Wednesday, July 11, 2012

Markets retreat as FOMC minutes disappoint

Dow lost 48, decliners 5-4 ahead of advancers & NAZ was off 14.  Bank stocks had a good day, taking the Fnancial Index up 1+ to the 194s. The MLP index was up 2+ to 388 & the REIT index gained 1 to the 263s.  Junk bond funds drifted lower & Treasuries were little changed, with yields near record low levels.  Oil rose as the Energy Dept reported that crude supplies dropped & refinery use increased.  Gold slid lower, still trying to find traction.

AMJ (Alerian MLP Index tracking fund)

stock chart

Click below for the latest market update:

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLQ12.NYM...Crude Oil Aug 12...85.76 ...Up 1.85  (2.2%)

Live 24 hours gold chart [Kitco Inc.]

The U.S. Federal Reserve

Photo:   Bloomberg

A few policy makers said the Federal Reserve will probably need to take more action to boost the labor market & meet its inflation target, according to minutes of the Jun meeting.  “A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal,” according to the record of the FOMC Jun 19-20 meeting.  Ben Bernanke said last month policy makers were prepared to “take additional steps” to boost the economy following their decision to extend the Operation Twist program aimed at lowering long-term interest rates.  2 participants said additional bond purchases are appropriate, while 2 others said they would be warranted in the absence of “satisfactory progress” in cutting unemployment or if downside risks increase.  FOMC members also said strains in global markets stemming from Europe's debt crisis had increased since their Apr meeting, & that “U.S. fiscal policy would be more contractionary than anticipated.”  The minutes also show policy makers considering the risk that further easing might pose.  Some noted that excessive purchase of Treasuries could “at some point, lead to deterioration in the functioning of the Treasury securities market that could undermine the intended effects of the policy.”

A Few on FOMC Said More Stimulus Probably Will Be Needed

US consumer spending could slow in H2 as shoppers reduce purchases amid a weak economic recovery, a volatile stock market and uncertainty over the presidential election, according to a study by Citigroup (C).  That will make the important back-to-school shopping season “challenging” for retailers & it begins shortly.  In a survey, 81% planned to spend the same or less in H2 than a year ago & about 2-3 expected the economy to deteriorate or not improve.  Citi first noticed a slowdown in Apr when same-stores sales trailed its forecasts for the first time since Dec.  Then sales remained soft in May & Jun.  Now high- income shoppers, who account for about 50% of total spending & own 90% of US equities, are at risk of cutting back with increased volatility in the stock market.  Several retailers and consumer companies have already reported weakening results: Procter & Gamble (PG), Tiffany (TIF), Lowe's (LOW) & Tempur-Pedic (TPX) all cut annual profit projections, while other predictions trailed estimates.  Retail sales fell 0.2% in May, following a similar decline in Apr, according to the Commerce Dept.  Sales excluding automobiles slumped by the most in 2 years.  Jun results are due next weeks.

U.S. Shoppers to Slow Spending for Rest of 2012, Citigroup Says

Dimon's Own Words on JPMorgan Trading Loss, Europe

Photo:   Bloomberg

In a departure from a customary earnings-day conference call, JPMorgan's CEO Dimon will meet analysts on Fri to field questions about the bank's enormous trading loss loss & what he’s doing to contain the damage.  The firm also is being probed over the possible gaming of US energy markets & was subpoenaed in global investigations of interest-rate fixing.  The trading blunders will cost the company over $5B in Q2, but the bank is still expected to report a profit.  Future losses on the trade are projected to stay below $1B & the remaining position could turn profitable if the market turns in the company’s favor.  JPM is confident that the losses have been capped as 80-90% of the position has been closed.  “We will take proper corrective action and it is likely there will be clawbacks,” Dimon told the Senate Banking Committee last month.  The stock was up 36¢.

Dimon’s Risk Reputation at Stake as JPMorgan Briefs Analysts on Bad Trades

JPMorgan (JPM)

stock chart

This was the 5th consecutive day of losses for the Dow, down 340.  The news background is more of the same.  China growth is slowing, the euro debt mess drones on with no end in sight & the US economy is stumbling.  Dow had a mini rally in the last hour, running up almost 100.  But there was selling at the close & about 1/3 of that gain was lost.  Dow is only about 100 above its lows 2 weeks ago & looks to be very weak.

Dow Jones Industrials

stock chart

Get your favorite symbols' Trend Analysis TODAY!  

No comments: