Friday, June 8, 2012

Markets rise on hopes for a Spanish bailout

Dow gained 93 (closing at its highs), advancers ahead of decliners 5-2 & NAZ was up 27.  Bank stocks saw buying in the PM, taking the Financial Index up 2+ to the 189s to recoup most of the losses in Jun.

The MLP index slipped pocket change in the 363s but the REIT index rose 3+ to the 252s.  Junk bond funds rose along with stocks & Treasuries also were higher.  Oil fell for a 2nd day on concern that an economic slowdown in Europe & the US will worsen & curb fuel demand.  Gold saw more selling pressure, bringing it nearer its yearly lows. 

JPMorgan Chase Capital XVI (AMJ)

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CLN12.NYM...Crude Oil Jul 12...83.49 ...Down 1.33  (1.6%)

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  • Netherlands' Prime Minister Mark Rutte (L) shakes hands with Spanish Prime Minister Mariano Rajoy during a joint news conference at Madrid's Moncloa Palace June 7, 2012. REUTERS/Susana Vera
Photo:   Spain

Now Spain is expected to ask the eurozone for help with recapitalizing its banks by this weekend, becoming the 4th country to seek assistance.  Finance ministers from the single currency area will hold a conference call tomorrow to discuss a Spanish request for aid, although no figure for the assistance has yet been fixed.  Later the Eurogroup will hold a separate call to discuss approving the request.  "The announcement is expected for Saturday afternoon," one of the EU officials said.  This comes after Fitch cut credit rating Spanish debt by 3 notches to BBB yesterday, highlighting the banking sector's exposure to bad property loans & to contagion from Greece's debt crisis.  "The government of Spain has realized the seriousness of their problem," a senior German official said.  He added that an agreement needed to be reached before a Greek election on Jun 17 which could cause market panic & increase the threat of Greece leaving the euro zone.  The European Commission's spokesman on economic affairs said Spain had made no request for aid but the eurozone stood ready to help.  This situation is fluid.

Spain Poised to Request EU Bank Aid Saturday   Reuters

  • <p>               FILE - In this May 9, 2012 file photo, Antonio Moreno shops at a Costco Wholesale store, in Portland, Ore. U.S. wholesale businesses restocked faster in April, responding to a strong gain in sales. The Commerce Department says stockpiles grew 0.6 percent at the wholesale level in April, double the March gain. Sales by wholesale businesses jumped 1.1 percent in April, nearly three times the March sales gain. (AP Photo/Rick Bowmer, File)
Photo:   Yahoo

US wholesale businesses increased inventory stockpiles at a faster rate in Apr, responding to a gain in sales & the increase could be a good sign for economic growth in Q2.  The Commerce Dept said stockpiles grew 0.6% at wholesale, double the Mar gain.  Sales by wholesale businesses jumped 1.1% in Apr, nearly 3 times the Mar sales gain. Stockpiles at the wholesale stood at $483B in Apr, 25.6% above the post-recession low of $385B in Sep 2009.  It would take roughly 5 weeks to exhaust all wholesale stockpiles at the Apr sales pace, considered a healthy time frame & suggests businesses will keep restocking to meet demand.  When businesses step up restocking, they order more goods which generally leads to increased factory production & higher economic growth.  Slower inventory growth held back growth in Q1 when GDP grew at an annual rate of 1.9%.  The increase in wholesale inventories was bigger than expected which might signal that inventory growth will pick up & boost growth in Q2.  But stockpile growth largely depends on the spending habits of US consumers & businesses.

US wholesale stockpiles grew 0.6 percent in April AP

Time Warner raised $1B in a 2-part offering at its lowest coupons on record.  The company sold $500M of 3.4% 10-year notes that yield 180 basis points more than similar-maturity Treasuries & $500M of 4.9% 30-year bonds with a 225 basis-point spread.  Both spreads are lower than initial talk of about 200 & 245 more than Treasuries.  Proceeds be used for general corp purposes.  In the last 12 months general purposes include $7B of share repurchases. The stock was up 22¢.

Time Warner Inc. (TWX)

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After all is said & done, this turned out to be the best week of the year.  Dow gained 425, not a bad week.  But it started from depressed levels, down over 2K from its highs 10 weeks ago.  There is a good chance that markets will rally on Mon if bailout IV goes thru.  But Spain & Greece are still very iffy.  In addition, there are other weak countries, like Italy which has been forgotten.  MLPs had been market leaders while stocks rebounded from recession lows.  But they have lost steam this year.  The MLP index is back to where it was in Oct (while Dow managed a 1K rise).

Dow Industrials

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