Friday, September 23, 2011

Markets suffer worst week in 3 years

Dow rose 37, advancers ahead of decliners 3-2 & NAZ added 27.  Bank stock rose on words from the G20 meeting that it's “committed to a strong and coordinated international response” to help the global economy.  But talk is cheap.

S&P 500 Financials Sector Index

Value 157.48 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    1.80    (1.2%)

The MLP index is off 16 from its peak this week & the REIT index gained 2+ to 207.  Junk bond funds were higher, up around 1% & Treasuries were weaker after their rally this week.  The yield on the 10 year Treasury back to 1.8%, still near record low territory.  Oil fell for a 3rd straight day on worries that the global economy is headed for recession, cutting demand for crude.  Gold is in its own bear market, falling $100.  Rumors say that hedge funds (easy to blame them for anything) & reserve banks were selling to raise capital.  However, long term fundamentals remain in place.

Alerian MLP Index

Value 341.22 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change   -2.20    (-0.6%)

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CLX11.NYM....Crude Oil Nov 11...80.13 ...Down 0.38  (0.5%)

Live 24 hours gold chart [Kitco Inc.]

European policymakers showed signs they were preparing new steps to cope with the Europoean debt crisis.  Finance ministers & central bankers are meeting in DC for semi-annual policy discussions, have turned up the heat on Europe to do more to prevent Greece's debt crisis from infecting the world economy.  "They have six weeks to resolve this crisis," said British finance minister George Osborne.  Euro zone leaders needed to have the situation under control by the time leaders of the Group of 20 economies meet in France in Nov, he said.  Policymakers in Europe seem to be warming to the idea of giving more firepower to their bailout fund.  The head of the IMF, Christine Lagarde, said Europe & the grim economic outlook in the US required a new collective effort or "we run the risk of losing the battle for growth."  A lot of good ideas, but it's all talk.  Markets want action.

Hewlett-Packard Co. CEO Officer Meg Whitman

Photo:   Bloomberg

Hewlett-Packard, a Dow stock, sank to its lowest level in 6 years, as investors worried that new CEO Meg Whitman isn't the right person to turn the company around.  Investors are now looking for clarity about the company's direction but the company isn't looking at "getting out of the PC business."  However, it is still evaluating options for the division (the world's largest PC maker).  There are doubts about Whitman.  She led eBay (EBAY) for 10 years, taking it from a startup to one of the dominant e-commerce companies.  But some say she has no experience in enterprise technology &, indeed, no expertise outside the consumer sphere. With all the unknowns the stock sold off, falling 51¢ to $22.29.

HP’s Whitman Sticks to Strategy Begun by Apotheker to Stem 47% Stock Drop

Hewlett-Packard Company (HPQ)

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BofA Leads Lenders Higher on Asset Sales

Photo:  Bloomberg

Bank of America led the Dow higher as the company prepared more asset sales to bolster capital.  BAC is in talks to sell its stake in NPC Intl the biggest US Pizza Hut franchisee, for more than $.8B.  It also agreed to sell about $880M in commercial mortgages at a discount of as much as 25%. CEO Moynihan has agreed to sell almost $50B in assets after the company lost more than half its market value this year amid concern that losses from soured mortgages will force BAC to issue stock to bolster capital.  BAC is shrinking through an initiative known as Project New BAC, which involves slashing 30K jobs from consumer banking & back-office operations. Last week it agreed to sell its stake in US hospital operator HCA Holdings which like NPC was acquired by the Merrill Lynch private-equity arm in 2006.  The stock rose 24¢ to $6.30.

BofA Leads Lenders Higher on Asset Sales

Bank of America Corporation (BAC)

stock chart

Markets weren't sure what to do.  Dow held above the 10,720 closing low last month after testing that low.  Bulls are encouraged.  But there are a ton of problems out there, including a possible gov shutdown (maybe that would be viewed as good).  MLPs got a nice bump  up recently, but that was lost in recent days.  The index is back below 350, representing a 10% decline from its record highs 5 months ago.  MLP yields have a 500 basis point advantage over the 10 year Treasury yield, but that will widen if there is more selling in MLPs.  In the ugly days 3 years ago, the spread was 1300.  The VIX volatility index, remains above 40, markets are nervous. 

Dow Industrials (INDU)

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