Friday, June 22, 2012

Markets rally after Moody's downgrades bank credit ratings

Dow rose 66, advancers over decliners 3-2 & NAZ climbed 17.  Bank stocks rose, taking the Financial Index up 1+ to 193.  The MLP index was down a fraction to 362 & the REIT index slipped fractionally in the 251s.  Junk bond funds edged higher & Treasuries lost ground.  Oil rose from an 8-month low as stocks rallied after Moody’s downgrade of 15 global banks was less severe than threatened.  Gold was little changed as Europe’s worsening debt crisis spurred modest demand for the metal as a hedge.

AMJ (Alerian MLP Index tracking fund)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLQ12.NYM....Crude Oil Aug 12...78.59 ...Up 0.39  (0.5%)

GCM12.CMX...Gold Jun 12.......1,568.40 ...Up 3.90  (0.3%)

Get the latest daily market update below:

  • <p>               Austria's Finance Minister Maria Fekter, left, gestures while speaking with Spain's Economy Minister Luis de Guindos during a meeting of EU finance ministers at the European Council building in Luxembourg on Friday, June 22, 2012. European finance ministers are meeting in Luxembourg to discuss the idea of a tax on financial transactions that would be used to make banks pay for their own bailouts. (AP Photo/Virginia Mayo)
Photo:   Yahoo

Spain says the size of the bank bailout it requests from the other eurozone countries will be determined & announced on Jul 9.  Economy Minister Luis de Guindos said that on that day Spain & its euro partners will reach agreement on the terms of the loan, such as the interest rate.  He estimated the rate would be around 3-4%.  De Guindos spoke after a meeting with other eurozone ministers & said a letter formally requesting the loan will be delivered on Mon but it will be only 2 paragraphs long, with no mention of terms or amount.  Yesterday, independent auditors estimated Spain's troubled bank sector would need up to €62B in new money to survive a severe economic downturn.  Sounds good except I'm not sure what it means or accomplishes.

Spain to Reveal Size of Bank Bailout July 9 AP

ECB Loosens Collateral Rules for Banks

Photo:   Bloomberg

The ECB said it decided this week to relax some rules on the collateral that banks can offer in exchange for central bank funds.  The Governing Council will lower rating thresholds & amend eligibility requirements for some asset-backed securities.  Residential mortgage-backed securities, loans to small & medium-sized enterprises & auto loans rated BBB- at S&P will now be accepted with a valuation haircut of 26%.  “The risk control framework with higher haircuts applicable to the newly eligible ABS aims at ensuring risk equalization across asset classes and maintaining the risk profile of the Eurosystem,” the ECB said.

ECB Loosens Collateral Rules for Banks to Ease Access to Funds

Federal Reserve Chairman Ben S. Bernanke

Photo:   Bloomberg

Ben Bernanke has repeatedly warned lawmakers that a fiscal cliff threatens the economy. Now he’s created a precipice of his own.  The Federal Reserve (FED) on Wed extended its Operation Twist program to swap $267B in short-term securities with longer-term debt through Dec.  That end date coincides with reductions in federal spending, a halt to payroll-tax cuts & expiration of income-tax cuts enacted under President Bush.  The timing of Bernanke’s easing raises the stakes for the FED’s 4 remaining policy meetings in 2012 as investors focus on whether the central bank will provide stimulus for 2013 to help the economy overcome the impact of the fiscal tightening due to take hold in Jan.  The new year is only 6 months away & more attention should be paid to tax hikes that are coming (unless Congress gets its act together in the closing weeks of this year).

Bernanke’s New Twist Sharpens Anxiety Over Year-End Fiscal Cliff: Economy

The credit downgrade was not as bad as feared which brought buyers back to the stock markets.  That's a rather weak excuse to buy stocks & could be all the bulls have going for them.  The ruling on Obamacare will come next week & the Dems are already preparing for talking points assuming it is struck down by the Supreme Court.  The euro debt mess remains wishy washy at best & Q2 earnings are just a couple of weeks away.  Expectations are low.  Dow is down 140 this week as the rally stalled out before reaching 13K which has been an important support/floor for over a year.

Dow Jones Industrials

stock chart

Get your favorite symbols' Trend Analysis TODAY!  

No comments: