Friday, August 5, 2011

Mixed markets after a roller coaster day

On an unusually wild day for the markets, Dow ended with a gain of 60, decliners over advancers 5-2 & NAZ dropped 23.  Banks had another terrible day with the only consolation that the Financial Index finished 3 above its lows.

S&P 500 Financials Sector Index

Value 180.75 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -3.23    (-1.8%)

The Alerian MLP Index was lower again, bringing its loss from the record high to 50 (more than 10%) & the REIT index fell 5 to the 214s.  Junk bond funds were weaker & Treasuries had profit taking after their enormous run in recent weeks. Oil fell to the lowest in 8 months with the biggest weekly decline since May, on speculation fuel demand will falter as US economic growth stumbles & Europe's debt crisis worsens.  Gold rose for the 5th straight weekly gain, as investors sought a haven from financial-market turmoil spurred by budget woes in the US & Europe.

Alerian MLP Index

Value 339.75 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change    -5.55    (-1.6%)

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CLU11.NYM...Crude Oil Sep 11...86.46 ...Down 0.17  (0.2%)

Live 24 hours gold chart [Kitco Inc.]

Italy pledged to work for a constitutional amendment requiring the gov to balance its budget, as it feverishly tries to assure domestic & foreign investors its finances are sound & calm a nervous market.  Finance Minister Giulio Tremonti said that Italy, aims to balance its budget in 2013, a year before previously scheduled.  Italy's borrowing costs rose above Spain's for the first time in more than a year, pushing European leaders to interrupt vacations & look for a response to deepening fears about the health of the eurozone's #3 economy.  At the start of Europe's debt crisis 21 months ago, Italy was rarely grouped with the weaker members such as Greece, Ireland & Portugal.  But the emergence of Italy as a potential victim over the past few weeks has highlighted just how vulnerable the eurozone is & how insufficient its anti-crisis measures are!  The yield on Italy's 10-year bond stands at 6.09%, above Spain's equivalent of 6.04% (though both are lower than the highs earlier in the week & markedly below where they were at the start of the day),  Debt problems are not going away soon.

Italy Seeks to Balance Budget by ’13 as Berlusconi Speeds Up Fiscal Steps

The Postal Service posted a loss of $3.1B in its Q3 & warned again it would default on payments to the federal gov if Congress did not step in.  Total mail volume in Q3 fell to 39.8B pieces, a 2.6% drop from last year.  It has struggled to overhaul its business as mail volumes fall.  "We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule," Joseph Corbett, USPS chief financial officer, said.  "Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September."  The Postal Service said it lost $5.7B during the 9-month period compared to $5.4B in the prior year.  In its 4th straight year of declines, the agency had a net loss of $8.5B for the 2010 fiscal year.  Despite the overall losses, USPS said shipping & standard mail saw growth in Q3, with revenue up 7.3% & 1.7% respectively.  This is another major business that is coming unglued & it's going to be tougher for Congress to come to its aid.

This was an usually wild day in the markets.  In the first 3 hours, Dow dropped 400 & then recovered that in just one hour.  In the PM, it drifted higher.  For the week, it lost 700, reminiscent of its performance during the financial meltdown.  The VIX, Volatility Index, had been in the teens most of the year.  But in the last month it popped to 39 today & closing at 33.  These are unsettled markets with a strong bias on the selling side.  The stories above indicate a lot is coming unglued & nobody is quite sure how to handle this global mess. A stronger market would have brought out buyers after the slightly encouraging jobs report but this was a day for speculators & day traders.  The markets continue to be on defense.

Dow Industrials (INDU)

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