Dow dropped 110, decliners over advancers 3-2 but NAZ only slipped 1. The Financial Index fell 1+ to 195. The MLP index fell 2+ to 392 & the REIT index was off 1 to 265. Junk bond funds were mixed to lower but remain near yearly highs & Treasuries gained on growing uncertainty out of Europe. Crude fell after the ECB failed to give details of a plan designed to shore up the € by curbing rising gov borrowing costs in the region. Gold also declined.
Photo: Yahoo
ECB head Mario Draghi said the bank is ready to intervene in the bond market to drive down countries' high borrowing rates & urged European leaders to get their bailout fund ready to intervene as well. He said the bank could buy bonds if the borrowing rates stop the ECB in its efforts to spread its low interest rates throughout the 17 countries that use the currency. Such a move could lower the borrowing rates that are threatening to push Spain & Italy into financial disaster. The ECB "may undertake outright open market operations of a size adequate to reach its objective," Draghi said. Draghi announced no immediate action. "Over the coming weeks, we will design the appropriate modalities for such policy measures." Those words were not big enough to impress bond markets. In his comments, Draghi was careful to add that the bank would be acting independently to determine monetary policy & interest rates. It is forbidden by the EU treaty from using its monetary powers just to support gov finances. He said the eurozone governments "must stand ready" to use their bailout funds, the European Financial Stability Fund & its successor, the European Stability Mechanism, in direct market interventions themselves. Countries would have to ask for that help first, which would take time, while the ECB can act at any time. No wonder, markets pulled back after the press conference.
Draghi Says ECB Working on Bond Plan Amid Bundesbank Concern
Photo: Yahoo
The number filing new claims for jobless benefits rose less than expected last week, but the data continues to be influenced by distortions from seasonal auto shutdowns. Initial claims for state unemployment benefits rose 8K to 365K according to the Labor Dept. The prior week's figure was revised up to 357K from the previously reported 353K. The forecast was for an increase to 370K. The 4-week moving average for new claims fell 2K to 365K, the lowest in 4 months. An uncertain fiscal policy path & ongoing debt problems in Europe have hurt demand & left businesses cautious about hiring new workers.
Jobless Claims in U.S. Climbed Less Than Forecast Last Week
Photo: Bloomberg
Orders placed with US factories unexpectedly declined in Jun, reflecting less demand for business equipment & the biggest decrease in bookings for non- durable goods in more than 3 years. The 0.5% drop followed a revised 0.5% increase in May, according to the Commerce Dept said. The forecast called for a 0.5% gain. Jun orders for durable goods climbed 1.3%, revised from the 1.6% surge reported last week. Demand for non-durable items, slumped 2%, the biggest drop since Mar 2009. Orders may have waned last month as well. A purchasing managers’ report yesterday that showed manufacturing unexpectedly contracted in Jul. The decrease in non-durable goods orders followed a 0.4% drop in May & reflected broad-based declines in sales of everything from petroleum products to chemicals to food. Factory orders excluding the transportation category, decreased 1.8% in Jun, the biggest drop since Mar 2009, after no change the month before. Bookings for capital goods excluding aircraft & military equipment, a measure of future business investment, fell 1.7%. But shipments of those goods, which are used in calculating GDP, climbed 1% for a 2nd month. More drab numbers on the economy.
Orders to U.S. Factories Unexpectedly Declined 0.5% in June
Expectations were high following the remarks by Draghi last week about doing whatever is necessary for the €. They were disappointed today & more selling may lie ahead. Bold action was missing. The ECB has no magic bullets beyond "trying harder" & giving encouraging words to govs about getting their acts together. Macro economic data continues to come in weak, although not weak enough to signal a recession. Just more plodding along at a good enough pace to produce modest GDP growth. Dow is well below 13K & that may prove to be significant.
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month | 0.086% | |
U.S. 2-year | 0.219% | |
U.S. 10-year | 1.483% |
| CLU12.NYM | ...Crude Oil Sep 12 | ...87.16 ..... |  1.75 | (2.0%) |
| GCQ12.CMX | ...Gold Aug 12 | .....1,593.70 | ... 10.00 | (0.6%) |
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ECB head Mario Draghi said the bank is ready to intervene in the bond market to drive down countries' high borrowing rates & urged European leaders to get their bailout fund ready to intervene as well. He said the bank could buy bonds if the borrowing rates stop the ECB in its efforts to spread its low interest rates throughout the 17 countries that use the currency. Such a move could lower the borrowing rates that are threatening to push Spain & Italy into financial disaster. The ECB "may undertake outright open market operations of a size adequate to reach its objective," Draghi said. Draghi announced no immediate action. "Over the coming weeks, we will design the appropriate modalities for such policy measures." Those words were not big enough to impress bond markets. In his comments, Draghi was careful to add that the bank would be acting independently to determine monetary policy & interest rates. It is forbidden by the EU treaty from using its monetary powers just to support gov finances. He said the eurozone governments "must stand ready" to use their bailout funds, the European Financial Stability Fund & its successor, the European Stability Mechanism, in direct market interventions themselves. Countries would have to ask for that help first, which would take time, while the ECB can act at any time. No wonder, markets pulled back after the press conference.
Draghi Says ECB Working on Bond Plan Amid Bundesbank Concern
The number filing new claims for jobless benefits rose less than expected last week, but the data continues to be influenced by distortions from seasonal auto shutdowns. Initial claims for state unemployment benefits rose 8K to 365K according to the Labor Dept. The prior week's figure was revised up to 357K from the previously reported 353K. The forecast was for an increase to 370K. The 4-week moving average for new claims fell 2K to 365K, the lowest in 4 months. An uncertain fiscal policy path & ongoing debt problems in Europe have hurt demand & left businesses cautious about hiring new workers.
Jobless Claims in U.S. Climbed Less Than Forecast Last Week
Orders placed with US factories unexpectedly declined in Jun, reflecting less demand for business equipment & the biggest decrease in bookings for non- durable goods in more than 3 years. The 0.5% drop followed a revised 0.5% increase in May, according to the Commerce Dept said. The forecast called for a 0.5% gain. Jun orders for durable goods climbed 1.3%, revised from the 1.6% surge reported last week. Demand for non-durable items, slumped 2%, the biggest drop since Mar 2009. Orders may have waned last month as well. A purchasing managers’ report yesterday that showed manufacturing unexpectedly contracted in Jul. The decrease in non-durable goods orders followed a 0.4% drop in May & reflected broad-based declines in sales of everything from petroleum products to chemicals to food. Factory orders excluding the transportation category, decreased 1.8% in Jun, the biggest drop since Mar 2009, after no change the month before. Bookings for capital goods excluding aircraft & military equipment, a measure of future business investment, fell 1.7%. But shipments of those goods, which are used in calculating GDP, climbed 1% for a 2nd month. More drab numbers on the economy.
Orders to U.S. Factories Unexpectedly Declined 0.5% in June
Expectations were high following the remarks by Draghi last week about doing whatever is necessary for the €. They were disappointed today & more selling may lie ahead. Bold action was missing. The ECB has no magic bullets beyond "trying harder" & giving encouraging words to govs about getting their acts together. Macro economic data continues to come in weak, although not weak enough to signal a recession. Just more plodding along at a good enough pace to produce modest GDP growth. Dow is well below 13K & that may prove to be significant.
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