Stock markets have worst quarter in 3 years

Dow sank 240 finishing at the lows, decliners over advancers 3-1 & NAZ sold off 65.  The Financial Index dropped a very big 6 to 159, just a few points above its 2½ lows set 2 weeks ago.  This group of market leaders has a very dreary chart!  The MLP index fell 2 to just above 240 & the REIT index was off 6 to the 203s.  Junk bond funds dropped about 1% but Treasuries were strong as the yield on the 10 year Treasury is solidly below 2% again.  Oil was lower along with the stock market but gold managed a modest gain in what has been its worst qtr in some time.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.251%
U.S. 10-year	1.907%

CLX11.NYM

...Crude Oil Nov 11

...79.26

... 2.88

(3.5%)

Click below the latest market update:

This has been a dreary month, as expected, & an even worse Q3.  Dow dropped 700 in Sep & 12% in Q3.  MLPs & REITs had similar kind of performances.  Stock markets have nothing going for them.  The European credit crisis drones on & the latest squiggles in the drama are negative.  The US economy is stuck in neutral while DC is deeply divided on how to deal with it.  Stock in neutral is applied to the economy because of all the uncertainty about the future (especially with higher taxes & reduced gov spending).  Business  is holding back expansion plans.  Now Q4 begins with Oct, which is best remembered for some of the ugliest days in market's history.

Volatility Index (^VIX)

Dow Industrials (INDU)

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Market rally ends on growing worries about European debt crisis

Markets tried to extend gains, but sellers came in.  Dow sank 179 (closing at its lows & just barely holding above 11K), decliners over advancers 4-1 & NAZ dropped 55.  After reaching 165 yesterday, the Financial Index may be heading back down to test the 151 lows from last week on increased recognition that solving European debt problems could hurt bank results.  I hate to keep bringing it up, the the Financial Index chart looks awful.

S&P 500 Financials Sector Index

Value	160.30
Change	-4.80    (-2.9%)

The MLP index tumbled in the lower end of its 5 month trading range & the REIT index fell 6 to the 205s.  Junk bond funds fell more than 1%, & Treasuries were weaker taking the yield on the 10 year Treasury back over 2%.  Oil traded near its highs in 4 days, paring an earlier decline & loss for Q3.  Gold had another bad day, difficult to understand when the flight to safety is not directed to gold.

Alerian MLP Index

Value	341.57
Change	-6.67    (-1.9%)

DJ REIT INDEXDJR (^DJR)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.005%
U.S. 2-year	0.250%
U.S. 10-year	2.004%

CLX11.NYM

...Crude Oil Nov 11

...81.42

... 3.03

(3.6%)

Photo:    Yahoo

Jose Manuel Barroso, the president of the EU's executive arm, proposed taxing financial trades which could raise €57B ($77B) a year in Europe to help combat the European debt crisis that is threatening the euro currency.  "In the last three years, member states have granted aid and provided guarantees of euro4.6 trillion to the financial sector," Barroso said. "It is time for the financial sector to make a contribution back to society."  The tax would be a tiny percentage of the value of a trade (i.e. stocks & bonds).  The European Commission has formally backed the tax to take effect from Jan 2014. Though the tax could dent growth & employment, it has won a fair degree of support across the 17-country eurozone, including France & Germany, the EU's 2 biggest economies.  Britain, however, has been adamantly against it unless it is used on a global basis.  This may sound far away, in distance & time, but traders do not like to hear this kind of talk!

EU Proposes $78 Billion-a-Year Financial Transaction Tax to Start in 2014


Chancellor Merkel hinted that the 2nd Greek bailout package might have to be renegotiated amid increasing market speculation that European leaders want to force private holders (i.e. banks) of Greek bonds to take bigger losses.  She didn't rule out altering the terms to the €109B ($148B) package, saying the decision must be based on how Greece's debt inspectors judge Athens' recent austerity efforts.  "So we must now wait for what the troika finds out and what it tells us: do we have to renegotiate or do we not have to renegotiate?" she said.  Merkel added that she "cannot anticipate the result of the troika."  Many maintain that Greece must have its total debt reduced by as much as 50% if it is to have a chance of recovering.  This is not good news for lending banks, &, in turn, the stock market.

Merkel says Greek bailout terms may be changed AP


The VIX, volatility index, has been quite volatile in the last month.  It had been lumbering along in the teens for a couple of years when stocks had their glorious run.  Then the markets sank & the index shot up to the 40s, reflecting increased nervousness by investors.  Today it was up 3, to 41.

