Wednesday, November 14, 2012

Markets tumble on fiscal cliff worries

Dow dropped 185, decliners over advancers 11-1 & NAZ was off 37.  Much of the selling came in the last 2 hours of trading with a small amount of buying at the close.  The Financial Index fell almost 4 to the 203s.  The MLP index sank another 5+ to the 376s (a low since late Jun) & the REIT index dropped 5+ to the 251s.  Junk bond funds plunged 5-8% (for them that's a huge loss) & Treasuries were flattish with yields at 2 month lows.  Oil advanced after Israel carried out a series of airstrikes in the Gaza Strip that killed the leader of Hamas’s militant wing, bolstering concern that unrest in the MidEast will intensify & affect supplies.  Gold inched higher but may have a better day tomorrow.

AMJ (Alerian MLP Index tracking fund)

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CLG13.NYM...Crude Oil Feb 13...87.38 ...Up 0.90 (1.0%)

Live 24 hours gold chart [Kitco Inc.]

  • <p>               Police clash with demonstrators during a protest against Italian Government austerity measures in Rome, Wednesday, Nov. 14, 2012. Workers across the European Union sought to present a united front against rampant unemployment and government spending cuts Wednesday with a string of strikes and demonstrations across the region. Protesters clashed with police in various demonstrations in Rome, Milan, Turin, Padua and Brescia. (AP Photo/Gregorio Borgia)
Photo:   Yahoo

Hundreds of thousands went on strike or snarled the streets of several capitals in Europe, at times clashing with riot police, as they demanded that govs stop cutting benefits & create more jobs.  Workers with jobs, spoke of a "social emergency" crippling the world's largest economic bloc.  The protests were met with tear gas in Italy & Spain, but were largely limited to the countries hardest hit by the austerity measures designed to bring gov spending into line with revenues.  Wealthier nations like Germany, the Netherlands & Denmark saw only small, sedate demonstrations.  Govs backing the line of stringent austerity were not impressed by the show of force.  "We must nevertheless do what is necessary: break open encrusted labor markets, give more people a chance to work, become more flexible in many areas," German Chancellor Angela Merkel said.  "We will of course make this clear, again and again, in talks with the unions."  Spanish Economy Minister Luis de Guindos spoke of "a long crisis that has meant sacrifice and uncertainty," but said: "The government is convinced that the path we have taken is the only possible way out."  The Europe situation keeps going from bad to worse.

Austerity protests stall several European nations AP

Facebook Investors Brace for Share Flood as Biggest Lockup Ends

Photo:    Bloomberg

Facebook rallied as investors, undeterred by a surge in the number of tradeable shares, bet on the company’s potential to boost advertising revenue.  Restrictions were lifted today on 804M shares held by former employees & those who sold at the IPO, almost doubling the total publicly available.  The stock has lost about half its value since going public as the number of shares rose & investors fretted about the company’s ability to generate ad revenue on mobile devices.  The bans on sales are put in place to prevent shares from flooding the market immediately after an IPO.  Restrictions were lifted on smaller numbers of shares in Aug & Oct.  Today’s trading volume, already more than twice the average level, may be driven in part by short-sellers getting out of the stock.  The stock rose a whopping $2.50 (13%).

Facebook Shares Surge After Biggest Lockup Expiration: San Francisco Mover

Facebook (FB)

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  • <p>               A woman shops for groceries by flashlight in the Tribeca neighborhood of New York, Tuesday, Oct. 30, 2012. Wholesale prices fell in October as a big drop in gasoline and other energy prices offset a rise in the cost of food. Wholesale prices dipped 0.2 percent last month, the Labor Department said Wednesday, Nov. 14. 2012. It was the first decline since May and followed big gains of 1.1 percent in September and 1.7 percent in August, increases that had been driven by spikes in energy. (AP Photo/Richard Drew)
Photo:    Yahoo

Wholesale prices fell in Oct as a big drop in gasoline & other energy prices offset a rise in the cost of food.  Wholesale prices dipped 0.2% last month according to the Labor Dept. This was the first decline since May & followed big gains of 1.1% in Sep & 1.7% in Aug, driven by spikes in energy.  Energy prices retreated a bit in Oct, dipping 0.5% but food costs were up 0.4% as the summer drought continued to put pressure on some food prices.  Core prices, which exclude food & energy, fell 0.2%, the biggest drop in 2 years.  Over the past year, core prices were up a moderate 2.1%, evidence inflation remains under control.  In Oct, the fall in energy costs included a 2.2% drop in gasoline prices, the biggest since Jul, and a 3.3% decline in home heating oil costs.  Gas prices averaged $3.44 a gallon nationwide, down 35¢ from a month ago, according to a the AAA.  The 12-month rise in core prices of 2.1% reflected a moderation from the start of the year.  Core wholesale prices were up 3.1% for the 12 months ending in Jan.  In better times, this could have been the reason for a higher stock market.

US wholesale prices fell 0.2 percent in October AP

The sell-off came on increased worries about going over the fiscal cliff.  Both sides have dug in & there is little sign of  compromise for at least another month.  The story remains the same.  Conditions in Europe are not going to improve for some time & there are concerns about the change in leadership in China while its economy is (relatively) stumbling.  The sharp drop in junk bond prices (1-2% is considered a very big drop) is another sign of weakness in the markets.  Dow has lost 1K in less than a month.  This is a bear market if I ever saw one.

Dow Jones Industrials

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