Thursday, December 8, 2011

Markets slip on lack of bond buying by the ECB

Dow fell 106, decliners over advancers almost 6-1 & NAZ was down 23.  Bank stocks led the decline as the Financial Index dropped a very big 4+.

S&P 500 Financials Sector Index

Value 174.46 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -4.27    (-2.4%)

The MLP & REIT indices each fell 3+, along with the selling in the stock market.  Junk bond funds were mixed & Treasuries were also little changed.  Oil declined as the ECB signaled it won’t increase purchases of gov bonds to stem the debt crisis.  Gold fell the most in more than 2 weeks, still sloshing around the low 1700s.

AMZ   Alerian MLP Index

DJR  Dow Jones Equity REIT Index

Treasury Yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF12.NYM...Crude Oil Jan 12...98.47 ....Down 2.02  (2.0%)

GCZ11.CMX...Gold Dec 11...1,718.00 ...Down 22.90  (1.3%)

Get the latest market update below:

Jobless Claims in U.S. Decrease

Photo:   Bloomberg

The number applying for unemployment benefits fell last week to the lowest level in 9 months.  The Labor Dept reported that weekly applications dropped 23K to 381K, the number since late Feb.  The 4-week average fell for the 9th time in 11 weeks to 393K, the lowest since early Apr.  But the US economy remains vulnerable to shocks from overseas as European leaders are struggling to contain a 2-year old debt crisis & the 17 nations that use the € may already be in recession.  That could slow US exports. Fewer are receiving unemployment benefits, & the number on extended benefits also fell.  Some of that decline is because those out of work found jobs.  However, most have likely used up all their benefits.  The number receiving benefits fell by 174K to 3.58M which doesn't include several million receiving aid.  All told, 6.6M received unemployment aid in the latest week, about 400K fewer than the previous week.  Mildly encouraging news although there are many more who are working at menial jobs, while still searching for meaningful work.

Jobless Claims in U.S. at Lowest in Nine Months

European Central Bank President Mario Draghi

Mario Draghi
Photo:   Bloomberg

Mario Draghi, the head of ECB dampened expectations for large-scale gov bond purchases, saying the bank had no understanding with govs to take that step if politicians agreed on new rules to curb gov debt that underlies the debt crisis.  Instead the bank cut interest rates to help revive the slowing European economy, & added new credit for banks struggling in the continent's debt crisis.  The benchmark refinancing rate was cut 25 basis points to 1% & the ECB announced its longest-term loans to banks would now be 3 years instead of 13 months.  It also eased collateral requirements for banks to borrow, allowing banks to put up loans to companies in return for credit.  In addition, it cut the required reserves banks must keep on account with the ECB from 2% of assets to 1%, which should free up money for lending & restocking bank's financial buffers against losses.  But markets were looking for more aggressive action.  The debt mess drones on as the financial leaders have a big weekend summit, trying to patch together a broken debt mess.

ECB Cuts Key Rate to 1%, May Dig Into Toolbox

Enterprise Products Partners, the largest MLP presently, offered 9M units at a price of $44.68 per unit plus an additional 1.35M units will be sold for over-allotments   The proceeds of $390M will be used to temporarily reduce borrowings under its multi-year revolving credit facility.  EPD is heavily expanding capital investments in the shale gas boom. 

Enterprise Products Partners L.P. Announces Pricing of Public Unit OfferingBusiness Wire

EPD   Enterprise Products Partners

Markets were disappointed by the lack of magic coming from the ECB.  The European debt mess is a mess & remains fluid, making it difficult to figure out where it will take the stock markets.  All eyes are on the big meeting this weekend to see what magic tricks can be pulled out.  Interest rates are already low & banks are getting plenty of support, so the powers will have to come up something really big to make a difference.  Dow keeps bumping against the 12.2K ceiling, not able to break thru.  Results from the European financial meeting will influence where stocks go next week.

Dow Jones Industrial Average

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