SPX Volatility Index (^VIX)

The rally in the markets seemed way overdone.  European debt problems are not close to being resolved with unrest in the streets of Greece & uncertain terms about taking haircuts (losses) on Greek debts by banks & other holders.  Attention on the European debt crisis makes it easy to forget the US has whopper sized financial problems.  Sat, a new fiscal year begins & it will bring another huge deficit.  Congress has to make tough decisions about reducing the debt & there is no agreement about how to make budget cuts.  The super committee has less than 2 months to come up with recommendations or automatic budget cuts will be put into place. Additionally, end of the month/qtr decisions will influence trading thru Fri.

Dow Industrials (INDU)

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Overbought markets turn mixed

Dow was up 26, decliners over advancers 5-2 & NAZ fell 6.  Bank stocks, market leaders, are pulling back after their recent run.

S&P 500 Financials Sector Index

Value	163.36
Change	-1.74   (-1.1%)

The MLP index fell 1+ to the 246s & the REIT index was flattish.  Junk bond funds were little changed as were Treasuries with the yield on the 10 year Treasury holding near 2%.  Oil fell, heading for the biggest quarterly drop since 2008, on concern Europe's debt crisis may linger & speculation US stockpiles increased.  Gold is adjusting to its lower levels in the 1600s.

ALERIAN MLP Index (^AMZ)

Treasury yields:

U.S. 3-month	0.005%
U.S. 2-year	0.243%
U.S. 10-year	1.992%

CLX11.NYM

...Crude Oil Nov 11

...83.49

..... 0.96

(1.1%)

GCU11.CMX

...Gold Sep 11

......1,650.00

... 4.70

(0.3%)

Get the latest market update below:

Photo:   Bloomberg

Amazon is unveiling a tablet, called the Fire, that may not have all the same features as an iPad, but will start at a much lower price.  It will cost $199, compared to the iPad, which starts at $499.  Initially the Kindle Fire will be more of a color version of the Kindle e-reader than a true competitor to the iPad.  It will have a 7" display (3" shy of the iPad),& will run Google (GOOG) Android software, but it won’t have an embedded camera or microphone. It will come with Wi-Fi, but not 3G.  The device comes with a 30-day free trial of Amazon Prime, the $79 annual membership, which includes free 2-day shipping & some content, like streaming video.  The stock has had a fantastic run & is up $7+ today.

Amazon Unveils $199 Kindle Fire Tablet

Amazon.com, Inc. (AMZN)

• 

Photo:   Yahoo

EU & IMF inspectors will return to Greece to decide whether Greece has done enough to secure additional aid, vital to avoid bankruptcy.  Germany has suggested a new bailout may have to be renegotiated.  Facing a wave of strikes & protests, the Greek gov is accelerating budget measures to meet the terms of an IMF & EU rescue deal so it can receive a new loan next month.  The "troika" team of inspectors, which had threatened to cut off aid if Athens did not move faster, will hold talks on a plan to deepen budget cuts & raise taxes which has driven protesters back onto the streets.  German Chancellor Angela Merkel suggested that parts of a planned new €109B ($148.6B) rescue for Greece could be reopened, depending on the outcome of the troika's audit.  "We have to wait and see what the troika ... finds and what it will tell us (whether) we will have to renegotiate or not," she said without elaborating.  The Greek drama has been dragging on for months.

Merkel Sees More Bailout Talks After Review

• 

Photos:   Yahoo

New orders for durable goods slipped in Aug on weak demand for motor vehicles, but a rebound in a gauge of business spending supported views the economy would likely avoid another recession.  The Commerce Dept said durable goods orders dipped 0.2% after a 4.1% jump in Jul.  Expectations were that durable goods orders would be unchanged.  Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, increased 1.1% last month after a 0.2% fall in Jul, suggesting that businesses had not responded to the recent financial market volatility by curtailing spending on capital goods.  Although manufacturing, which has done the heavy lifting for the fragile economy recovery, is slowing, Aug durable goods report pointed to underlying resilience & offered hope output would continue to expand.  Orders last month were held back by an 8.5% drop in bookings for motor vehicles -- the largest decline since Feb last year.

U.S. Durable Goods Orders Likely Fell in August


The greatest excitement comes from the new product announcement by AMZN.  Everybody is having fun speculating if it will be a big winner.  Bigger picture, the markets reversed from over sold to over bought in just 2 days with little news to support the gains.  There is a lot of focus on getting Greece the next batch of bailout funds to keep it alive.  It's important to remember that nothing has been decided & Greece will probably be kept waiting to the last minute in mid Oct before it finds out.

