Markets decline ahead of confidence vote in Greece

Dow fell declined 61, (closing above its lows & near 12K), decliners over advancers 3-2 & NAZ was off 11.  Bank stocks had a rough day, the Financial Index dropped 2+ to the 178s. 

The MLP index rose 2+ to 370 while the REIT index fell 2+ to the 229s.  Junk bond funds & Treasuries were a little lower.  Oil fluctuated near a 3-month high after the jobs report & the G-20 failed to agree to boost IMF resources to fight Europe’s debt   Gold traders are the most bullish in 3 weeks after hedge funds boosted their wagers on higher prices on speculation Europe's debt crisis & slow US growth will spur demand for gold as a protection of wealth.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	-0.005%
U.S. 2-year	0.222%
U.S. 10-year	2.042%

CLZ11.NYM

...Crude Oil Dec 11

...94.28

.... 0.21

(0.2%)

Photo:   Bloomberg

Party lawmakers urged Prime Minister Papandreou to step aside & allow the formation of a new gov that can approve an EU aid package needed to avert default.  A deputy in the Pasok party, said a confidence vote tonight signaled the end of the administration & a colleague said the motion would support the formation of an administration of national consensus (i.e. new gov).  The vote of confidence will take place tonight.  “The issue is how to keep the country going and then evolve the current government into a broader government that takes on board other political forces,” the Energy Minister said.  “We need broader support and approval for the kind of measures that were taken.”  I remember saying 3 months ago, the Greek drama plays on.  And on & on & on.   Nothing has been resolved.

Greek Ruling Party Lawmakers Desert Papandreou Before Confidence Vote Held

Photo:   Bloomberg

Bershire Hathaway may post its first quarterly decline in book value in more than a year on drops in Wells Fargo (WFC) , American Express (AMX & a Dow stock) & equity-derivative bets.  Book value is estimated to have slipped to under $98K per Class A share on Sep 30 from $98.7K on Jun 30.  Warren Buffett, is adding investments after a market slump pressured the $65B stock portfolio & its equity derivatives (which have about $35B at risk).  The S&P 500 had its biggest quarterly decline since 2008, as Buffett spent $18B on common-stock bets, Bank of America (BAC & a Dow stock) preferred stock & the takeover of Lubrizol.  On Sep. 26, BRK.A announced a plan to repurchase shares.   The stock fell $2428 (2%).

Berkshire May Post First Book-Value Drop in Five Quarters on Equity Bets

Berkshire Hathaway Inc. (BRK/A)

 

Photo:   Bloomberg

Sony, the largest exporter of consumer electronics from Japan, fell the most in almost 8 months in Tokyo after forecasting a full-year loss because of a strong ¥, waning TV sales & flooding damage in Thailand.  The company, based in Tokyo, said it will lose ¥90B ($1.2B) this year, compared with a previous projection for a ¥60B profit.  The loss will be its 4th in a row.  The world’s #3 TV maker slashed TV sales targets after the ¥ reached a postwar high & floods in Thailand cut production.  Its annual sales projection were lowered to 20M TVs from 22M.  SNE cut annual sales targets for PCs, compact cameras & Blu-ray DVD players.  While many of its troubles are internal, a less than rebust global economic recovery is aggravating those problems.  The US shares fell 39¢ (2%).

Sony Falls Most in Eight Months After Forecasting Fourth Annual Net Loss

Sony Corp Ord (SNE)

After the super rally in Oct, stocks can be excused for taking a breather this week, Dow fell 250.  There was a lot of gloomy news which was taken fairly well.  An anemic jobs recovery was reaffirmed today & the G-20 failed to agree on how to aid ailing economies.  There are numerous signs that the European & US economies are not having strong recoveries.  When companies report Q3 earnings, common themes are higher earnings come from overseas growth & belt tightening in the US (as a way of dealing with a sluggish recovery).  Heat is starting to increase in DC on findings by the supercommitte which is charged with reducing massive gov deficits.  That will get ugly because both sides are standing by their principals.  There is a lot riding on the confidence vote in Greece tonight.  But there is so much disarray in Europe, that it is just one of many uncertainties.  

