Markets fall on Greek election worries

Dow fell 97, decliners over advancers 2-1 & NAZ was off 11.  The Financial Index dropped to just over 200, the lowest level in more than a month.  The MLP index fell another 3½ to the 381s (down 18 in May) & the REIT index was flattish at 260.  Junk bond funds were mixed & Treasuries inched higher near their best levels in more than 6 months.  Losses were reduced for crude oil with thinking that the recent selling has been overdone.  Gold fell to the lowest level of the year as uncertainty about Europe's political & economic future dominates financial markets.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month	0.086%
U.S. 2-year	0.258%
U.S. 10-year	1.837%

CLM12.NYM

...Crude Oil Jun 12

...96.62

... 0.39

(0.4%)

Photo:   Yahoo

The Greek conservative leader, whose party came first in last weekend's elections that produced a hung parliament, has not reached an agreement for a coalition gov with the head of the runner-up Radical Left Coalition.  He explained to Radical Left leader that his demands for Greece to reject the country's intl bailout deal would lead Greece into bankruptcy.  Then he reiterated he was prepared to even back a minority gov on condition that the country remain in the EU joint € currency.  Demands from the left accept Greece's exit from the € & the country's bankruptcy.  The Greek socialist (3rd party) leader said there has been no success so far in negotiations to form a coalition gov after the elections resulted in a deadlock.  The party leaders are meeting, but there is no agreement on what to do next.  All have said they want to avoid another round of elections, which will be inevitable if no coalition gov can be formed.  But there may be another election next month & leaving the € zone is being discussed by more people.  Confusion reigns.

Greek Euro-Exit Talk Goes Public as Officials Air Doubts

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Photo:    Yahoo

Walt Disney, a Dow stock, shares rose to a life-high after the company reported a rise in quarterly profit despite its science fiction film John Carter bombing, & announced a sequel to its hugely successful superhero flick, The Avengers.  Brokerage firms raised price targets on the stock, citing the strong debut of The Avengers, which had the biggest weekend opening in film history, & the company's announcement of a sequel.  Q2 profit was driven by strong attendance at its theme parks & higher advertising revenue at its cable networks, including ESPN.  The success of The Avengers has changed the company's mixed track record, which had brought on by flops.  EPS was 63¢, up from 49¢ last year.   Excluding one-time items, EPS was 58¢, beating the 55¢ estimate.  Sales gained 6.1% to $9.63B, beating projections of $9.56B.  EPS included a gain of 5¢, reflecting a $184M noncash credit on its investment in UTV Software Communication & $38M in impairment costs.  Theme-park operating profit leapt 53% to $222M on a 7% increase in domestic attendance & higher average room rates worldwide.  Revenue rose 10% at the namesake resorts to $2.9B, driven by gains in the US, Tokyo & Hong Kong.  But revenue fell at Disneyland Paris.  The stock gained 70¢.

Disney Races to Exploit ‘Avengers’ After Second-Quarter Profit Gains 21%

Walt Disney Company (The) (DIS)

Photo:   Bloomberg

The number of FHA insured home loans entering foreclosure jumped in Mar after half the mortgages it modified to ease repayment terms were in default again a year or more later.  The FHA’s role in lending to first-time buyers with poor credit & limited cash expanded after the 2008 collapse of the mortgage market put it at the center of gov efforts to revive housing. The FHA allows down payments as low as 3.5% for borrowers with subprime credit rating.  An increase in foreclosures may lead to further demands for stricter standards that could shut buyers out of the real estate market as it shows signs of stabilizing after a 6-year slump.  Borrowers with mortgages for homes bought in 2010, the FHA’s peak lending year, now owe almost 7% more than their homes are worth if they used the minimum down payment, according to S&P/Case-Shiller home price index data.  That year, the agency insured 1.1M loans to purchase single-family homes, more than 4X the total of 261K in 2007.  Lenders initiated foreclosures on 36K FHA-backed mortgages, twice the number in Apr 2011, according to Lender Processing Services. A Treasury Dept study of modified gov- guaranteed mortgages in Q4 found that 49% were delinquent again after 12 months.  The share of gov-guaranteed loans being paid on time dropped to 84% in Q4 from 85% in Q3, the 3rd consecutive quarterly decline.  The housing market still has major problems in spite of other favorable data.