Dow Industrials (INDU)

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Early strength in stock market pared in the last hour

Stocks were soaring until selling into the close.  Dow rose 146 (but 180 below its highs), advancers over decliners 4-1 & NAZ was up 30.  Bank stocks led the way up but were sold off in the PM.  The modest gain for the Financial Index was 4 below its earlier highs.

S&P 500 Financials Sector Index

Value	165.10
Change	0.67   (0.4%)

MLPs & REITs had strong gains during the rally, although some was given back in late day trading.  Junk bond funds were up around 1% while Treasuries gave up recent gains.  The yield on the benchmark 10 year Treasury went back over 2%.  Oil rose more than 5% on hopes that European leaders are closer to drafting a plan to contain the region's debt crisis.  Gold has had an unusually volatile 2 months (shown in the graph below), but bulls returned for a $62 gain. 

Alerian MLP Index

Value	348.08
Change	5.19   (1.5%)

Get the latest market update below:

Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.239%
U.S. 10-year	2.002%

CLX11.NYM

...Crude Oil Nov 11

...84.46

... 4.22

(5.36%)

Greek lawmakers approved a new property tax that aims to boost revenue as the country struggles to obtain a critical installment of intl bailout loans to prevent it from default.  The financial inspectors are expected to return to Athens this week.  Greece must receive an €8B ($11B) rescue loan before mid-Oct to stave off bankruptcy.  But creditors have demanded more efforts to raise revenue.  The new tax will be charged through electricity bills to make it easier for the state to collect, instead of going through the unwieldy & inefficient tax system. Those who refuse to pay risk having their power cut off.  The extra charge has deeply angered Greeks, who have already been through more than a year of sharp austerity that has seen salary & pension cuts & increased taxes.  State electricity company unionists have threatened not to collect the tax.  Finance Minister Evangelos Venizelos acknowledged the new tax was harsh on some, but stressed the gov had no choice but to impose it as it fought to reduce its budget deficit.  "Clearly there will be categories of people who will not be able to pay this housing charge and this is a situation that will be resolved," he said.  "But the most important thing is that we achieve the targets agreed to in 2011 and 2012."  This is only one more step in a long journey for Greece.

Papandreou Wins Vote on Property Tax

Photo:   Bloomberg

Apple, with the largest market cap in the world, will unveil its much-awaited new iPhone, which which is expected to have a bigger screen & work better with remote computing services.  AAPL invited media to a "special event" called "Let's talk iPhone" on Oct 4 at its headquarters.  No additional details about the event were mentioned but it is assumed to be the launch of iPhone 5,  This would be the first major launch under Tim Cook, who took over full-time as CEO after Steve Jobs resigned last month.  It was unclear if Jobs will take the stage at the event.  It has been reported that suppliers were told to gear up capacity for up to 45M units.  But investors are nervous.  The stock dropped 3.91, going below 400.

Apple to Introduce New IPhone at Oct. 4 Event

Apple Inc. (AAPL)

Chevron, a Dow stock, rose as investors cheered progress on a huge Australian natural gas project.  Yesterday CVX said it will build the Wheatstone field platform 140 miles off the Australian coast & pipe 8.9M tons of gas & liquid a year to a processing plant on shore.  The first phase will cost $29B & the first gas is expected to be shipped in 2016.  Capacity could expand to 25M tons a year.  This is expected to position CVX to supply the growing energy demand in the Asia-Pacific region.  Wheatstone is a joint venture operated by Chevron, which has a 73.6% stake & other partners which include Apache (APA) with 13%; Kuwait Foreign Petroleum Exploration (7%) & Royal Dutch Shell (RDS.A) with 6.4%.  CVX rose 2.05.

Chevron shares rise on project progress AP

Chevron Corporation (CVX)

When the markets were rising, it seemed like European financial problems were going to vanish.  But now so fast!  Greece remains a long way away from resolving its messy situation & other countries which are getting less attention, remain fragile.  Reality hit the overbought markets in late day trading.  The VIX, volatility index, was improving (going lower) until selling in the last hour.  At the end of the day, the VIX was a little lower than where it started & the trend was for higher values.  Investors were growing more nervous, not good for the markets.

Volatility Index (^VIX)

Dow Industrials (INDU)

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