Tuesday, May 8, 2012

Markets sell off on growing Greek debt crisis

Late day buying reduced the losses for stocks. Dow finished down 76, decliners ahead of advancers 3-2 & NAZ was off only 11. The Financial Index fell 1+ to the 202s, remaining near its 2 month lows. The MLP index sank 5 to the 384s (down a huge 15 this month) & the REIT index was off a fraction to 260. Junk bond funds eased lower & Treasuries rose, with yields falling to a 3-month low, as Greece’s struggle to form a gov bolstered demand at a $32B Treasury 3-year note auction to the highest level since Jan. Oil fell for a 5th day as Saudi Arabian Oil Minister said prices should come down & the € weakened against after election results in Greece & France. Gold should have found support, but it didn't.

JPMorgan Chase Capital XVI (AMJ)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.092%
U.S. 2-year	0.254%
U.S. 10-year	1.833%

CLM12.NYM

...Crude Oil Jun 12...

97.06

....

0.88

(0.9%)

Job Openings in U.S. Increased to Three-Year High in March

Photo Bloomberg

US employers were looking to fill more jobs in Mar than at any time in almost 4 years. The number of open positions increased 172K to 3.74M, the most since Jul 2008, from a revised 3.57M in the prior month that was larger than previously estimated by the Labor Dept. Another report showed small companies were more optimistic on their outlook. More vacancies are a sign companies were looking to expand at the end of Q1, undaunted by the jump in fuel costs or concerns that global economic growth will slow. This jobs opening report helps shed light on the dynamics behind the monthly employment figures. Payrolls climbed 115K in Apr, the fewest in 6 months & less than the forecast showed. It followed a revised 154K gain in Mar that was larger than initially estimated. The number hired decreased to 4.36M in Mar from 4.44M in the previous month. The hiring rate held at 3.3%. Somewhat encouraging news but the trend is for a softer jobs market.

Job Openings in U.S. Rise to Highest Level Since 2008: Economy

US manufacturers became less-optimistic about 2012 sales growth than at the end of last year, while service companies grew more upbeat. Purchasing managers at US factories anticipate sales will grow 4.5% this year, less than a 5.5% Dec prediction, according to the Institute for Supply Management. By contrast, service providers estimated revenue will climb 4.8% this year, up from the 3.1% forecast in Dec. Factory managers remain confident enough that they estimate spending on new equipment will climb 6.2% in 2012, compared with a 1.9% increase projected in Dec. Service providers forecast a 3.6% pickup in investment. Manufacturers projected employment will increase 1.4% for the rest of this year, while service companies predicted a 1.9% gain. Factory leaders see the cost of raw materials rising 2.3% this year, the report showed & service providers see a 2.6% increase in input costs this year. This is another indication that the recovery is stumbling to some degree.

Factories in U.S. Grow Less Optimistic About Sales

IBM, a Dow stock, is offering $1.5B of bonds in its 2nd dollar- denominated debt offering this year, as yields in the corp bond market reach record lows. IBM wants to sell $900M of 3-year notes at a relative yield of 45 basis points more than similar-maturity Treasuries, & $600M of 7-year bonds at 65 basis points. In Feb, when IBM last issued debt, it got a record-low coupon on 3-year notes, selling $1.5B of 0.55% securities at 42 basis points more than Treasuries. The proceeds will be used for general corp purposes. The bonds are expected to be rated Aa3 by Moody's & A+ by S&P. IBM is offering bonds as borrowing costs have reached record lows. Investment-grade corp bond yields fell to 3.34% on May 4, the least in data going back to 1986. IBM stock fell 1.96.

IBM Selling $1.5 Billion of Bonds as Company Yields Fall

International Business Machines Corporation (IBM)

Buyers returned late in the day, but stocks still had a bad day. While France may abolish recent austerity moves, Greece remains the focus of attention. Some are betting it will leave the Euro area group shortly. The parties can not come together to form a new gov. With no gov, there is talk of another election next month when it will need another bailout to avoid default. The Greek debt mess is going from bad to worse. But the US stock markets are taking increased uncertainty with relative calm. Treasuries are in demand (as is investment grade corp debt), but gold, the traditional safe haven investment, is not. Dow fell below 13K, which doesn't mean much these days, but not by much & remains only 470 below its 2012 highs at the start of May.