Tuesday, July 10, 2012

Fourth straight decline for anxious markets

Dow dropped 83, decliners over advancers 5-2 & NAZ was off 29.  The Financial Index lost 1+ to the 193s, a low since Jun 28.  The MLP index slid 1½ to the 383s & the REIT index dropped 4 to 261.  Junk bond funds inched higher & Treasuries rose, bringing the yield on the 10 year Treasury back to 1½%.  Oil fell despite growing tensions with Iran & gold lost more than 20, failing to get above 1600.

AMJ (Alerian MLP Index tracking fund)

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CLQ12.NYM...Crude Oil Aug 12...84.08 ...Down 1.91  (2.2%)

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Job Openings in U.S. Climbed in May and Hiring Accelerated

Photo:   Bloomberg

May job openings increased after plunging in the prior month.  The number of positions waiting to be filled climbed 195K to 3.6M, partially countering the 294K drop in Apr, according to the Labor Dept.  But another report showed confidence among small companies slumped in Jun.  Increasing demand for workers indicates some companies see an opportunity to expand as sales improve.  At the same time, the report showed layoffs also picked up, indicating the European debt crisis & slowing growth in emerging markets like China may be prompting some employers to cut back.  Confidence among small US companies dropped in Jun to its lowest point since Oct, driven by concern that sales & the economy will deteriorate.  The National Federation of Independent Business's optimism index fell to 91.4 from 94.4 in May, the biggest monthly decline in 2 years with 8 of its 10 components contributing to the slump.  The economic recovery is sputtering.

Growing activity in the spring housing market brought new growth in home prices, but those gains are growing more precarious because they are dependent on low-priced, distressed properties.  While prices in the past 3 months rose 1.7% on a national average from a year ago, according to Clear Capital, the biggest gains were in the West, where foreclosures & short sales are often the majority of a local market's activity.  For example in Minneapolis, 35% of home sales are foreclosures & prices there rose more than 13% from a year ago.  The same happened in Columbus, Ohio where prices rose 14% & 1/3 of sales were foreclosed properties.  While foreclosures brought home prices down initially, they are now driving them up because there is so much demand from investors & first time buyers, looking for bargains.  Supplies of these cheap homes are also dwindling, because banks are still working to modify many troubled loans & states that require a judge in the foreclosure process are still facing a huge backlog.  Phoenix is a prime example where prices are up 20% from a year ago because so much of the market was foreclosures.  They used to make up more than half of all sales, but now they're down to about 23% because there are just not that many foreclosures left to buy.  Investors honed in on the market, buying properties in bulk to put them up for rent.  Some investors are even cashing out & selling.  Recovering sales in these markets could be hiding a real market where sales of ongoing properties are really falling.

Foreclosure Supply Could Prevent a Housing Bottom

Advanced Micro Devices slashed its outlook for Q2 revenue after seeing disappointing sales in China & Europe, becoming one of the biggest tech names to date to warn that a global economic slowdown is taking a harsher-than-expected toll.  PC-related firms have been hit by a slump in demand as smartphones & tablets grow in popularity but its woes were also seen as at least partly company-specific.  Q2 revenue may drop 11% from the $1.6B booked in Q1, worse than its previous forecast of flat sales to a 6% rise.  An 11% revenue decline would be its worst decline since Q4 2008, when revenue plunged 35%.  Despite the cut in revenue outlook, AMD reiterated prior guidance for Q2 gross margin to be flat to slightly up from Q1, saying operating expenses will be about 8 % less than its earlier forecast.  The stock dropped 63¢.

AMD warns Q2 sales to take hit on global economic slowdownat Reuters


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Stocks fell for a 4th day as pessimism about the earnings season grew while commodity producers slid amid lower oil & metal prices.  2 earnings warnings in the last 24 hours are biting hard.  Following winds are hard to find in this market.  Dow is just 150 above its lows set 2 weeks ago & may be testing them in a day or 2.  It's only 550 above the Jun low set a month ago, earnings season may not be pretty.

Dow Jones Industrials

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