Markets ran into a wall again today as the Euro continued to decline and fears over European debt continued to roil the markets. Stocks sold-off on very high volume and breadth was negative at 3:1. The S&P lost 1.3% on the day. The market is marginally higher for the year and is now off 8% from the recent peak.
High beta names were hit hard on the day as the Russell 2,000 lost almost 2%. Banks were hit particularly hard after Goldman Sachs released a report estimating a 20% decline in annual earnings if the current FinReg plan is approved. European leaders are finalizing the details on the Greek bailout, but the plan is having little to no positive impact on the markets. From Trade The News:
“With a day to go to Greek refinancing deadline, EU finance ministers ironed out the first tranche of loans in the amount of €20B to be disbursed later today. Juncker further noted that Greek measures have placed the country on the right track to meeting its obligations and also cheered austerity steps in Spain and Portugal. EU’s Rehn acknowledged that fiscal consolidation will likely take different shape in troubled states, which could potentially slow the overall recovery. In Germany, Fin Min Schaeuble saw progress on agreement regarding the EU special purpose bailout mechanism, suggesting that France and Germany were on the same page.”
Daily Futures has the action from other markets:
U.S. Economy
The U.S. Census Bureau said that housing starts were at an annual rate of 672,000 in April, up 5.8% from March and up 40.9% from a year ago, better than expected. July lumber fell $8.60 to $242.70 after yesterday’s limit-down close.
The U.S. Labor Department said that the producer price index was down .1% in April and up 5.5% from a year ago. The June 2011 eurodollars were up .025 at s new contract high of 98.81.
This afternoon, news began to emerge that Germany will ban at midnight naked short-selling of Euro government bonds at major banks (see article).
Wal-Mart said that they earned $3.32 billion in the quarter that ended on April 30th, up from $3.03 billion a year ago and more than analysts expected.
Grains and Cotton
July soybeans closed down 2.5 cents at $9.385 after the USDA said late yesterday that 38% of the soybean crop has been planted. The ten-day forecast from Weather.com looks favorable for more planting progress ahead.
Coffee
Bloomberg news reported that Japan’s government has decided to relax a rule on the level of fungicide allowed in its coffee imports and go with a more internationally accepted standard. The move may increase the amount of coffee that Japan imports from Brazil. July coffee finished up 1.70 cents at $1.3425.
Sugar
In spite of today’s higher dollar, July sugar closed up .91 at 14.80, helped by talk of buying from Pakistan and China.
Orange juice
July orange juice closed up 1.65 cents at $1.4450, the highest close in seven weeks, even after yesterday’s Florida Weather Crop Report said that “growing conditions continued to be good across the citrus region.”
Energies
Crude oil started the day higher with some early relief from the panic over Europe, but that did not last. July crude oil ended down .52 at $72.70.
An official from the National Oceanic and Atmospheric Administration said that 19% of the Gulf of Mexico is now off-limits to fishing, due to British Petroleum’s oil spill.
Metals
August gold dropped $13.50 to $1,216.40, blamed on profit-taking after reaching new contract highs last week.
Currencies
The U.K.’s Office for National Statistics said that its consumer price index was up 3.7% in April from a year ago, up from a 3.4% annual gain in March and more than expected. The June pound closed down 1.55 cents at $1.4321.
Eurostat said that consumer prices in the EU-27 were up 2.0% in April from a year ago, up from an annual gain of 1.9% in March. This morning, it looked like the market wanted to take a break from its concerns about Europe, but the June euro finished the day down 1.82 cents at a new contract low of $1.2207.
Japan’s Trade Ministry said that its tertiary index of services was down 3% in March, weaker than expected. The Cabinet Office said that its index of consumer sentiment increased from 40.9 to 42.0 in April, still a sign of pessimism. The June yen ended up .0029 at 1.0840.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.