Friday, January 13, 2012

Markets slump on Euro credit downgrades

Late day buying limited the damage from selling after the opening.  Dow finished down 57, decliners over advancers 2-1 & NAZ fell 15.  Bank stocks found buyers in the PM which reduced the loss for the Financial Index.

S&P 500 Financials Sector Index

Value 186.16 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change     -1.51     (-0.8%)

The MLP index was able to rebound &, breaking into the black after retreating more than 10 from its record highs last week.  The REIT index was up a fraction in the 234s, junk bond funds continued mixed & while Treasuries were strong on growing uncertainties about Euro debts. Oil dropped to a 3 week low after European Union officials said an embargo on Iranian crude imports may be postponed for 6 months.  Gold fell 10 on profit taking.

JPMorgan Chase Capital XVI (AMJ)

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CLG12.NYMCrude Oil Feb 1298.88 Down 0.22 (0.2%)

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Germany is keeping its AAA rating at S&P as France & Austria face downgrades on concern about Europe's debt crisis, according.  A confirmation of Germany’s AAA rating may lessen the blow of a French downgrade as govs struggle to convince investors that they can cut deficits & end the turmoil that has roiled markets for 2 years.  Still, France & Austria losing their top ranking may erode the firepower of the euro- region’s bailout fund that’s needed to tap markets to finance aid for the weaklings like Greece, Ireland &Portugal.  The US also is looking over its shoulders at another credit downgrade.  Late breaking news is that France's finance ministry says S&P has cut the country's credit rating by one notch to AA. 

Housing to Give U.S. Economy Modest Push in ’12

Photo:    Bloomberg

Home sales & construction will improve in 2012, contributing “modestly” to economic expansion after acting as a drag on growth since 2006, according to a Fannie Mae forecast.   Sales of new & existing homes are expecte to increase 3.5% & housing starts are projected to rise 16%, fueled by apartments & a rebound in single-family house construction.   Mortgages rates will continue to provide support for the market, rising only slightly in 2012.  The average rate for a 30 year fixed loan fell to 3.89%, the lowest in records dating to 1971.  Mortgage originations in 2012 are expected to decline to $1.01T from an estimated $1.36T last year as refinancing “declines sharply.”  The refinancing portion is likely to drop to about 53% from 66% last year because many homeowners have already taken advantage of lower rates.  A mildly encouraging forecast, but not good enough to have a major impact on lowering  unemployment.

Housing Recovery to Give U.S. Economy Modest Push in ’12, Fannie Mae Says

There are plenty of worries for the markets to deal with.  The Euro debt mess got worse with the credit downgrade for France along with concerns about other countries.  The credit agencies are looking at fundamental problems of spending too much which causes debts to balloon,   NYSE will be closed on Mon, but European markets will be open, giving their reactions (probably negative).  On Tues, Citi (C) & Wells Fargo (WFC) report Q4 earnings which may not get good reviews.  JPMorgan (JPM) found support in the PM, limiting its damage to a 99¢ loss.  Dow is up 200 in Jan, not too bad considering mixed reports so far.

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