Thursday, June 28, 2012

Late day buying pares market losses

Strong buying going into the close reduced losses.  Dow finished down 24, advancers over decliners 5-4 & NAZ was off 25.  Bank stocks led the recovery, reducing the loss for the Financial Index to a fraction in the 192s.  It had been down more than 3 at midday.

The MLP index rebounded 1+ to 370 & the REIT index rose 2 to 255.  Junk bond funds were petty much even but Treasuries rose, bringing lower yields.  Oil fell to an 8-month low as applications for unemployment benefits remain near the highest level of 2012, indicating that fewer commuters will need fuel to get to work.  Gold slumped 24, back to the mid $1500s & close to yearly lows.

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CLQ12.NYM...Crude Oil Aug 12...77.59 T...Down 2.62  (3.3%)

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Chancellor Angela Merkel

Photo:   Bloomberg

The EU focused on immediate help for Spain & Itlay at the start of a 2-day summit intended to chart a path out of their financial crisis.  The financial ministers of 27 govs will discuss buying Spanish & Italian gov bonds to bring down borrowing costs that are near euro-era records.  Finland is also proposing that bailout funds buy collateralized gov debt in primary markets.  “I’ve come for very rapid solutions to support countries in difficulty on the markets,” French President Hollande said.  Without specifying Spain or Italy, he said they “have made considerable efforts to deal with their public accounts.”  Leaders will consider short-term measures to stem the sovereign debt turmoil as the EU plans to strengthen the bloc’s common currency & financial oversight ran into immediate opposition from Chancellor Merkel who has become increasingly isolated as other ministers push for quicker action to ease the crisis that emerged in Greece in late 2009.  Italy needs to be able to pool debt sales with the 16 other nations   “I don’t think that anything more can be done, because otherwise you kill the economy,” Prodi, Italy’s prime minister from 2006-2008, said. “European solidarity, which must come to euro bonds, is the only possible solution.”  Today Italy paid the most to sell 10-year debt (6.19%) since Dec.  Spanish 10- year yields rose to 6.94%.  Merkel, who has rejected calls to investigate joint debt or do more to cut Spanish & Italian borrowing costs, said her focus will be on measures to boost economic growth.   It looks like nobody is in charge, so it will be hard to accomplish anything (besides a lot of talk).

EU Chiefs Put Bond Buying on Table as Crisis Summit Opens

IMF May Consider Greek Loan Changes After Team Visit Next Week

Photo:   Bloomberg

The IMF is open to adjusting the terms of a Greek bailout & will send a team to Greece next week to meet with the new gov.  IMF officials will join officials from the European Commission & the ECB at the meetings.  The IMF also said a separate "negotiating team" from the fund will then visit Greece after the fact-finding discuss the policies Greece must follow to meet the terms of its bailout.  "If the new government has ideas on how those program objectives can be achieved, we're open to those discussions," an IMF official said.

Mortgage rates in the US were little changed, keeping borrowing costs at the record-low levels that have helped bolster the housing market.  The average rate for a 30-year fixed mortgage held at 3.66% last week, the lowest in Freddie Mac records dating to 1971.  The average 15-year rate dropped to 2.94%, also a record, from 2.95%.  Low borrowing costs are helping to strengthen housing demand as property prices stabilize.  Contracts to buy previously owned homes rose 5.9% last month, matching a 2-year high.  The S&P/Case Shiller index of values in 20 cities dropped 1.9% in Apr from a year earlier, the smallest decline since Nov 2010.  Purchases of new U.S. houses rose in May to a 2-year high according to the Commerce Dept.  Housing is producing favorable statistics, although a full recovery is still down the road.

Mortgage Rates for 30-Year Fixed Loans in U.S. Hold at Record-Low 3.66%

The € is a good proxy for what's going on in Europe & it's down to $1.24½, close to yearly lows.  JPMorgan (JPM), a Dow stock & used to be the best managed bank, has trouble estimating the loss from its Europe debt mess.  It began at $2B, rose to $9B & now maybe it's not that bad.  Swell!  Other banks may be reporting ugly trading stories when earnings are released in a couple of weeks.  But in the last hour of trading, Dow recovered most of its 200 decline.  Now it's up 200 for Jun, not an impressive recovery from the rough days of May.  Concerns about global banks, a surprise Supreme Court ruling upholding & pessimism about the ability of a European summit to ease the region's debt crisis dominated trading for most of the day.  Those stories are not going away soon. 

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