Monday, March 18, 2013

Markets fall on Cyprus bailout worries

Dow dropped 32, decliners over advancers 2-1 & NAZ was off 15. The Financial Index fell almost 3 to the 246s.  The MLP index fell 1+ to the 432s & the REIT index lost 2 to 282s.  Junk bond funds rose & Treasuries climbed, pushing 10-year note yields down the most in 3 weeks, as an unprecedented proposed levy on bank deposits in Cyprus threatened to reignite the euro debt crisis, boosting demand for a refuge. Oil pulled back & gold rose to over 1600 on Cyprus worries.

AMJ (Alerian MLP Index tracking fund)

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CLJ13.NYM....Crude Oil Apr 13...91.96 ...Down 1.49  (1.6%)

GCH13.CMX...Gold Mar 13....1,601.60 ....Up 9.10 (0.6%)

Europe Braces for Renewed Turmoil as Cyprus Deposit Levy at Risk

Photo:   Bloomberg

European big wigs signaled flexibility on the application of an unprecedented bank tax in Cyprus, seeking to overcome outrage that threatens to derail the country’s bailout.  Euro shares & the € fell more than a penny to under $1.30.  While demanding that the levy raise the targeted €5.8B ($7.6B), finance officials said easing the cost to smaller savers was up to Cyprus.  A vote on the tax, needed to secure €10B in rescue loans, was delayed for a 2nd day until tomorrow.  Banks may not reopen tomorrow after a holiday today, state-run broadcaster CYBC reported.  “If the government wants to change the structure of the solidarity levy for the banking sector, the government can decide as such,” ECB Executive Board member Joerg Asmussen said today.  “What’s important is that the planned revenue of 5.8 billion euros remain.”  While Cyprus accounts for less than ½ of 1% of the 17-nation euro economy, the raid on bank accounts risks triggering new convulsions in the financial crisis that began in 2009 in Greece.  Moody’s said that the move is a significant step toward limiting support for bank creditors across Europe & shows that policy makers will risk financial- market disruptions to avoid sovereign defaults.  Scenes of Cypriots lining up at cash machines raised the specter of capital flight elsewhere & threatened to disrupt a market calm since the ECB pledge in Sep to backstop troubled nations’ debt.  With no gov in Italy, Spain in the throes of a political scandal & Greece struggling to meet the terms of its own bailout, more turmoil could hamper efforts to end the crisis.  All is not well in the euro zone.

Homebuilder Confidence in U.S. Unexpectedly Declined in March

Photo:   Bloomberg

Confidence among US homebuilders unexpectedly fell for a 2nd month in Mar, a sign the residential real-estate market will take time to strengthen.  The National Association of Home Builders/Wells Fargo index of builder confidence dropped by 2 points to 44, due to a decrease in the measure of current sales versus a forecast 47.  Readings below 50 mean more respondents said conditions were poor.  “In addition to tight credit and below-price appraisals, homebuilding is beginning to suffer growth pains as the infrastructure that supports it tries to re-establish itself,”  David Crowe, chief economist at the builders association, said.  “The road to a housing recovery will be a bumpy one until these issues are addressed, but in the meantime, builders are much more optimistic today than they were at this time last year.”  The group’s gauges of the sales outlook for the next 6 months & traffic of prospective buyers improved this month, reflecting stable property values, mortgage rates close to all- time lows & job gains.  Limited inventories and resilient sales are benefiting builders.  The builders’ index compares with a reading of 28 in Mar 2012 after reaching a record low of 8 in Jan 2009.

Homebuilder Confidence in U.S. Unexpectedly Fell in March

U.S. House Speaker John Boehner

Photo:   Bloomberg

The fight between Dems & Reps over how to address the fiscal deficit mess continues even after a week of meetings between the pres & Reps Speaker John Boehner said.  “It’s always a good thing to engage in more conversation,” Boehner said in an interview.  “But when you get down to the bottom line, the president believes that we have to have more taxes from the American people, we’re not going to get very far.  ”In meetings with lawmakers last week, Obama urged Dems to be open to revisions in entitlement programs & pressed Reps to put increases in revenue onto the negotiating table.  Boehner said that raising taxes is off the table.  “The president got his tax hikes on January the 1st,” Boehner said, referring to a tax increase on top earners enacted early this year. “The talk about raising revenue is over. It’s time to deal with the spending problem.”

Obama Meetings Didn’t Ease Budget Standoff, Boehner Says

Dow was on a 10 day winning streak & that was not meant to last.  Although so far it is getting by with only limited selling.  The euro debt mess is back in the headlines, it was never far away.  The US debt mess remains with us with no solutions in sight.  But stocks are prices to perfection & Dow is overdue for a correction.  Apple (AAPL) was up all of 5 on hopes for a big div increase which could raise its yield to around 4%.  However, that kind of return is not associated with growth stocks.  A depressed AAPL stock does not indicate the stock markets are healthy.

Dow Jones Industrials

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