Friday, June 5, 2015

Markets slide lower on growing Greek debt worries

Dow dropped 51, decliners over advancers about 5-4 & NAZ gained 10.  The MLP index rose 3+ to the 421s & the REIT index lost 3+ to the 311s.  Junk bond funds sold off & Treasuries retreated, taking the yield on the 10 year Treasury to its highest in 8 months!  Oil rebounded after selling off this week & gold continued sliding lower.

AMJ (Alerian MLP Index tracking fund)

CLN15.NYM....Crude Oil Jul 15....58.93 Up ...0.93 (1.6%)

Live 24 hours gold chart [Kitco Inc.]

Prime Minister Tsipras asked Greece’s intl creditors to withdraw their conditions for giving more money in a defiant address to parliament.  “The proposals from the creditors are clearly unrealistic,” Tsipras told lawmakers.  “The Greek government cannot consent to unreasonable proposals that call for devastating measures for pensioners and Greek families. I want to believe that it was a bad negotiating trick.”  The leader went on the attack after telling Chancellor Merkel & French pres Hollande yesterday that a list of proposals set by creditors to unlock bailout funds can’t be the basis for a deal.  The latest proposal was an “unpleasant surprise,” Tsipras said, adding that voters are asking the gov “not to succumb to the irrational, blackmailing demands of our creditors.”  Greece notified the IMF on yesterday that a €300M ($337M) payment due Fri would be deferred & bundled with 3 more payments at the end of Jun.  The move was a 180-degree turn by the gov & caught many by surprise.  While bundling the transfers is permitted under IMF rules, the deviation from standard practice adds to signs that Greece may be readying for a potential breakdown of talks after a 4-month-long impasse.  Tsipras said the IMF’s consent to the bundling means “it’s finally clear to everyone, and mostly understood by the markets themselves, no one wants a rift. And time now is running out not just for Greece, but for everyone.”  The gov main targets for a deal with Greece’s creditors remain lower primary budget surpluses in coming years, on which the 2 sides have already agreed, as well as some kind of debt relief & the protection of pensions & wages, Tsipras said.  The benchmark Athens Stock Exchange plummeted 5% before Tsipras spoke today.  The IMF delay wasn’t related to a lack of funds, as Greece had enough cash reserves to make the payment due Fri according to a leaker. 

Tsipras Asks Greece’s Creditors to Withdraw Latest Proposal

US central bankers are still likely to start raising interest rates this year if the labor market improves further, though the jobs outlook has become more uncertain, said William C. Dudley, pres of the Federal Reserve Bank of New York.  “If the labor market continues to improve and inflation expectations remain well-anchored, then I would expect -- in the absence of some dark cloud gathering over the growth outlook -- to support a decision to begin normalizing monetary policy later this year,” Dudley said.  At the same time, he cautioned that “there remains some uncertainty about whether growth will be strong enough to lead to further improvement in the labor market.”  He also stressed that interest rates are likely to rise gradually after liftoff.  Dudley spoke hours after the Labor Dept reported that employers added more jobs to payrolls than forecast.  The dollar strengthened as investors increased bets that the Fed will raise rates in Sep.  Fed Chair Janet Yellen and her colleagues are trying to determine if economic weakness at the start of the year is transitory or longer-lasting, as they consider the timing of their first rate rise since 2006.  Fed officials next meet to discuss policy on Jun 16-17, & Yellen will hold a press conference after the gathering.  Yellen said on May 22 that she still expects to raise rates this year if the economy meets her forecasts.  Those remarks were before gov data showed the economy shrank by 0.7% at an annual rate in Q1.

Dudley Says Fed Still Likely to Raise Interest Rates in 2015

Wal-Mart Stores, a Dow stock & Dividend Aristocrat, elected Vice Chairman Greg Penner as chairman, replacing family scion Rob Walton.  Walton, is part of WMTs founding family & has served as chairman since 1992.  WMT also said it was realigning the composition of its board committees so that most of the independent directors will serve on at least 2 committees.  Investors have been pushing hard for changes in how the world's largest retailer governs itself, seeking to install an independent chairman.  The stock fell 1.09.  If you would like to learn more about WMT, click on this link:

Wal-Mart Elects New Chairman, Walton Steps Down

Wal-Mart (WMT)

There was a lot to digest to in the stock market.  Favorable jobs data got little respect, OPEC holding its target for oil production flat was widely predicted & the odds that the Greek debt mess could get uglier are rising.  Higher interest rates are coming & investors will have to learn to control their emotions about that.  Increases will come in increments of 25 basis points every 2 meetings to give investors time to adjust.  Oil will keep pumping oil with some countries "cheating" on their suggested targets.  Extending the Greek loans is becoming a fuzzy concept, & that's being kind.  GDP growth in the US will pick up in Q2 (hard to miss after a negative number in Q1), but the overall yearly figure will continue to be mediocre as it has been for the 6 year recovery.  Dow has remained close to 18K for 4 months & a breakout from that trend is coming.  If investors pay more attention to these developments, the breakout will be to downside.

Dow Jones Industrials

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