspension of short-selling in Apr 2010, after a 6 day losing streak on the stock exchange, following a downgrade of Greece's credit rating.  This came as financial markets were buffeted by worries over the US economy following a downgrade of the country's debt.

The European Central Bank (ECB) move to buy Italian & Spanish bonds to tame the region’s debt crisis marks a step toward the kind of fiscal union that Germany has opposed since the founding of the single currency. While investors& economists say tighter fiscal ties & increased transfers to the financially weak euro states will be needed to end the financial contagion, purchases of Italian & Spanish debt that Royal Bank of Scotland estimates may eventually reach €850B ($1.2T) threaten fresh political fault lines.  “This huge-risk pooling exercise will not come easily and the risk of political fallout will be large,” said Jacques Cailloux, chief European economist at RBS.  “This might be the necessary and painful step required to pave the way for the creation of a common debt instrument, the quid pro quo for this might be the loss of fiscal sovereignty.”  “We don’t need a fiscal union and we should oppose it because that would mark a dissolution of responsibilities,” said Michael Meister, a finance spokesman for The German Chancellor.  Can you spell "confusion?"

ECB Bond Buying May Reach $1.2 Trillion

Photo:  Yahoo

The only winners on this day of selling are gold & to a limited degree Treasuries.  Even after the credit downgrade, Treasuries are still viewed by many as a safe haven investment.  Go figgah!!  This month, Dow is down 1K already & over 1.6 K below its recent highs!!!  There are no shortage of problems around the world & markets will remain on defense.

Dow Industrials (INDU)

stock chart

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