Dow dropped 31, decliners just ahead of advancers & NAZ was off 13. The Financial Index was pretty much even in the 193s. The MLP index was off 1 to the 384s & the REIT index fell a fraction in the 261s. Junk bond funds slipped slightly & Treasuries were also a little lower (following recent gains). Oil rebounded from the lowest close in more than a week on speculation that declines may have been excessive amid shrinking stockpiles. Gold continues to flounder under 1600.
Photo: Yahoo
Recession-plagued Spain unveiled new austerity measures designed to slash €65B from the public deficit by 2014 as Prime Minister Rajoy yielded to EU pressure to try to avoid a full state bailout. The conservative leader announced a 3-point hike in the main rate of Value Added Tax on goods and services to 21% & cuts in unemployment benefits, civil service pay & perks in a speech interrupted by jeers and boos. "These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billions of euros," he told parliament. The draconian savings plan, tearing up several of his campaign promises, showed Spain was already under de facto supervision from Brussels even though it has not requested a sovereign bailout & retains access to bond markets. However tax increases could exacerbate the recession. Spain won softer deficit targets from the EU this week & also negotiated rescue aid of up to €100B ($123B) for its crippled banking sector. In line with recommendations from the European Commission, Rajoy announced new indirect taxes on energy, plans to privatize ports, airports & rail assets, & a reversal of property tax breaks that his Popular Party had restored last Dec. Keeping one election promise, Rajoy did not touch pensions but he said he would discuss with the Socialist opposition a change to the system in line with EU recommendations to link benefits to life expectancy. In the streets of Madrid, hundreds of coal miners who had staged a long march from northern Spain protested against cuts in mining subsidies they say will put them out of work, as public discontent over austerity measures grows. But Spain's borrowing costs have soared in recent months, with the yield on the 10-year gov bond breaching the 7% level regarded as unsustainable in the long run.
Rajoy Outlines Budget Cuts as Protests Hit Madrid
Photo: Bloomberg
The US trade deficit narrowed in May from Apr, helped by cheaper oil that lowered imports & an increase in American exports to Europe & China. But the decline wasn't enough to alter weak growth forecasts for Q2. The Commerce Dept said that the trade deficit fell 3.8% to $48.7B, down from $50.6B in Apr. Exports edged up 0.2% to $183.1B reflecting stronger sales of telecommunications equipment & heavy machinery. Imports dropped 0.7% to $231.8B as the foreign oil bill fell to the lowest level in 15 months. A narrower trade gap is less of a drag on growth as the US is spending less on foreign-made products, while taking in more from sales of US made goods. The increase in exports to the 2nd-highest level on record is a hopeful sign for growth. Still manufacturing has weakened this spring, hurt by Europe's financial crisis & slower growth in China. projections for GDP growth in Q2 are under a 2% rate. America's trade deficit with China increased to $26B in May while exports to China rose 5.2%. The deficit with China, the largest with any country, is on pace to break last year's all-time high.
Photo: Bloomberg
US wholesale companies added modestly to their stockpiles in May while sales at the wholesale level dropped by the largest amount in 3 years, a troubling sign for future growth. The Commerce Dept said that wholesale stockpiles rose 0.3% in May following a 0.5% increase in Apr (revised lower from an initially reported 1.1% gain). But sales at the wholesale level fell 0.8% in May, the biggest decline since Mar 2009. Greater restocking means companies ordered more goods, which increases factory production. But the broader economic benefits from faster restocking were likely offset by the decline in sales, which could prompt wholesalers to restock more slowly in the coming months. Stockpiles at the wholesale level stood at $484B in May, 25.8% above the post-recession low of $384.9B in Sep 2009. The May increase reflected gains in stockpiles of autos, computer equipment, drug products & clothing.
Wholesalers in U.S. Lift Stockpiles at Slower Pace as Sales Fall
There is no significant news to inspire buyers. The European debt mess is going nowhere. China is not giving as big a boost to the global economy as in the past. And earnings season in the US looks to be glum. Dow is nearing its recent lows, just below 12.5K.
