Wednesday, January 11, 2012

Markets slump on Euro concerns

Stocks have been under water so far.  Dow fell 55, decliners over advancers 3-2 but NAZ was off only 1, helped by excitement from the CES show in Las Vegas.  The Financial Index was flat at 185.

The MLP index dropped another 3 to the 387s (graph is for the tracking ETF) while the REIT index was off fractionally in the 233s.  Junk bond funds were mixed & Treasuries rose.  Oil declined on concern that a contacting German economy may drag the region into recession, curbing fuel demand.  Gold,continues on its winning ways this year.

JPMorgan Chase Capital XVI (AMJ)

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CLG12.NYM...Crude Oil Feb 12...101.09 ....Down 1.15  (1.1%)

GCF12.CMX...Gold Jan 12.........1,638.60 ...Up 7.60  (0.5%)

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Germany's economy slipped into reverse in Q4 despite posting strong growth of 3% for the full year.  While the 2011 growth figure was as expected, the economy likely contracted by 0.25% in Q4.  Exact data is due in Feb & could be revised.  Most recent economic indicators suggest 2012 will be a tough year, both for Germany & the rest of Europe. The annual growth rate was achieved in spite of the financial crisis in Europe which has other economies struggling with huge debts & slumping output. Greece & Portugal, bailed out to avoid default, are in deep recessions.  The German deficit was only 1% of GDP, well below the limit of 3.0% enshrined in the eurozone's rules.  In 2010, the German economy grew 3.7% after a painful contraction of 5.1% in 2009, which was by far its worst showing since World War II.  The economic health of Germany is important because it controls much of the money needed to bail out weaker countries in Europe.

German Economy May Have Shrunk at End 2011

  • <p>               Greek Deputy Prime Minister Theodoros Pangalos speaks during a business forum in front of United Arab Emirates Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan in the Lagonissi resort south of Athens, on Wednesday, Jan.11, 2012. Debt-crippled Greece is seeking to boost investment from the United  Arab Emirates, and officials from both countries expressed interest in boosting economic ties. (AP Photo/Petros Giannakouris)

Photo:   Yahoo

Greece's budget deficit is expected to hit 9.6% of GDP in 2011, about half a percentage point above target.  A gov official said that an increase in the use of EU structural development funds had contributed to lowering gov overspending from 10.6% of GDP in 2010.  But Greece had pledged to cut the 2011 deficit to 9% of GDP.   Cutbacks have a cost, sparking deep popular resentment, with labor unions staging a string of general strikes & protests that often turned into street battles between youths & riot police.  The new gov is rushing to pass a new batch of reforms & cutbacks, to secure a 2nd, €130B bailout approved in Oct but not yet finalized.  Prime Minister Papademos has urged unions to accept further income losses, warning that the country could otherwise face a disorderly bankruptcy in Mar & be forced to leave the euro.  Greece is in talks with private investors about a voluntary 50% reduction in the value of their bond holdings, needed before it can get another installment.

  • Microsoft Says Fourth-Quarter PC Shipments May Have Fallen

    Photo:   Bloomberg

    Microsoft, a Dow stock, said industrywide sales of PCs will probably be lower in Q4 than projected because supply was hurt by flooding in Thailand. Estimates are for PC shipments to fall 1% & the actual number is probably lower.  Last year’s flooding in Thailand, which knocked disk-drive factories off line, took a toll on a PC market that was already suffering from competition with smartphones.  Sales for MSFT Windows have missed estimates in 3 of the past 4 qts.  Expectations are for MSFT sales in the fiscal Q2 will rise 5.3% to $21B.  Win 8, a new operating system, is designed to work on iPad-like tablets, helping it compete with tablets.  A public test version is set for Feb & is expected to be sold later this year.  PC shipments rose 3.6% in Q3, less than the 4.5% growth that had been predicted.  The stock was up a penny.

    Microsoft Says PC Sales May Have Missed Its Targets in the Fourth Quarter

    Microsoft Corporation (MSFT)

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    While there is not a lot going on in the markets, the bias is to the negative side.  MLPs has have been hit with profit taking after taking the index to a new record high near 400. In addition, MLPs are yield securities & the yield for index is 6%, a level that has made advances difficult in the past.  Euro economic & debt worries are not going way anytime soon.  Earnings season will kick to into high gear when big banks start reporting this week.  While Dow is back to sloshing around in the mud, it has held solidly above the 12.2K that had been a barrier for months.

    Dow Industrials

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