Thursday, November 17, 2011

Selling accelerates in nervous markets

Stocks sold off in the PM & closed not far from the lows.  Dow sank 134, decliners over advancers 4-1 & NAZ fell 51.  As usual, bank stocks led the way (down).  The Financial Index has been trading sideways & is at its lowest level in a month.  More headwinds are ahead.

S&P 500 Financials Sector Index

Value166.97One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -3.57    (-2.1%)

The MLP index was up a fraction in the 366s but the REIT index fell 4+ to 218.  Junk bond funds sold off, following lower stock prices while Treasuries rallied.  Frightened money still seeks the main safe haven investment, Treasuries.  Selling in oil took it back below $100 & gold had a very bad fall, down 53 to 1720..

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

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Treasury yields:

U.S. 3-month


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U.S. 10-year


CLZ11.NYM...Crude Oil Dec 1199.11 ...Down 3.48  (3.4%)

Live 24 hours gold chart [Kitco Inc.]

US. banks face a “serious risk” that their creditworthiness will deteriorate if debt crisis in Europe deepens & spreads beyond the 5 most-troubled nations, according to Fitch.  “Unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” Fitch said.  Even as US banks have “manageable” exposure to stressed European markets, “further contagion poses a serious risk,” Fitch said.  It is believed that the 6 biggest US banks have about $50B in risk tied to the weak European countires.  Presently ratings on the US banking industry are stable & take into account lenders’ improved capital & liquidity position, Fitch said.  Bottom line, there are a lot of questions about the the worth of European sovereign debts..

Greece Turns to Budget After Winning Confidence Vote

Photo:    Bloomberg

Greek Prime Minister Papademos is finalizing next year’s budget & a voluntary debt swap, 2 conditions the country must meet to resume receiving intl loans & avert a collapse of the economy.  Finance Minister Venizelos will present the 2012 spending plan to the Cabinet tomorrow before submitting it to parliament.  The interim gov, backed by 3 of the 5 Greek parties, also started talks with bondholders on a voluntary debt swap that is part of the country’s 2nd bailout agreement.  The immediate priority is to secure the release of an €8B ($10.8B) loan under an earlier bailout by the middle of next month. Disbursement was halted by Germany & France after former Prime Minister Papadreou said he planned a referendum on the terms of the 2nd bailout.  Papademos has won a 3-month mandate to implement budget measures & ensure a bailout of €130B agreed to on Oct 26.  That will also mean arranging a debt swap that aims to slice €100B off the country’s debt burden of €355B.  It's unclear what progress the country has made in recent months.

Papademos Turns Attention to Budget After Winning Greece Confidence Vote

Housing Starts in U.S. Declined 0.3% to 628,000

Photo:   Bloomberg

Builders broke ground on more homes than forecast in Oct & construction permits climbed to the highest level since Mar 2010, cautionary signs that housing may become less of a laggard in the 3rd year of recovery.  Starts decreased 0.3% to a 628K annual rate from the 630K pace in Sep (slower than previously reported), according to Commerce Dept.  But this was above the 610K estimate.  The Oct results compare with last year’s tally of a 587K pace, the 2nd-fewest on record.  Home construction totaled 554K units in 2009, the lowest since record-keeping began in 1959.  Building permits, a proxy for future construction, increased 10.9% in Oct.  Record low mortgage interest rates & a reduced stock of new properties are positives but foreclosures are holding down property values. Housing just can't escape from the bottom of its depression.

Housing Starts in U.S. Declined 0.3% in October

Brown-Forman, a Dividend Aristocrat, increased its quarterly dividend by 9% to 35¢ ($1.40 annualized).  The company is known for the Jack Daniel's Tennessee Whiskey & Southern Comfort brands which are sold in 135 countries.  This is the 28th consecutive year it has increased the dividend.  Unlike many other stocks, this one is having a good year despite today's drop of 91¢.

Brown-Forman boosts dividend AP
BF.B   Brown-Forman Corp. Cl B

The bulls went home early today, so the sellers had their way in the PM.  What's there to say that hasn't already been said about the credit mess in Europe?  It's getting uglier with more countries in the shaky category.  Greece & Italy are far from resolving their problems & Spain is just behind them.  Little noticed among all the debt issues getting attention, oil has shot up & this will be a drag on economies.  Europe is already forecasted to have a recession next year & growth estimates for the US economy in 2012 have been lowered.  Looking at the chart, Dow is in sensitive territory,  About 11½K had been a ceiling for weeks, then it became a floor which is soggy after today's sell-off.

Dow Jones Industrial Average

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