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Weak markets, nervous on Greek debt problems

Dow sank 154, decliners over advancers almost 4-1 & NAZ fell  30.  Bank stocks led the decline, bringing the Financial Index 12 below its highs last week. 

S&P 500 Financials Sector Index

Value	177.21
Change	-3.98    (-2.2%)

The MLP index dropped 1+ to the 366s & the REIT index fell 4 to the 227s.  Junk bond funds, Treasuries, oil & gold also pulled back in today's markets..

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	-0.005%
U.S. 2-year	0.222%
U.S. 10-year	2.038%

CLZ11.NYM

....Crude Oil Dec 11

...93.29

... 0.78

(0.8%)

GCX11.CMX

...Gold Nov 11

.....1,760.80

... 3.40

(0.2%)

Get the latest market update below:






Photo:   Bloomberg

The American economy added 80K jobs in Oct, the smallest in 4 months, but job growth in the 2 previous months was much stronger than first thought.  The private sector added 104K jobs.  The unemployment rate dropped to 9% from 9.1%, the first time it has fallen since Jul & the lowest rate since Apr.  Expectations were for a gain of 100K jobs.  The Labor Dept said the economy added 102K more jobs in Aug & Sep than first thought & the ranks of the long-term unemployed fell sharply to 5.9M.  The number of discouraged workers fell & fewer people with part-time jobs were looking for full-time work.  This is another report with mixed messages about unemployment, although it's well short of being favorable.

U.S. Payrolls Rose in October; Jobless Rate 9%




Photo:   Bloomberg

Leaders of the world's 20 most powerful economies failed to agree on how to increase the firepower of the IMF so that it can help stem the European debt crisis, though they acknowledged its resources should be boosted.  The meeting in France has been overshadowed by Greece's political turmoil & worries about Italy, which accepted IMF supervision of its economic reform efforts.  "It's important that the IMF sees its resources reinforced," Jose Manuel Barroso, the president of the European Commission, said.  He added that increased resources would be there to help countries around the world, not just the eurozone, indicating Europe is struggling to attract extra help from its global partners for its debt crisis.  The IMF may also decide to issue more special drawing rights, SDRs, the fund's own reserve currency that can be exchanged for cash with central banks around the world.  SDRs can just be created & do not require new commitments from IMF member states.  Finance ministers will now have to work out the details of how to boost the IMF resource. No surprise, little was decided on solving complex intl financial issues.

G-20 Fails to Agree on IMF Resources


Groupon (GRPN) stock soared nearly 40% after its IPO.  Even in unsettled markets, there is strong demand for an internet company whose business model is considered unsustainable by some.  The stock jumped $7.86 to $27.86.  GRPN sends frequent emails to subscribers offering a chance to buy discount deals for anything from laser hair removal to weekend getaways. The company takes a cut & gives the rest to the merchant.  5½% of the stock was sold to the public, less than many prominent tech companies sold in recent years.  The IPO price gave GRPN a market value of $12.7B.

Groupon shares soars in public market debut AP


The jobs report was pretty much what was expected.  The data was inconclusive, but tells us that the economic recovery is still just sputtering.  The G-20 meeting is getting little accomplished, again to be expected.  The Greek debt mess drones on with seemingly no end in sight.  The stock market is taking this dismal news scenerio fairly well.  Dow is only about 300 below its recent highs, after rising 1600 from its lows.  This week Dow is down 200, pretty much today's decline.  European financial problems (sovereign debt issues & slumping economies) will be around into next year. 

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Markets rise again on Greek debt hopes

Dow shot up 208, closing near its highs, advancers over decliners 4-1 & NAZ added 57.  Bank stocks were higher, but worries about the European debt mess are weighing on the minds of investors.

S&P 500 Financials Sector Index

Value	181.19
Change	3.31    (1.9%)

The MLP index did well & the REIT index was up 3 to the 231s.  Junk bond funds inched higher but Treasuries fell.  The yield on the 10 year Treasury bond increased 6 basis points, taking it solidly above 2%.  Oil rose, closing at a 3-month high, after the European Central Bank unexpectedly lowered interest rates & the Greek referendum was cancelled.  Gold is getting a lot more respect with the disarray over Greek debts.

