Thursday, December 1, 2011

Lower markets digest recent gains

Dow dropped 25, decliners over advancers 4-3 & NAZ  gained 5.  Bank stocks were weaker, taking the Financial Index down 1½ to 170.

The MLP index rose 5 to the 373s while the REIT index fell 2+ to 220.  Junk bond funds were a tad lower & Treasuries sold off, bringing higher yields.  Oil declined after more Americans filed applications for unemployment benefits & as European & Chinese manufacturing weakened last month.  Gold marked time in all the confusion coming from European sovereign debts.

AMZ   Alerian MLP Index

DJR    Dow Jones Equity REIT Index

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LF12.NYM...Crude Oil Jan 12...100.09 ...Down 0.27  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

A report form the UN on the World Economic Situation & Prospects 2012  forecasts 2.6% growth next year in its main, relatively optimistic scenario, & just 0.5% growth in its pessimistic scenario.  That's significantly below the May forecast that the global economy would grow 3.6% in 2012.  Following 2 years of anemic & uneven recovery from the global financial crisis, the report said, "the world economy is teetering on the brink of another major downturn" & "the risks for a double-dip recession have heightened."  Not good!

UN warns of possible new recession AP

German Chancellor Angela Merkel

Photo:   Bloomberg

German Chancellor Merkel is willing to snub investor pleas to back an expanded ECB role in solving the debt crisis, as she pushes her demand for tighter economic ties in Europe as the only way forward, repeating her push to rework EU rules to lock in budget monitoring & enforcement, & seal off the ECB from political pressure.  That risks a showdown with fellow EU leaders & extends her conflict with financial markets looking for immediate measures to end the contagion.  Underscoring the focus on debt cutting, Germany will propose that each euro country set up a national debt-reduction fund as one way to boost market confidence.  Each country could pay into the fund every year until its debt level returns to the euro-area limit of 60% of GDP.   Merkel’s drive to pursue economic & political convergence may still not be the final word.  “You can’t put the cart before the horse,” she said last week.  Debt mess drones on.

Merkel Shuns ECB Role in Favor of Budget Limits

  • <p>               FILE - In this Nov. 25, 2011 file photo, Rhonda Cochran, left, and Tiffany Strickland load bags of Black Friday deals into a car at Bel Air Mall in Mobile, Ala. Retailers are reporting strong sales gains in November, boosted by a discount-fueled spending binge for the start of the holiday shopping season last weekend. Now, the challenge is to keep shoppers spending throughout the most important selling period of the year. (AP Photo/Mobile Press-Register, Mike Kittrell) MAGS OUT; NO SALES
Photo:   Yahoo

Shoppers, taking advantage of big discounts & earlier store hours at the start of the holiday shopping season last weekend, helped boost retailers' revenue for Nov.  Retailers reported monthly revenue at stores open at least a year that beat estimates.  The overall total for the 21 retailers rose 3.2%, according to the International Council of Shopping Centers.  Nov results were boosted by the 4-day weekend start on Thanksgiving Day.  Americans spent $52.4B  over the weekend, the highest total ever recorded according to the National Retail Federation.  While the figures point to a solid start to the shopping season, they represent only a small slice of the industry.  Dollar stores, home-improvement chains & consumer electronics stores don't report monthly revenue.  Still, retailers can glean a lot from the numbers, well-heeled shoppers continue to be resilient in the weak economy.

Retailers report strong sales for November AP

All is not well at retail.  42% of Americans & 49% of parents  plan to spend less this holiday season than last year.  Bankrate's Nov Financial Security Index found that just 10% of Americans plan to spend more this year than they did in 2010.  "While consumers indicate a reluctance to spend more this holiday season, there is a notorious disconnect between how consumers feel and how consumers act, particularly regarding spending," said Greg McBride, senior financial analyst for Bankrate.  Princeton Survey Research Associates conducted the telephone survey of 1005 adults in early Nov & the index fell to its 2nd-lowest level of the year, as feelings of job security hit a new low.  Just 13% of Americans feel more secure in their jobs now than they did one year ago, which helped drag down the overall index to 92.5, just above the 2011 low of 92.3 recorded in Aug.  (below 100 indicates decreasing levels of financial security compared with 12 months earlier).  The success of holiday retail sales continues to be iffy.

The lack of follow thru by the markets indicates that enthusiasm got out of hand yesterday.  European banks did not participate in the global rally & US banks pulled back today (selling near 2 year lows).  Next week, important speeches will be made in Europe about solving the debt problems which are not going away anytime soon, no matter what reserve banks do.  Tomorrow will begin with the Nov jobs report which is expected to show 125K jobs were created.  This will be a more of the same kind of report.

Dow Jones Industrial Average

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