FHA Foreclosures Jump With Half of Modified Loans Re-Defaulting: Mortgages


Greece is not the only euro country with debt problems.  Spain plans to partly nationalize BFA- Bankia group as the Prime Minister tries to restore investor confidence with his 2nd overhaul of lenders in 3 months.  It has different problems than Greece, but the big picture is similar.  It's called debt mess.  Spain may be looking for a bailout & the stronger euro countries, starting with Germany, are running out of patience (not to mention money).  Markets are having a very bad month & it's not 1/3 over. 

Dow Industrials

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Markets vacillate on European debt fears

Dow slipped 18, advancers are barely ahead of decliners & NAZ fell 22.  The Financial Index was down a tad to 170, the lower end of its trading range for more than a month.. 

The MLP index was up 2 to 367 but the REIT index fell a fraction, taking it below 222.  Junk bond funds were mixed & Treasuries also had modest changes.  Oil is absorbing its run up which took it over $100, still remaining above that important level.  Gold pulled back & continues to bob around the mid 1700s.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.258%
U.S. 10-year	1.997%

CLZ11.NYM

....Crude Oil Dec 11

...100.99

..... 1.60

(1.6%)

GCX11.CMX

...Gold Nov 11

.......1,748.70

... 25.10

(1.4%)

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Photo:   Yahoo

The number applying for unemployment benefits fell last week to the lowest level since early Apr, a sign that layoffs are easing & hiring may pick up.  Weekly applications dropped 5K to 388K according to the Labor Dept, the 4th decline in 5 weeks.  The 4-week average dropped to 397K, the first time the average been below 400K in 5 months.  The number receiving benefits also fell to the lowest level since Sep 2008, when Lehman Brothers collapsed & the financial crisis intensified.  Some people may no longer be getting benefits because they've found jobs.  But a larger number have likely used up all their benefits.  The benefit rolls fell 57K to 3.6M in the latest week, the lowest since Sep 2008.  That doesn't include about 3M additional people receiving extended benefits from emergency programs put in place during the recession.  All told, 6.8M received benefits during the latest week.  The pace of hiring over the past few months has been mixed.  The economy is growing but not quickly enough to generate many jobs.  More mildly good news, but not strong enough to be encouraging.

U.S. Initial Jobless Claims at Seven-Month Low

Lenders started foreclosures on more properties in Q3, the first increase in a year, as a backlog stemming from claims of faulty home seizures began to ease.  Foreclosures rose to 1.08% of all loans from 0.96% in Q1 according to the Mortgage Bankers Assoc.  The rate had been falling since Q3 of 2010, when regulators began investigating robo-signing, the practice of pushing through unverified paperwork.  Several banks called a temporary halt to foreclosures while they addressed claims of flaws in their court documents.  Notices of default, the first step of the foreclosure process, fell every month from Sep 2010, when the claims first surfaced, to a 5-year low in May, according to RealtyTrac.  Gloomy news home builders are not happy to hear.

Home Foreclosures in U.S. Rise for the First Time in Year as Backlogs Ease


Sears Holdings Q3 loss widened, dragged down by weakness in Canada, declining consumer electronics sales & softer clothing sales at Kmart stores. The results also missed expectations.  The loss per share was $3.95 compared to a loss of $1.98 last year.  Removing a pension expense & other items, SHLD lost $2.57 per share while analysts were expecting a smaller loss of $2.29.  CEO Lou D'Ambrosio said that the retailer was not satisfied with its performance but that there were some bright spots, such as better sales of clothing at Sears stores & an almost 20% increase in its domestic online business.  Sears & Kmart both saw gross margin rates drop, with Kmart hurt by more markdowns for clothing & home goods & Sears mostly hampered by reduced margins in its home appliance & consumer electronics categories.  Quarterly revenue slipped 1% to $9.57B, missing estimates of $9.63B.  The revenue decline was partly due to fewer Sears & Kmart stores being in operation.  Revenue at its Sears stores open at least a year dipped 0.7% & fell 0.9% at Kmart stores.  The figure dropped 7.8% for Sears Canada.  The stock dropped $2.85 (4%).

Sears Quarterly Loss Widens as Sales Fall at Canadian Stores; Shares Drop

SHLD   Sears Holdings Corp.

