Monday, March 12, 2012

Markets drift ahead of Euro ministers meeting

Dow rose 37, decliners over advancers 4-3 & NAZ was off 4.  Bank stocks rebounded modestly in the PM, limiting the loss for the Financial Index to a fraction in the 199s. The MLP index was off a fraction to 404 & the the REIT index rose 1+ ot the 245s.  Junk bond funds were mixed as were Treasuries.  Oil & gold were lower, but gold held above $1700.

JPMorgan Chase Capital XVI (AMJ)

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CLJ12.NYM...Crude Oil Apr 12...106.39 ...Down 1.01  (0.9%)

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Euro-area ministers will move toward completing bailout II this week when they meet in Brussels.  Luxembourg Prime Minister Junker, head of the finance ministers, said he had “no doubt” that bailout II would be approved & expected a final decision by Wed.   “As far as principles are concerned, there is no doubt that the second Greek program will be approved,” Juncker said.  The ministers are also looking at Spain’s budget-cutting efforts & Portugal's aid program to prevent contagion.  Euro finance ministers agreed last week that Greece had met the terms for bailout funding & released €35.5B to bondholders, while postponing approval of the entire package.  Greek Finance Minister Venizelos said today that he’s “very optimistic” the gov will achieve 100% participation in its debt swap with private investors.  “I am very optimistic for a universal participation in the PSI,” Venizelos said.  “From our side, the target is now the full implementation of the program and of course the return of Greece to growth.”  While the debt swap seeks to wipe over €100B in debt, there are still difficulties for Greece in meeting creditors’ demands that prompted many to speculate it will need further assistance.  “Nobody can now exclude that Greece at a single moment may need a third bailout,” German Finance Minister Schaeuble said. “I have all confidence that the measures that we have taken and that Greece must now implement - - no simple exercise -- will bring the country on the road to recovery.”  OK!

Greek Bailout Payment Set to Be Approved by Euro Ministers After Debt Deal

The federal deficit was slightly smaller thru the first 5 months of the budget year than the previous year, but the imbalance is on pace to exceed $1T for the 4th straight year.  The Treasury said that the deficit grew $232B in Feb.  That increased the imbalance of the fiscal year to $581B, or 9% less than the same period in fiscal 2011.  The administration expects the deficit will reach $1.3T when the budget year ends on Sep 30, nearly matching last year's gap.  The gov ran a record deficit of $1.4T in 2009 & a $1.29T gap in 2010.  The deficit was slightly lower at the start of the year in part because the gov took in more taxes from corps.  The gap was smaller even after more money in Feb was paid out in tax refunds.  The last surplus was in 2001.  Deficits grew under Pres Bush & reached a then-record of $458B during his last year. 

Deficit rose in February, on pace to top $1T again


Photo:   Bloomberg

Wells Fargo & Citigroup may join banks unleashing more than $9B in div increases & share buybacks if they get passing grades this week on the Federal Reserve’s (FED) annual stress test.  13 of the 19 largest lenders may say they’ll pay out $3.8B in extra divs this year & buy $5.5B of additional shares, according to estimates by Bloomberg.  That’s 30% more than they spent last year.  WFC will probably offer the biggest difference at a combined $4.1B, followed by Citi with $2.9B.  The FED imposed the stress tests on 31 firms with at least $50B in assets to ensure lenders can withstand another crisis.  The most dire scenarios call for unemployment to hit 13% & a 20% slump in home prices.  There’s still doubt that all the requests will be approved & that investors will get the full amount anticipated.  WFC was off 15¢ & Citi gained 9¢.

Wells Fargo & Company (WFC)

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Citigroup Inc. (C)

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Markets continued to  stumble, not knowing where to go.  But the bias was on the downside.  The FOMC will have its 2nd meeting in 2012, but nobody is expecting any exciting news to come from it.  The Euro ministers have more important matters & anything can come out of their meeting.  Dow is just below where it was on Feb 21.  The markets look like they're out of wind.

Dow Industrials

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