Monday, September 12, 2011

Markets rebound in the last hour, erasing earlier losses

Trading was choppy, but a late day rally brought Dow into the black.  Dow gained 68 (closing at its highs & 230 above the lows), decliners ahead of advancers 5-4 & NAZ rose 27.  The Financial Index bounced nicely off its 162 lows a half hour before the close.

S&P 500 Financials Sector Index

Value166.22One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   2.01     (1.2%)

The MLP index finished 6 above its lows & the REIT index was up a fraction to the 219s.  Junk bond funds inched higher & Treasuries were a tad lower after a successful auction of 3 year notes at a record low yield.  Oil bounced back & would like to reach $90 again.  Gold declined as the stock market rebounded.

Alerian MLP Index

Value347.01One-Year Chart for Alerian MLP Index (AMZ:IND)
Change   -1.55    (-0.4%)

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CLV11.NYM...Crude Oil Oct 11...88.24...Up 1.00  (1.2%)

Live 24 hours gold chart [Kitco Inc.]

Greece’s chance of default in the next 5 years has soared to 98% after the Prime Minister failed to reassure intl investors that his country can survive the euro-region crisis.  It now costs a record $5.8M upfront & $100K annually to insure $10M of Greek debt for 5 years, up from $5.5M in advance Sep 9. Papandreou’s promises to adhere to deficit targets that are conditions of the EU & IMF bailout were undermined by data showing Greece’s budget gap widened 22% in the first 8 months of the year.  The nation’s 2-year note yield climbed toward 70%, while its stock market has plummeted a third in the past 7 weeks.  The nation’s gov now expects the economy to shrink more than 5% this year, worse than the 3.8% forecast by the European Commission, as austerity measures deepen a 3-year recession.  The risk of contagion beyond Greece pushed sovereign credit-default swap prices to record highs across the euro region.  European bank debt risk also rose to the highest ever amid speculation French lenders will be downgraded because of their holdings of Greek bonds.  We go from bad to worse & then, even worse. 

Greece Default Risk Hits 98%- Bloomberg

Bank of America (BAC), still a Dow stock, will cut about 30K jobs over the next few years to save $5B per year as part of a broader effort to reshape & shrink the nation's largest bank.  The bank announced the job cuts shortly after CEO Brian Moynihan disclosed the cost-saving goals in New York.  "We're a much simpler company than we were 24 months ago," Moynihan said.  BAC expects many cuts to come through attrition & eliminating unfilled positions.  The number of job cuts isn't fixed, but it expects they will total 30K & hopes to save $5B in annual costs through 2014 under a cost-cutting plan dubbed internally as "Project New BAC."    BAC stock was up 7¢.

The President called on Congress to act on his $447B package with “no games, no politics, no delays.”  “I’m sending this bill to Congress today and they ought to pass it immediately,” Obama said.  “Let’s put them back to work.”  The package is weighted toward tax cuts, which account for more than half value of the plan.  The rest would provide money for improving infrastructure, modernizing schools & helping states keep teachers & emergency workers on the job.  The centerpiece is a cut in the payroll tax, which covers the first $106K in earnings.  Obama would reduce the portion paid by workers next year to 3.1% from 4.2% now.  The rate was reduced by 2 percentage points under the terms of a tax deal reached last year & is set to expire Dec 31, which would push the tax rate back to 6.2%.  “If Congress does not act, just about every family in America will pay more taxes next year,” Obama said. “That would be a self-inflicted wound that our economy just cannot afford right now.”  The president called on lawmakers to heed his sense of urgency, saying the measure will reduce economic uncertainty & blunt headwinds from Europe's debt crisis.  This is iffy & controversial to say the least!. 

Obama Says Congress Should Act on $447 Billion Jobs Plan With ‘No Delays’

Stocks pared losses after a report that Italy was in talks with a Chinese investment firm to buy bonds, somewhat offsetting concern about a default on Greek debt.  Sounds to me like there's still a big mess in Europe.  There are an abundance of financial problems out there, starting with DC.  Congress will begin debate on another spending plan.  Somehow that's not supposed to get in the way of deficit reduction, but not sure how that will work.  Dow held above 11K & is further away from the floor set with last month's low.   Below is the chart for the VIX, volatility index.  While off from its intra day high of 43, 38½ remains at an elevated level (where it has been for more than a month).
 Volatility Index (^VIX)


Dow Industrials (INDU)

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