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Photo:   Yahoo

As protests erupted, Italy's new premier unveiled his economic plan , vowing to spur growth yet fairly spread the sacrifices Italians must accept to save their country from bankruptcy.  As Mario Monti spoke, riot police clashed with anti-austerity protesters in Milan, signaling the depths of resistance the economist-turned-premier will have to overcome if his plan is to succeed.  "The end of the euro would cause the disintegration of the united market," the former European Union competition commissioner told the Senate ahead of a confidence vote.  "The future of the € also depends on what Italy will do in the next weeks."  He revealed plans to fight tax evasion, lower costs for companies so they can hire more & possibly lower taxes rates for women, to encourage their increased participation in the work place.  He warned Italians they must brace for more "sacrifices," including the probable return of a property tax on primary residences.  "We must convince the markets we have started going down the road of a lasting reduction in the ratio of public debt to GDP.  To reach this objective we have three priorities: budgetary rigor, growth and fairness," Monti said.  He also said he would quickly work on lowering Italy's staggering public debt, which now stands €1.9T ($2.6T), about 120% of GDP.  Austerity is needed but it will not go down well with the population.

Italy’s Monti Vows Urgent Action on Debt, Growth


This is another day when little will be decided in the stock market.  Greece & Italy are trying solve enormous sized debt problems & Spain is not far behind.  Economic news in the US has been mildly good but that has not brought out buyers.  Dow can not make up its mind where to go.  It continues to hover around 12K until the bulls take control or give up.

Dow Jones Industrial Average

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Markets slumps on weak economic data

Dow sold off 155, decliners over advancers 6-1 & NAZ tumbled 47. Banks which have been trading sideways for 3 months led the way down.


S&P 500 FINANCIALS INDEX

Value 196.96

Change -4.44

% Change -2.2%

The high yielders fell along with the markets. The Alerian MLP Index dropped 2¼ to the 262s, failing to top its 265 yearly high. The Dow Jones REIT Index fell 4 to 160, again not able to take out its 180 highs from 2 months ago. Junk bond funds were down along with the markets. Treasuries rose up modestly, the yield on the 10-year Treasury bond fell 2 basis points to 3.34%.


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks





Selling in the markets is affecting commodities. Oil had been trying to break above 80 but that ceiling held, oil is pulling back. There is no listing for gold, still showing 1141.

CLZ09.NYM

...Crude Oil Dec 09

...78.44

... 1.14 .......(1.4%)

OIL (ETF) --- 2 months






More than 14% of homeowners with a mortgage were either behind or in foreclosure by Sep 30, a record-high for the 9th straight qtr, a problem that could threaten the economic recovery. This adds to fears that the housing market & broader recovery could be thwarted by the continuing surge in home loan defaults as unemployment keeps rising. Lost jobs, rather than the shady loans made during the housing boom, are now the main reason homeowners falling behind on mortgages. 4M homeowners were either in foreclosure or at least 3 months behind on mortgage payments as of Sep 30, a lot of homes could be coming to the market next year. Fixed-rate loans made to so-called prime borrowers with good credit histories caused nearly 33% of new foreclosures in Q3, compared with 21% last year. Subprime loans with adjustable rates have fallen to 16% of new foreclosures from 35% a year earlier. More than 18% of FHA borrowers are at least one payment behind or in foreclosure. These figures are gloomy especially when combined with high unemployment dragging on.

•FHA, Prime Mortgage Defaults Rise to Record Highs as U.S. Job Losses Mount

Foreclosures - 1 year




Foreclosures started - 1 year

The number of newly laid-off workers seeking unemployment insurance was unchanged last week, remaining above the level that would indicate the economy is adding jobs. The first-time claims for jobless benefits were 505K, the same as the prior week's revised figure. A year ago, there were 533K claims. The 4-week average fell for the 11th straight week to 514K, the lowest level in almost a year. While the decline in claims is evidence that layoffs are decreasing, they would have to fall to about 425K for several weeks to signal that the economy is adding jobs. The number continuing to claim benefits dropped by 39K to 5.6M for the week ending Nov 7. The continuing claims figure does not include millions who have used up the regular 26 weeks of benefits (typically provided by states) & are receiving extended benefits for up to 73 additional weeks, paid for by the federal gov.

US Initial Jobless Claims Unchanged at 505,000

Weekly jobless claims - 1 year





Dreary economic numbers on housing & employment are too much for the markets to handle. After 3 days of sideways trading Dow broke out, unfortunately to the downside.

Dow Jones Industrials --- 2 weeks