Wednesday, December 14, 2011

European jitters sink stocks

Dow dropped 131 (but 50 above the lows), decliners ahead of advancers 5-2 & NAZ fell 39.  Banks stocks got off easier today with the Financial Index down only a fraction at 168.

The MLP index fell 2+ to 370 but the REIT index gained 1 to the 218s.  Junk bond funds were soft but Treasuries were strong with the yield on the 10 year Treasury bond at its lowest level in almost 3 months.  Oil tumbled the most since Sep as OPEC agreed to raise its production ceiling & Europe struggled to contain the debt crisis.  Gold tumbled the most in 11 weeks on panic selling from the Euro debt woes.  Gold closed at 1567, last seen in mid Jul, however still up YTD.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

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CLF12.NYM...Crude Oil Jan 12...94.83 ...Down 5.31  (5.3%)

Live 24 hours gold chart [Kitco Inc.]

China to Impose Anti-Dumping Duties

Photo:    Bloomberg

China plans to impose anti-dumping duties on some vehicles imported from the US after failing to block a US tariff on Chinese tires.  Punitive duties will be as high as 12.9% for autos from General Motors (GM) & 8.8% for Chrysler Group.  US units of BMW & Daimler (Mercedes) will face duties of 2% & 2.7% respectively.  Auto sales in China are rising at the slowest pace in 13 years, putting pressure on local Chinese producers to consolidate as GM & other foreign carmakers post gains.  This move comes 3 months after the WTO rejected China’s appeal of a ruling backing US duties on tire imports.  This is called a trade war which can lead to bigger tariffs issues, not good for intl business & the stock market.

China to Impose Anti-Dumping Duties on GM, U.S. Cars

Caterpillar, a Dow stock, expects 2012 revenue of roughly $63.8-$69.6B, & reaffirmed its full-year 2011 guidance.  CAT expects EPS of about $6.75 on revenue of $58B this year, the same guidance given Oct.  It also expects 2012 revenue to rise 10-20%, "based on improving but slow growth in the developed parts of the world with continuing improvement in sales from what are currently low levels."  Analysts had been forecasting 2012 revenue of $67.2B.  More guidance  will be provided when it reports results in late Jan.  The stock has had a spectacular rise from the its lows at the depths of the recession 3 years ago.  Today it fell 3.98 in a tough market.

Caterpillar sees 2012 revenue of at least $63.8B AP

CAT   Caterpillar

Senator Reid is vowing to block a payroll tax-cut extension that passed the House because it includes Rep priorities that Dems oppose.  The $202B measure was approved yesterday.  President Obama opposes provisions of the legislation that would speed up approval of a Canadian pipeline & restructure unemployment compensation.  The White House threatened to veto the measure & Reid plans to hold a vote as soon as today to stop it from advancing.  If Congress doesn't act by Dec 31, employees will begin paying 6.2 % on the first $110K in wages in Jan, up from 4.2% this year.  The tax funds Social Security.  The most significant division is whether the cost of the payroll tax-cut package should be covered by spending cuts or new revenue from levies on high earners.  The House bill focused on spending cuts while Dems have proposed a surtax on income exceeding $1M.  This is a "biggie" & will have a huge effect on the economic recovery one way or the other.

Reid says he will block Republican payroll tax cut

The Federal Reserve refrained from taking new action to bolster the US economy & the markets are disappointed.  I'm not sure what they expect.  GDP is growing at a 2½% annual rate, good but not great.  Throwing gasoline on that fire could cause big problems & probably would have little affect on correcting the unemployment & housing troubles.  Dow jumped 1K off its lows 3 weeks ago & has given back more than a third of that gain this week.  The Euro debt mess should drone on which will keep stock buyers away.  The payroll tax uncertainty is a domestic problem that the politicos in DC have to manage & that situation is fuzzy, again not good for the stock market.

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