Markets fall on lower JPMorgan earnings

Dow dropped 117, decliners over advancers 5-1 & NAZ was off 11.  Banks led the way down with the Financial Index falling 6 to the 165s. The MLP index dropped 2+ to the 248s, turned back at the important 351 ceiling, & the REIT index was down 5 to the 204s.  Junk bond funds fell but Treasuries were back in demand, with the yield on the 10 year Treasury heading back towards 2%.  Oil & gold also lost ground.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.010%
U.S. 2-year	0.265%
U.S. 10-year	2.150%

CLX11.NYM

...Crude Oil Nov 11

............83.61

..... 1.96

(2.3%)

GCV11.CMX...

Gold Oct 11

...............1,656.80

.... 24.50

(1.5%)

Below, get the latest market update:

Photo:   Bloomberg

New claims for jobless benefits were little changed last week.  Initial claims for unemployment benefits dipped 1K to 404K according to the Labor Dept.  The 4-week moving average fell to a 2-month low of 408K (from 415K).  The number continuing to collect benefits dropped 55K to 3.67M, the fewest since Apr. The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.  Those who’ve used up their traditional benefits & are now collecting emergency & extended payments increased by 2K to 3.55M in the latest reporting week.  The unemployment rate among people eligible for benefits fell to 2.9% from 3% in the prior week.  30 states & territories reported an increase in claims, while 23 had a decrease.  Glum figures have become routine.

Initial Jobless Claims in U.S. Fell to 404,000




Photo:   Yahoo

The Slovak parliament endorsed early elections in Mar, a key condition for approval of expanding the powers of an EU bailout fund by a vote of 143-3.  Previously this week, the Parliament rejected the changes in the fund because a junior coalition party was against it, causing the gov to fall.  But the main opposition party agreed to help the outgoing coalition approved the expanded fund in exchange for early elections.  Slovakia is the last of the 17 eurozone nations to vote on increasing the size & powers of the bailout fund (for Greece).  This is only another step in a long road ahead for Greece.

Slovakia to take 2nd vote on EU bailout fund AP




Photo:   Yahoo

JPMorgan, a Dow stock, was the first of the big banks to report earnings,  Q3 income fell 4% on weaker investment banking & trading results & a loss in its private equity division. The bank also set aside $1B for litigation tied to poorly-written mortgage loans & securities.  EPS was $1.02, compared with $1.01 last year (higher because of accounting magic). Revenue edged up to $24.37B from $24.34B last year.  The investment banking declines were caused by extreme volatility in stock & bond markets in Q3 leading to a slowdown in debt issuance & a record backlog in IPOs, both sources of banking fees, as companies elected to wait out the turmoil & investors pulled money out of stocks & bonds.  Fees from investment banking fell 31% to $1B.  Debt underwriting fees fell 37% to $496M as fewer companies raised money by selling debt.  With many IPOs also shelved, stock underwriting fees fell 47%.  Its private equity business lost $347M.  Lawsuits against US banks for bad mortgage loans piled up in Q3, including a federal suit against 17 banks for selling risky mortgage-backed securities.  However, business lending increased sharply, an encouraging sign for the US economy, according to CEO Jamie Dimon.  New loans to small businesses grew 71% from last year to $12.6B, loans to middle-market businesses grew 18% to $41.5B, while loans to companies related to intl trade were up 69% to $30.1B.  Meanwhile, confused protestors are complaining about huge banking profits!  The stock dropped 1.87 (6%). 

JPMorgan’s Earnings Decline on Slump

J P Morgan Chase & Co (JPM)

The chart below shows the Dow bumped against 10.6K once again & was turned back as before.  JPM is the 2nd Dow stock to report earnings, both reports have been disappointing.  3 more big banks are due to report in the next few days & chances there numbers will not be a lot different than with JPM.  After all, it was hurt by weak financial conditions at the macro level.  Europe is muddling thru the current debt crisis, but keep in mind that there will be more problems in the weeks & months ahead.  Even this one is not a done deal yet.  Dow failed its first test to break into new higher ground, there could be more selling ahead.