Alerian MLP Index

Value	368.9
Change	1.37    (0.4%)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.234%
U.S. 10-year	2.061%

CLZ11.NYM

....Crude Oil Dec 11

...93.97

.... 1.46

(1.6%)

Photo:   Yahoo

The Greek prime minister abandoned his plan to put a European rescue deal to popular vote & opened emergency talks with his opponents, demanding their support in parliament to pass the hard-fought agreement into law.  Prime Minister Papandreou changed his mind after a widespread rebellion from within his own Socialist party over the referendum idea, but ignored repeated calls to resign.  He faces a critical vote of confidence tomorrow.  With Greece's euro membership & bailout loan suddenly in danger, pressure mounted for Papandreou to resign & even his own deputies are calling for the creation of a transition gov to pass the new European debt deal.  The opposition indicated it would support the European debt deal.  The new debt deal would be brought to parliament under a procedure that would require a super-majority of 180 to vote in favor.  With the Socialists holding 152 seats, that means the debt deal will only pass if the opposition votes in favor.  Despite the gut reaction sending stocks higher, nobody knows how this will turn out.

Papandreou Seeks Accord to Secure Aid Without Referendum

Photo:   Bloomberg

House Speaker Boehner said, "Our focus here is on jobs."  "We're doing everything we can to get our economy moving again and to get people back to work."  Boehner said Reps oppose tax increases because "we believe tax hikes will hurt our economy and put Americans out of work."  But he added that there is “room for revenue” in a deficit-cutting plan under discussion by a congressional supercommittee.  Adamant opposition to higher taxes among Reps is one reason why Congress' special debt-cutting "supercommittee" has been unable so far to reach a compromise on mopping up red ink.  Boehner has said it is essential that the special panel reach an agreement.  40 House Reps & 60 Dems signed a letter urging the "supercommittee" to consider all options for raising revenues & cutting spending.  The goings on in DC will be getting a lot more attention in the coming weeks.

Boehner: ‘Room for Revenue’ in Debt-Cutting Plan


Americans were shopping in Oct, but spending at a slower pace than expected as they faced a barrage of bad economic news.  Revenue  at stores open at least a year rose 3.7%, according to the International Council of Shopping Centers.  But 13 of 19 retailers missed estimates for Oct revenue including Macy's (M), Saks (SKS) & Target (TGT & a Dividend Aristocrat).  Consumers continue to worry about the challenges of the weak economy, including high unemployment & a weak housing market.  This data gives no clear sign about the approaching holiday season.  The National Retail Federation, the largest retail trade group, predicts revenue in Nov & Dec will rise 2.8% to $466B, smaller than the 5.2% increase last year but higher than the average over the last 10 years.  Although Oct results weren't as promising as hoped for, revenue was impacted by unseasonably warm weather during the beginning of the month & then a snowstorm at the end of the month. 

Retailers report solid sales gains in October AP

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Photo:   Yahoo

Orders to US factories increased slightly in Sep, but demand in a key category that tracks business investment plans jumped by the largest amount in 6 months.  This was the 3rd straight month,of increases, edging up 0.3%, according to the Commerce Dept.  Demand for core capital goods, the category that serves as a proxy for business investment spending, jumped 2.5%, the largest increase since a 5.4% rise in Mar. The surge in demand for capital goods reflected significant increases in demand for heavy machinery & computers.  Orders for durable goods fell 0.6%, reflecting weakness in commercial aircraft & autos.  Orders for nondurable goods such as gasoline, chemicals, food & paper, were up 1% in Sep after no gain in Aug.

Factory orders rose 0.3 percent in September AP


There was a lot of excitement in the markets when the Greek referendum was called off, bringing out buyers.  But nothing was resolved.  The Greek situation is still hazy.  OK, the politicos will probably give them the money since the alternative is not pretty, but nobody knows where this is going.  The US debt mess is getting more attention with both sides very far apart.  But Dow is doing well, just 1% below its recent highs.  The VIX, volatility index, dropped 2 to 30, but remains elevated.  These days, worries get little attention.

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Higher markets on hopes about Greek vote

Dow rose 96, advancers over decliners 2-1 & NAZ is up 17.  Bank stocks, however, are soft.