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month | 0.091% | |
U.S. 2-year | 0.262% | |
U.S. 10-year | 1.510% |
| CLQ12.NYM | ...Crude Oil Aug 12 | ...84.91 | ... 1.00 | (1.2%) |
| GCN12.CMX | ...Gold Jul 12 | .......1,575.40 | ... 3.90 | (0.3%) |
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Recession-plagued Spain unveiled new austerity measures designed to slash €65B from the public deficit by 2014 as Prime Minister Rajoy yielded to EU pressure to try to avoid a full state bailout. The conservative leader announced a 3-point hike in the main rate of Value Added Tax on goods and services to 21% & cuts in unemployment benefits, civil service pay & perks in a speech interrupted by jeers and boos. "These measures are not pleasant, but they are necessary. Our public spending exceeds our income by tens of billions of euros," he told parliament. The draconian savings plan, tearing up several of his campaign promises, showed Spain was already under de facto supervision from Brussels even though it has not requested a sovereign bailout & retains access to bond markets. However tax increases could exacerbate the recession. Spain won softer deficit targets from the EU this week & also negotiated rescue aid of up to €100B ($123B) for its crippled banking sector. In line with recommendations from the European Commission, Rajoy announced new indirect taxes on energy, plans to privatize ports, airports & rail assets, & a reversal of property tax breaks that his Popular Party had restored last Dec. Keeping one election promise, Rajoy did not touch pensions but he said he would discuss with the Socialist opposition a change to the system in line with EU recommendations to link benefits to life expectancy. In the streets of Madrid, hundreds of coal miners who had staged a long march from northern Spain protested against cuts in mining subsidies they say will put them out of work, as public discontent over austerity measures grows. But Spain's borrowing costs have soared in recent months, with the yield on the 10-year gov bond breaching the 7% level regarded as unsustainable in the long run.
Rajoy Outlines Budget Cuts as Protests Hit Madrid
The US trade deficit narrowed in May from Apr, helped by cheaper oil that lowered imports & an increase in American exports to Europe & China. But the decline wasn't enough to alter weak growth forecasts for Q2. The Commerce Dept said that the trade deficit fell 3.8% to $48.7B, down from $50.6B in Apr. Exports edged up 0.2% to $183.1B reflecting stronger sales of telecommunications equipment & heavy machinery. Imports dropped 0.7% to $231.8B as the foreign oil bill fell to the lowest level in 15 months. A narrower trade gap is less of a drag on growth as the US is spending less on foreign-made products, while taking in more from sales of US made goods. The increase in exports to the 2nd-highest level on record is a hopeful sign for growth. Still manufacturing has weakened this spring, hurt by Europe's financial crisis & slower growth in China. projections for GDP growth in Q2 are under a 2% rate. America's trade deficit with China increased to $26B in May while exports to China rose 5.2%. The deficit with China, the largest with any country, is on pace to break last year's all-time high.
US wholesale companies added modestly to their stockpiles in May while sales at the wholesale level dropped by the largest amount in 3 years, a troubling sign for future growth. The Commerce Dept said that wholesale stockpiles rose 0.3% in May following a 0.5% increase in Apr (revised lower from an initially reported 1.1% gain). But sales at the wholesale level fell 0.8% in May, the biggest decline since Mar 2009. Greater restocking means companies ordered more goods, which increases factory production. But the broader economic benefits from faster restocking were likely offset by the decline in sales, which could prompt wholesalers to restock more slowly in the coming months. Stockpiles at the wholesale level stood at $484B in May, 25.8% above the post-recession low of $384.9B in Sep 2009. The May increase reflected gains in stockpiles of autos, computer equipment, drug products & clothing.
Wholesalers in U.S. Lift Stockpiles at Slower Pace as Sales Fall
There is no significant news to inspire buyers. The European debt mess is going nowhere. China is not giving as big a boost to the global economy as in the past. And earnings season in the US looks to be glum. Dow is nearing its recent lows, just below 12.5K.
Dow Jones Industrials
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