Dow Industrials (INDU)

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Markets rally on European hopes

Dow shot up 97, advancers over decliners 5-1 & NAZ was up 31.  Bank stocks are leading the way higher.  The Financial Index is up a dazzling 20 in Oct (off the 151 low) despite Q3 earnings estimates being lowered & a very volatile situation with European debts.

S&P 500 Financials Sector Index

Value	170.37
Change	3.22     (2.9%)

The MLP index rose 1 to 350 & the REIT index gained 5 to 211.  Junk bond funds were up 1-2% & Treasuries were weak with a higher stock market.  Oil was a tad higher after going nowhere in the last 2 months.  Gold rose to a 2-week high as equities & commodities rallied amid optimism that European officials will tame the region’s debt crisis.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.015%
U.S. 2-year	0.305%
U.S. 10-year	2.208%

CLX11.NYM

...Crude Oil Nov 11

...85.97

..... 0.16

(0.2%)

GCV11.CMX

...Gold Oct 11

......1,684.10

... 24.40

(1.5%)

Get the latest market update below:

Greek bailout II is hanging on Slovakia.  Its political parties rushed to find a way to approve Europe’s enhanced bailout fund after lawmakers rejected it amid a dispute over the future of Prime Minister Radicova who wants to start talks today with the opposition on a 2nd vote, according to a spokesman.  The premier said the only country in the 17-member euro area yet to approve European Financial Stability Facility (EFSF) must find a solution to the issue “as soon as possible.”  But no time for a new vote has been set.  Global stock markets rebounded from earlier declines on optimism the EFSF changes will be approved.  Slovak approval of enhanced powers of the the temporary bailout fund is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region.

Slovak Parties Seek Way to Appove Bailout Fund Amid Dispute Over Radicova




Photo:   Yahoo

Greece's gov deficit continued to grow in the first 9 months of 2011 despite a series of austerity measures designed to raise revenues.  The deficit stood at €19.2B ($26.1B) for Jan-Sep from €16.65B last year. The 15% increase was slightly lower than the gov forecast of a rise to €19.24B.  Swell!  The ministry blamed the revenue shortfall on a deeper than anticipated recession, but said shortfalls were likely to be made up in Q4 as recent tax rises, such as a controversial property levy, kick in.  The figures relate to the state budget deficit, which excludes spending in some areas, & is not the criteria used for the EU's assessment of Greece's financial reforms.  To qualify for additional bailout money, Greece has had to push thru a series of austerity measures, including salary & pension cuts in the public sector, & repeated tax hikes.  The gov is also pushing thru plans to suspend 30K civil servants on partial pay by the end of the year.  Unions have been outraged, with workers staging near-daily strikes, demonstrations & sit-ins.  Both the Finance & Interior Ministry buildings were under occupation by protesters Wed & Finance Ministry employees have called a 10-day strike from Oct 17.  This discord looks like chaos to me.

Greek deficit widens in first 9 months of years AP


In Aug, US job openings fell for the first time in 4 months, signaling a sustained labor market recovery will take time to unfold. The number of positions waiting to be filled dropped 157K to 3.06M according to Labor Dept. Hiring increased 38K to 4.01M.  Job openings decreased 4.9% in Aug from a revised 3.2M in Jul (smaller than initially reported).  The drop in vacancies was led by trade, transportation & utilities.  Employers discharged 1.66M workers in Aug, down from 1.69M in Jul.  Total separations, which include firings, retirements & those who left their jobs voluntarily, were little changed at 3.97M.  In the 12 months (ended in Aug), the economy created a net 1.2M jobs, from about 47.9M hires & about 46.7M separations.  Compared with the 14M Americans who were unemployed in Aug, today’s figures indicate there were more than 4 people vying for every opening, up from about 2 when the last recession began 4 years ago. This recovery is merely lumbering along as companies, especially small & medium size ones, are hesitant about expanding their labor forces.