S&P 500 Financials Sector Index

Value	177.08
Change	-0.80    (-0.5%)

The MLP & REIT indices were each down 1½.  Junk bond funds were little changed & Treasuries dropped, taking the yield on the10 year Treasury over 2%.  Oil gained & gold is up nicely.  Gold is on a run again, up over 100 in the last 2 weeks.  Safe haven qualities are attracting investors with all the turmoil coming from Europe.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.234%
U.S. 10-year	2.052%

CLZ11.NYM

....Crude Oil Dec 11

...93.01

..... 0.50

(0.5%)

GCX11.CMX

...Gold Nov 11

.....1,750.10

... 21.40

(1.2%)

Get the latest market update below:

Photo:   Bloomberg

The European Central Bank (ECB) cut interest rates by a ¼ percentage point under new head Mario Draghi as it tries to boost a weakening economy that's reeling from a gov debt crisis that threatens to spread from Greece.  The debut move from Draghi, which comes earlier than expected.  European growth is expected to slow in Q4 & the rate cut is aimed at preventing an outright recession.  Uncertainty from the debt crisis is a factor as business & consumers are reluctant to spend & investors are worried of the potential for more financial turmoil if Greece defaults on its debts.  The current market turbulence is "likely to dampen the pace of economic growth in the second half of the year and beyond," said Draghi.  He also signaled that the ECB bond purchases, which have been keeping down borrowing rates for financially weak countries like Italy, are temporary & limited.  Markets had hoped that Draghi would indicate the bank was willing to be more aggressive with the bond purchases, but he said it was up to govs to fix their finances. "It is pointless to think sovereign bond rates could be brought down for an extended period of time by outside interventions."   Everybody is making it up as they go along but he sounds like he has a tough attitude.

ECB Cuts Rates as Risk of Greek Euro Exit Grows

Photo:  Bloomberg

Jobless claims fell by 9K to 397K last week week, the fewest in a month, according to the Labor Dept & better than the forecast of 400K.  The 4-week moving average fell to 404K from 406K.  The number of continuing to receive jobless benefits dropped 15K to 3.68M.  The continuing claims figure does not include Americans receiving extended benefits under federal programs.  Those who’ve used up their traditional benefits & are now collecting emergency & extended payments increased by 39K to 3.49M in the lastest week.  Slight improvement is little consolation for those looking for work..

Jobless Claims in U.S. Fell to a One-Month Low Last Week




Photo:   Yahoo

Kellogg Q3 net income fell 14%, worse than expected, hurt by higher costs related to updating its supply chain & incentive compensation costs.  The world's largest cereal maker also lowered earnings guidance below expectations.  EPS was 80¢, below 90¢ last year & expectations of 89¢.  Money spent to improve the supply chain hurt net income by 8 percentage points, while incentive compensation costs hurt results by 12 percentage points.  The supply chain improvements will take several years & "improve the infrastructure and drive reliability and capability" of Kellogg, said CEO John Bryant.  Revenue rose 5% to $3.3B, analysts expected $3.4B.  In North America revenue rose 4% to $2.2B & Intl revenue rose 7% to $1.1B, boosted by the weaker dollar.  Results in Latin America were strong & Europe continued to improve.  Kellogg continues to expect revenue will grow 4-5% in 2011, but it lowered its net income guidance because of continued investment in its supply chain.  It now expects EPS of $3.35-$3.41, below prior guidance of $3.42-$3.49.  Analysts expect $3.48.  In 2012 the company expects revenue to rise 4-5% with net income, excluding currency fluctuation, up 2-4%.  The stock sank $4.48 (9%).

Kellogg Profit Falls 14% on Increased Spending to Improve Quality Controls

Kellogg Company (K)

Markets remain in limbo awaiting new developments from Europe.  The rate hike by the ECB will probably do little.  The G-20 meeting meeting in France will likely accomplish little, that is the norm.  Earnings seem to be more of a mixed bag, not acknowledged by the the optimists.  Companies are struggling to balance off rising costs with prices hikes in a less than friendly economic environment.  The weekly jobs report was more of the same.  Tomorrow's will be the big one & expectations are low.

Dow Industrials (INDU)