Friday, January 13, 2012

Markets fall on weak bank earnings & Greek debt woes.

Drow dropped 93, decliners over advancers 3-1 & NAZ fell 19.  Bank stock led the markets lower with a disappointing earnings report from JPMorgan.

S&P 500 Financials Sector Index

Value 184.99 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -2.68    (-1.4%)

The MLP index fell 1+ to 385 (12 below its record highs last week)  & the REIT index was off a fraction the 233s.  Junk bond funds were mixed & Treasuries advanced with the yield on the 10 year Treasury well below 1.9%.  Oil & gold followed the stock markets lower.

Alerian MLP Index

Value 384.98 One-Year Chart for Alerian MLP Index (AMZ:IND)
Change    -1.61    (-0.4%)

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CLG12.NYM...Crude Oil Feb 12...97.83 ...Down 1.27  (1.3%)

GCF12.CMX...Gold Jan 12.......1,641.40 ...Down 5.90  (0.4%)

Negotiations between the Greek gov & creditors on a bond swap deal needed to avoid default appeared close to collapse with representatives of private bondholders saying they had been "paused for reflection."  The bond swap aims to reduce Greece's debt by €100B ($128B) & is a key part of a 2nd, €130B ($166B) bailout.  Without it, the country could suffer a catastrophic bankruptcy that would send shockwaves thru the global economy.  Gov officials met with the Institute of International Finance, a global banking body representing bondholders to discuss the deal.  "Unfortunately, despite the efforts of Greece's leadership, the proposal put forward ... which involves an unprecedented 50 percent nominal reduction of Greece's sovereign bonds in private investors' hands and up to €100 billion of debt forgiveness — has not produced a constructive consolidated response by all parties, consistent with a voluntary exchange of Greek sovereign debt," the IIF said.  Can you spell "Uh-oh?"

Greece Bank Creditor Group Says Talks ‘Paused for Reflection

  • A sign is seen on the door of a JP Morgan Chase branch in New York March 26, 2009. REUTERS/Lucas Jackson/Files
Photo:  Yahoo

The drag of the European debt crisis on trading & corp deal-making pulled down JPMorgan, a Dow stock, profits.  CEO Dimon said the bank was seeing signs of improvement in credit quality as well as loan demand from corps & consumers in the US.  "We see a mild recovery which actually might be strengthening, and it's broad," Dimon said. "Hopefully, it will add to more jobs. We have seen jobs growing ... it's not enough but it could be self-sustaining."  In 2011, net income was a record $19B, 9% higher than in 2010.  But revenue declined 5% to $97B, & Q4 revenue fell 18%, to $21.5B, the lowest in 3 years & below estimates. “We believe these returns were reasonable given the environment, although the return for the fourth quarter was modestly disappointing,” Dimon said.  This is a glum report & suggests more disappointing reports from banks.  The stock dropped $1.55 (4%).

JPMorgan Profit Falls on Trading, Investment Banking

J P Morgan Chase & Co (JPM)

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Markets could be entering a gloomy period.  JPM earnings were not pretty with the decline in revenues being a major setback.  The talks to refinance Greek debts with bond holders taking a 50% haircut is another enormous worry the markets have to cope with.  Less noticed, DC is as divided as last year.  There is no agreement about raising the debt limit.  Dow is up 150 in Jan & may not be able to hold that gain.

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