Job Openings Fell in August, Hiring Climbed


Stocks keep rocketing ahead, with no shortage of buyers in Oct.  Dow has risen 1.1K off the lows at the start of the month.  There are protests on Wall Street demanding change, the Greek debt situation is fuzzy at best & one sign after another says the US economy is not recovering so that it can add enough jobs to reduce the unemployment rate.  Alcoa (AA), a Dow stock & the first major company to report Q3 earnings, disappointed & is down 40¢.  The rest of the market is unconcerned even though AA sells basic ingredients used in just about all manufactured produces (i.e. a leading indicator for the rest of the economy).  However, the 3 month Dow chart shows it has retraced lost ground which has taken it to the top of its recent range.  Breaking out from here is critical if the bulls want to take the market higher. 

Dow Industrials (INDU)

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Markets pause ahead of Q3 earnings season

Dow closed down 16 after zigzagging around breakeven all day, advancers ahead of decliners 5-4 but NAZ gained 16.  Bank stocks wavered as the Financial Index also remained close to breakeven.

S&P 500 Financials Sector Index

Value	167.15
Change	-0.11    (-0.1%)

MLPs had another good day, but the index remains below 351 representing a 10% decline from its record peak in Apr.  The REIT, after bouncing off lows last week, pulled back 4 to the 205s.  Junk bond funds were mixed to higher while Treasuries fell from their Fri closing prices.  Oil ended a little higher while gold fell $4.

Alerian MLP Index

Value	349.17
Change	4.12     (1.1%)

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.304%
U.S. 10-year	2.153%

CLX11.NYM

...Crude Oil Nov 11

...85.88

... 0.47

(0.6%)

Click below for the latest market update:

Slovakia may approve the euro region’s bailout fund for Greece this week after a political storm that is likely to topple ruling coalition led by Prime Minister Radicova.  The largest opposition party, which said it won’t back the motion today, will support the revamped European Financial Stability Facility (EFSF) in a 2nd vote, should the first try fail & bringing down the gov, giving the measure a majority.  But there is no date set for a repeated vote. Slovakia is the only country in the 17-nation euro area that hasn’t ratified the measure.  The Freedom of Solidarity party, one of the members of Radicova’s 4-way coalition, said it won’t support the EFSF even after the premier tied a no-confidence motion on her government, denying the plan a majority. Stock markets are nervous, awaiting the outcome. Slovak approval of enhanced powers of the EFSF, the temporary bailout fund, is crucial for adopting the key element in the strategy to prevent contagion from the debt crisis that has spread from Greece to other countries in the region.  You should know when the vote happens because the markets will either rally or sell-off.

Slovakia May Approve EFSF After Rebel Party Topples Radicova’s Government


A number of the largest banks, among them, Goldman Sachs (GS), Bank of America (BAC), HSBC & Barclays, have announced plans to lay off up to 10K employees. Analysts are lowering Q3 earnings estimates for banks, putting more pressure on management to lay off workers. Street protestors are not helping.  Bank stocks are supposed to be market leaders & GS is considered the best in the banking group.  3 years ago GS got thru the financial crisis in fairly decent shape.  But this could be payback time.  GS stock has already had an awful year.  The stock has fallen more than 40% from its peak in the last 12 months (although up 56¢ today) at a time when falling bank stocks prices have been common.

Big Banks Planning Big CutsWall St. Cheat Sheet

Goldman Sachs Group, Inc. (The) (GS)

 


The VIX, Volatility Index, edged lower going below 33 (in high territory) reflecting nervous investor sentiment.

Volatility Index (^VIX)

Over the short term, there is a lot riding on the Slovakia vote.  Seemingly it will give approval for the next Greek bailout.  Of course this does not end Greek troubles, only buys more time until the next installment is needed.  DC is unsettled.  The jobs bill is all but done, so Dems are coming up with jobs bill II.  Who knows where that will take us.  Meanwhile that super committee is trying to come up with massive savings to reduce budgets deficits over the next decade.  Dow has gained over 1K this month with all the uncertainties out there.  Citi (C) is up 6 off its lows at the start of the month while earnings forecasts are being cut.  I call that a disconnect.  Q3 earnings season kicks off tonight.  Alcoa (AA) just reported 15¢ for Q3, below the 22¢ forecast, & shares are down 50¢ in after hours trading.  Not a good sign going forward.  

Dow Industrials (INDU)

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