Friday, April 17, 2015

Markets tumble on Greek debt worries

Dow sank 264 (at the lows), decliners over advancers better than 5 to 1 & NAZ dropped 74.  The MLP index fell 2+ to the 444s & the REIT index lost 3+ to the 327s.  Junk bond funds were mixed to lower & Treasuries retreated.  Oil eased back after its recent run & gold climbed back over 1200.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...55.94 Down ...0.77  (1.4%)

GCJ15.CMX....Gold Apr 15.......1,202.20 Up ...4.20 (0.4%)

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Greece’s negotiations to secure funding & avoid a default weighed on other euro-area gov debt markets, with securities from Spain & Italy dropping, while German 10-year yields touched a record low.  Greek gov bonds headed for their worst week since the aftermath of Syriza’s election in Jan as officials worked to reach an agreement before the nation faces payments of almost €1B ($1.1B) next month.  German securities are also being boosted after Mario Draghi this week said the ECB's €1.1T-euro quantitative-easing program must be implemented in full.  That program has also been insulating bonds from the region’s periphery from the worst of the Greek selloff.  Benchmark German 10-year yields dropped 2 basis points to 0.07% & touched 0.049%, the lowest seen in decades.  Credit-default swaps suggest there’s an 80% chance of Greece being unable to repay its debt in 5 years.  Yanis Varoufakis, finance minister in the Syriza party-led gov, said he hoped to reach a deal with the euro area by the end of Jun & wasn’t considering a unilateral exit from the region.  The Greek gov, that came to power proposing to end austere budgets, has been locked in talks with creditors over measures attached to its bailout loans.  It must make payments to the IMF of €200M & almost €800M in the first 2 weeks of May.  Funds may be exhausted by May 12, when the 2nd payment is due, S&P said Wed, when it downgraded the nation’s sovereign credit rating to CCC+ from B-. 
Greece’s 10-year yield rose 11 basis points to 12.83%.  The yield has climbed 159 basis points this week, the most since the period ended Jan 30.  The price of the 3% bond due in Feb 2025 fell to 48.9% of face value.

Greek Woes Push German Yield to Record Low as Spanish Bonds Drop

US consumer sentiment rose more than expected in Apr, according to the University of Michigan's preliminary Apr reading.  The overall index on consumer sentiment came in at 95.9, up from the final Mar read of 93.0.  Analysts were looking for a reading of 94.0.  The survey's subindex on business conditions rose to 108.2 from 105.0 in Mar, while a read on consumer expectations rose to 88.0 from 85.3.  The forecast was for a reading of 105.2 for the conditions index & 87.0 for expectations.

Consumer Sentiment Rises in April

Consumer prices in the US increased for the 2nd consecutive month in Mar after falling thru much of the winter, a sign that US inflation may be stabilizing.  The consumer-price index, which reflects what Americans pay for everything from sneakers to airline tickets, rose a seasonally adjusted 0.2% in Mar from a month earlier, the Labor Dept said.  That matched the increase last month, which was the biggest rise since Jun.  Excluding the volatile food & energy categories, core prices also climbed 0.2%.  Economists expected prices would increase 0.3% & core prices would rise 0.1%.  Compared with a year earlier, overall prices declined 0.1% while core prices have risen 1.8%.  The overall price gauge had weakened since last summer, when oil prices began to tumble.  The stronger dollar also appears to be suppressing inflation, in part because it makes foreign goods relatively cheaper for US consumers.  The Federal Reserve (FED) is keeping a close eye on low inflation as it weighs whether the economy is strong enough to begin raising interest rates.  The FED's preferred inflation gauge, the personal consumption expenditures index, was up only 0.3% in Feb.  The index hasn't risen above 1% since Nov, & has run below the central bank's 2% target since spring 2012.  But wages may be starting to pick up, a development that could help policy makers at the FED feel more confident that sluggish US inflation also will gain traction, FED's Vice Chairman Stanley Fischer said.  Today's report showed energy prices rose 1.1% from Feb, with the gasoline index jumping 3.9%, its largest increase since Feb 2013.  Food prices decreased 0.2%, due in part to a decline in the prices for many grocery store products, including fruits & vegetables, nonalcoholic beverages, dairy, meats, poultry, fish & eggs.  The rise in core prices was largely driven by housing costs & medical care.  The index for used cars & trucks increased 1.2% after rising 1% the prior month.

CPI Rises in March

Today was a day of reckoning.  Traders noticed Greek debt situation is becoming desperate.  The rest  of Europe is not willing to go along with its anti austerity pledge.  And the rest of Europe controls the money it needs for another bailout.  Like every crisis in the past, the situation is fluid, subject to change any time for any reason.  However, may the money guys this time may get tough & bite the bullet as painful as it may be.  Dow is back to where it was 5 months ago (on the way up).

Dow Jones Industrials

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