Monday, December 12, 2011

Markets tumble on growing European debt worries

Dow sank 162, decliners over advancers 4-1 & NAZ fell 34.  As usual, bank stocks led the way - this time lower.  The Financial Index dropped 5+ ( a very bad day ) to below 171.

The MLP index was down only 1 to the 373s while the REIT index fell 4+ to the 219s.  Junk bond funds were off 1% & Treasuries saw some strength, although less than might have been expected with the stock market decline.  Oil fell, extending last week’s decline, on concern the European debt crisis may spread & as Moody’s said it will review ratings for countries in the region.  My AM post saying that gold rose as a safe haven was not correct.  I rely on Yahoo's computers to supply the info.  Its chart below shows it had an ugly day, down almost $50 to well under $1700.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

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CLF12.NYM...Crude Oil Jan 12...97.95... Down 1.46  (1.5%)

Live 24 hours gold chart [Kitco Inc.]

Euro Weakens Before Italy’s Bill Auction

Italian Stock Exchange
Photo:   Bloomberg

The €  fell to its lowest level in 2 months as Moody’s said it will review the ratings of EU nations after last week’s summit failed to produce decisive steps to end the debt crisis.  Pessimism about the  € is growing in the currency markets.  After reaching $1.48 in May & $1.42 in Oct, the € is below $1.32.  Reflecting the dreary outlook for European debts, Italian bonds slid as Italy sold €7B ($9.3B) of one-year bills to yield 5.95%, compared with an average 2.7% in the past 5 years. The debt crsis keeps going from bad to worse.

Pfizer, a Dow stock, authorized up to $10B worth of additional stock repurchases & raised its quarterly div 10% to 22¢.  The new stock repurchases will be in addition to an estimated $500M-$2.5B buybacks remaining from the current program.  In the first 10 months of this year, PFE purchased $6½B of stock  (332M shares), toward its goal of buying back $7-$9B in 2011.  The company expects to repurchase about $5B of its stock in 2012, hoping that buybacks & divs will retain investors & attract new ones as US sales of Lipitor continue to plunge with the arrival of cheaper generic competition.  "The dividend increase and new share repurchase program are a testament to our continued commitment to enhancing shareholder value and our continued confidence in the business," CEO Ian Read said.  The stock fell 17¢ in an ugly market & the higher div provides a 4.3% yield.

Pfizer Sets $10 Billion Share-Buyback Program, Boosts Quarterly Dividend

PFE    Pfizer

Speaking of div increases, Boeing, another Dow stock, raised its quarterly div 2¢, to 44¢.  The stock fell 1.03 in a very tough market.

Boeing raises dividend 5 percent, to 42 cents AP

BA   Boeing Co.

Investors withdrew a net $16B from US stock funds last month, extending a string that began in May.  Stock funds attracted new cash during the first 4 months of this year, following the market gains in late 2010.  However in recent months, fears that Europe's debt crisis was getting impossible to contain resulted in the outflow.  With the European debt mess dragging on, investors are losing interest in stocks. Through Nov, investors withdrew a net $65B from stock funds, more than the full-year total of 2010 when they pulled out $49B. 

Investors exit stock funds for 7th month in a row AP

The buying euphoria on Fri has been lost.  Investors had a chance to think thru last week's meeting by the financial powers & decided they didn't like the results.  There is a realization, at least for the moment, that there is no silver bullet to solve deep rooted financial problems.  Also, even the ECB has just so much money to buy bonds.  Not mentioned very often is that Europe is sliding into a recession with all the turmoil in the financial markets.  For more than a month, Dow has been maxxing out at 12.2K, not a good sign for the bulls.  

Dow Jones Industrial Average

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