Thursday, August 18, 2011

Turbulent stock markets, Dow plunges 419

Stocks had another ugly day from dreary news on many fronts.  Dow sank 419 finishing near the lows, decliners over advancers 10-1 & NAZ down 131 had a bigger percentage drop.  Bank stocks led the way lower, although all groups sold off with techs especially hard hit on worries about another recession.

S&P 500 Financials Sector Index

Value166.18One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   -8.77     (-5.0%)

The MLP index & REIT index each plunged 10+ & the MLP Index closed in the 344s, solidly below the important 350 resistance level.  Junk bond funds fell on the order of 2-3% but Treasuries were in demand as a safe haven investment.  The yield on the 10 year Treausury has returned to 2.1%, the rate investors accepted at last week's auction.  Oil declined the most in more than a week as commodities fell around the world after forecasts for global economic expansion were cut.  Gold hit its latest record high, nearly $1830 as investors spooked by the prospect of a return to recession sought out safety.


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CLU11.NYM...Crude Oil Sep 11...82.38 ...Down 5.23  (6.0%)

Live 24 hours gold chart [Kitco Inc.]

Job Seekers at Job Fair

Photo:   Bloomberg

News today was gloomy, giving reasons for the markets to sell off.  Jobless claims climbed 9K to 408K last week, the highest in a month according to the Labor Dept. The number on unemployment benefit rolls rose, while those receiving extended payments fell.  The 4-week moving average, dropped to 402K, the lowest in 4 months. The number continuing to receive jobless benefits climbed 7K to 3.7M.  Those who’ve used up their traditional benefits & are collecting emergency & extended payments decreased by about 43K to 3.66M. The unemployment rate among those eligible for benefits, which tends to track the jobless rate, held at 2.9%.  The outlook for unemployment rate remains dismal.

Jobless Claims in U.S. Top Forecast

Consumer Prices in U.S. Probably Stabilized

Photo:   Bloomberg

More expensive gas, food, clothes & other necessities are squeezing consumers who are already struggling with stagnant pay & worried about a weak economy.  The Consumer Price Index rose 0.5% in Jul according to, the Labor Dept, following a 0.2% drop in Jun, largely because of an increase in gas prices.  The core index, which excludes volatile food & energy costs, rose 0.2%, below the 0.3% rise in each of the previous 2 months.  Over the past 12 months, prices have risen 3.6%, equal to the 12-month increase in May & June.  Core prices over the past 12 months have gone up 1.8%, the largest increase since Dec 2009.

Existing Home Sales in U.S. Unexpectedly Decreased in July

Photo:  Bloomberg

Sales of previously owned homes in the US unexpectedly dropped in Jul, reflecting an increase in contract cancellations due to strict lending rules & low appraisals.  Purchases decreased 3.5% to a 4.67M annual rate, the weakest since Nov, according to the National Association of Realtors & economists had forecasted an increase. The median price dropped 4.4% from last year & 16% of real estate agents polled said they had at least one pending contract canceled last month.  Housing remains stuck in the mud! 

Hewlett-Packard, a Dow stock & the world’s largest computer maker, is in talks to buy Autonomy for about $10B & plans to spin off its personal-computer business.  Autonomy confirmed the  talks with HPQ & may receive a premium of more than 60% in an all-cash offer.  Autonomy, the UKs 2nd-largest software maker, offers programs used in database search with customers that include Coca-Cola (KO), Nestle (NESN) & the Securities & Exchange Commission.  HPQ fell 1.88 (6%) with an ugly chart over the last 6 months.

HP to Spin Off PCs, Eyes Software Purchase

Hewlett-Packard Company (HPQ)

stock chart

Caterpillar, another Dow stock, said global sales grew 35% in Jul even though last year's numbers were strong.  Last year, CAT reported a 32% increase in sales.  The strongest regions were in Latin America and Europe, Africa & the Middle East.  Both regions reported sales increases of more than 50%.   However the stock was hit with selling, dropping 4.31 (5%).

Caterpillar says sales growth continued in JulyAP

Caterpillar, Inc. (CAT)

stock chart

While volume is not running as high as last week, volatility had a sharp rise. The VIX, volatility index, shot up 11 to the 42s indicating there are a lot of nervous traders.  In prior months it had been lumbering along in the teens & spiked to a high of about 29 in May.  Today it started at 36.

SPX Volatility Index (^VIX)

The world is coming apart once again (Chicken Little is getting more phone calls).  Europe's banks are beginning to suffer the contagion of Europe's sovereign debt crisis ripped European markets.  Weak US economic reports made matters worse.  DC is closed, sort of good & bad.  There is less interference but the large numbers who are unemployed & underemployed are suffering while politicos are on holiday.  The Pres is starting a holiday that many could not afford.  Dow is back below 11K, down 300 this week & almost 1.2K in Aug.  The lowest closing for the Dow last week was 10.7K, which can become an important support level & may be tested soon.  There are 2 weeks left in Aug & dark days may not be over.   Sorry I missed the AM posting, but I was called away.

Dow Industrials (INDU)

stock chart

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