Friday, May 4, 2012

Markets tumble on weak jobs report

Dow sank 168, decliners over advancers 4-1 & NAZ fell a very big 67.  Bank stocks led the markets lower with the Financial Index dropping 3+ to the 202s, an almost 2 month low.   

The MLP index rebounded in the PM & fell only a fraction to the 393s while the REIT index was off 2 to the 259s (still near its multi year highs).  Junk bond funds were lower but Treasuries rallied on the gloomy jobs report.  Oil tumbled as an abrupt slow-down in US hiring soured economic sentiment & technical triggers intensified selling.  While gold was up 8, it continues to slosh around the mid 1600s.

JPMorgan Chase Capital XVI (AMJ)

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CLM12.NYM...Crude Oil Jun 12...102.66 ...Down 2.56  (2.4%)

Live 24 hours gold chart [Kitco Inc.]

The administration tightened rules on hydraulic fracturing, requiring the disclosure of chemicals used in the process when done on federal & American Indian lands.  The new rules will also require additional testing of oil & gas well construction & require the industry to have a management plan for the water used in the process.  "This proposed rule will strengthen the requirements for hydraulic fracturing performed on federal and Indian lands in order to build public confidence and protect the health of American communities, while ensuring continued access to the important resources that make up our energy economy," the Interior Dept said.  The move is part of a broader effort to increase rules for the controversial practice.  Earlier this month, the EPA tightened air pollution requirements for new oil & gas wells.  Hydraulic fracturing has unleashed a boom in energy production in the US, reducing the oil imports, boosting natural gas production & providing thousands of jobs.  But the process has also raised fears of ground water contamination.  Fracking involves injecting water & and some chemicals deep into the earth to crack shale rock, which allows oil & gas to more easily flow.  Critics fear the chemicals are seeping into the groundwater.  About 20% of the nation's natural gas production & 30% of its oil production is done on federal lands.  The oil & gas industry has long resisted disclosing what chemicals it uses in the fracking process, arguing they were trade secrets & that disclosure would harm their competitive advantage.  But environmentalists want disclosure, saying it was needed to monitor for pollution & effectively treat workers involved in accidents.  Ingredients used in fracking vary widely, & can include everything from sulfuric acid & benzene to instant coffee & paraffin wax.  While the industry initially resisted disclosing the formula, it has gradually been moving in that direction under intense public pressure.  Many states now require disclosure, & many companies list at least some of the ingredients on a website called FracFocus.  MLP pipelines bring much of that energy to market.

Obama Tightens Rules on Fracking

The price of gas at the pump has pulled back along with crude prices & there may be more small cuts ahead.  But even at present levels for crude, above $100, high prices are not going away soon.  And this is a tax on the American consumer.

12onth Average
State's Graph
Source:   AAA

Stocks had a bad day, taking the Dow back down towards 13K.  The jobs report, along with other reports suggesting a mild slowdown in what has been a less than robust recovery, was just too much.  MLPs held up well after new regulations on fracking were announced.  The markets made it thru earnings season with a mild sell-off & modest recovery.  Dow broke thru 13K on Mar 13 with a 218 advance.  Today it's 140 below that close.  Hmmm!

Dow Industrials

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