Tuesday, August 2, 2011

Markets tumble on weak economic data

Dow sank 265 closing at its lows well below 12K, decliners over advancers more than 3-1 & NAZ fell 75. Bank stocks led the way down with the Financial Index hitting levels not seen since late last year. A drop of over 5 is a major setback for the index & there was also selling into the close (dropping more than 2 in the last hour).

S&P 500 Financials Sector Index

Value	193.19
Change	-5.33 (-2.7%)

Selling in stocks hit MLPs & REITs. The MLP index pulled back to where it was in late 2010 & the REIT index fell 7½ to the 232s. The REIT index is down 16 from its highs just 5 trading days ago. Junk bond funds were mixed to lower but Treasuries are red hot rallying the most in more than a year after the Senate approved a debt limit deal & a gov report showed consumer spending unexpectedly fell in Jun, reinforcing speculation the economy is slowing. Oil fell to a 5-week low on the drop in personal spending. But gold is soaring to new heights as the Bank of Korea announced it bought gold for the first time since 1998.

Alerian MLP Index

Value	361.52
Change	-2.07 (-0.6%)

Treasury yields:

U.S. 3-month	0.036%
U.S. 2-year	0.320%
U.S. 10-year	2.620%

CLU11.NYM

...Crude Oil Sep 11

...93.91

...

0.98

(1.0%)

Get the latest daily market update below:

Ford Motor July Sales Miss Est.’ Shrs Hit Session Low

Photo: Bloomberg

Analysts predicted only a slight rise in Jul US sales for new cars & trucks. A lack of discounts & continuing shortages of Japanese cars kept many buyers away, causing sales to sputter for the 3rd straight month. Americans also worried about the weakening economy. But Jul wasn't a total loss as sales of compact cars & newer, more fuel-efficient SUVs rose. Chrysler sales rose 20% over last year, helped by new products such as the Jeep Grand Cherokee, which saw sales jump 76%. Sales rose 8% at General Motors (GM), led by fuel-efficient vehicles such as the Chevrolet Cruze, which gets 30 mpg in combined city-highway driving. Sales rose sharply for the Chevrolet Equinox & GMC Terrain small crossovers, which also get good mileage. Ford (F) sales rose 6%. The new Ford Explorer was a strong performer, with sales more than double a year ago & the Fiesta saw sales rise 58%. But a disappointment for the company was the popular Focus which didn't capitalize on strong small-car sales because of problems at a factory limited production. This is another glum signal that the economy is sputtering.

US auto industry uneasy after weak July sales AP

A woman walks past the entrance to offices of the McGraw-Hill Companies, in New York August 15, 2008. REUTERS/Brendan McDermid

Photo: Yahoo

The Ontario Teachers' Pension Fund & JANA Partners said in a securities filing that they may press McGraw-Hill, a Dividend Aristocrat, to break off parts of the company, & take other steps to boost its market value. The funds own 5.2% of MGH, which produces textbooks & trade publications, runs 9 TV stations & owns ratings agency Standard & Poor's. Its breakup value could be about $55 a share. The stock gained 3.02 (7%) to $44.43.

McGraw-Hill Breakup Valuation May Be as High as $70 a Share, Lazard Says

McGraw-Hill Companies, Inc. (The) (MHP)

Twitter raised $400M from DST Global, the investment fund led by Russian billionaire Yuri Milner, & is aiming to raise about $800M in total. Half will be used to buy back shares from employees & backers. The investment values the short-messaging service at $8B. Its valuation has more than doubled since Dec, when it received $200M from a group led by Kleiner Perkins Caufield & buyers that gave it a $3.7B valuation. It was pegged at about $1B in 2009. Even with stocks selling off, there are buyers for the right stocks.

Twitter Said to Raise $400 Million From Russian Billionaire

Serious recent selling in the Dow can be seen in the chart below. Dow was 12,724 on Jul 21 & has fallen 860 since then. The immediate threat from debt default is over although fundamental problems of massive gov deficits have not been solved. The pres talked about adding jobs (finally) but first he wants ot raise taxes on the rich. Meanwhile the politicos are going home for a long holiday. This could be a bad month for stocks.