Monday, August 13, 2012

Markets pull back after long rally

Dow dropped 73, decliners ahead of advancers 5-2 & NAZ was off 17. The Financial Index lost 1+, taking it just below 200.  The MLP index fell 1½ to 390 & the REIT index slipped a fraction to the 261s,  Junk bond funds eased back & Treasuries were slightly higher.  Oil & gold are marking time.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLU12.NYM...Crude Oil Sep 12...93.53 ....Up 0.66  (0.7%)

GCU12.CMX...Gold Sep 12.....1,620.80 ...Up 0.80  (0.1%)

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Greek Prime Minister Antonis Samaras

Photo:   Bloomberg

The Greek statistical authority says the country's deep recession has eased slightly, although the economy still contracted 6.2% in Q2 from the same period last year.  In Q1, the contraction was 6.5%.  Debt-crippled Greece has been in recession for 5 years, the cumulative shrinkage is expected to reach 20% at the end of this year.  The gov has said the recession could exceed 7% in 2012.  Greece is being kept solvent by intl bailout loans, granted in return for a harsh austerity program.  The situation keeps going from bad to worse with no end in sight.

Greek Recession Making Bailout Targets Harder to Meet: Economy

Time to get back to work.  Angela Merkel returned to the front line of the debt crisis as the leaders squabble over measures including bond purchases to relieve concerns the single currency may fragment.  Merkel ends her summer vacation to oversee a Cabinet meeting Aug 15 before departing for Canada & talks with Prime Minister Stephen Harper as the spiraling crisis threatens the global economy.  With policy makers awaiting a German high court decision on bailout funding next month, they’re struggling to smooth divisions over a ECB plan to buy the bonds of indebted nations.  “It makes no sense for the ECB to start financing” Spain & Italy, ECB Governing Council member Luc Coene said.  “It would only lead to the ECB taking on the whole public debt of Spain and Italy onto its balance sheet.”  ECB President Draghi said earlier this month the central bank could purchase sovereign debt alongside euro-area bailout funds.  While the plan offered Europe an initial respite from the turmoil, Spanish & Italian yields climbed last week on concern that a debt-purchasing program won’t be sufficient to curb the crisis. Concern over the € may weigh on already flagging global growth, a prospect underscored today by waning growth in Japan's economy.  Now Europe has to turn talk into action.

Google Said to Cut About 4,000 Workers in its Motorola Unit (1)

Photo:   Bloomberg

Motorola Mobility, the ailing cellphone maker that Google bought in May said it would lay off 20% of its work force & close a third of its 94 offices worldwide.  The cuts are the first step to reinvent Motorola, which has fallen far behind its biggest competitors & shore up its Android mobile business beyond search & software into the manufacture of hardware.  Though GOOG bought Motorola partly because of its more than 17K patents, which can help defend against challenges to the Android operating system, it also planned to use Motorola to make its own, better smartphones & tablets.  A third of the 4K jobs lost will be in the US.  The company plans to leave unprofitable markets, stop making low-end devices & focus on a few cellphones instead of dozens.  Dennis Woodside, Motorola’s new CEO said, “We’re excited about the smartphone business.”  “The Google business is built on a wired model, and as the world moves to a pretty much completely wireless model over time, it’s really going to be important for Google to understand everything about the mobile consumer.”  The stock rose 8.14.

Google (GOOG)

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This is turning out to be another quiet day in the markets, even though there is a downward bias.  Euro leaders may return to work & tackle the ugly euro debt mess which is not going to be solved just by buying more bonds.  Dow still has its eyes on the 13.4K ceiling, now almost 300 away.  August could be an indecisive month.

Dow Jones Industrials

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