MARKET WRAP – STOCKS GET CRUSHED

Stocks got hammered for 3.9% losses today as fears over Eurozone contagion continued to increase.  From a technical perspective today was an utter debacle.  93% of all stocks were down at the NYSE, just 44 issues were higher, breadth was negative at 68:1, and volume was enormous.  Credit markets were jittery all day as LIBOR/OIS jumped 8% and the TED Spread jumped almost 5%.  The Euro actually managed to rally all day and finished with 1% gains.  Rumors of continued government intervention in the forex markets resulted in huge intra-day moves in the Euro.  The market is in a full on revolt against government intervention at this point as they have proven themselves entirely ignorant with regards to the situation.

This market certainly appears broken and it’s difficult to see what can fix it.  The $1T bailout package has clearly been ruled a failure by markets.  The next logical step is some form of EMU break-up (most likely partial with Greece leaving) or full unity (which is impossible as no nation will cede taxing power to a central authority).  I’ve said for many months that this situation was uglier than market participants were assuming and I still see no good way out of this.

From Daily Futures:

U.S. Economy
The stock market is trading lower, blamed on the uncertainty of how Europe is changing the rules for its financial markets. The resulting liquidity crunch pressured most commodity prices.

The U.S. Labor Department said that jobless claims were up 25,000 last week to 471,000, more than expected. The June U.S. T-bonds closed up 1.08/32nds at 124.01/32nds.

The Conference Board’s index of leading indicators was down .1% in April, weaker than expected.

The Philadelphia Federal Reserve’s regional index of manufacturing increased from 20.2 to 21.4 in April, a little better than expected.

The Federal Deposit Insurance Corp. said that the number of troubled banks in the U.S. increased from 702 to 775 in the first quarter of 2010.

Grains and Cotton
The USDA said that, compared to the four-week average, last week’s net sales of:
Corn were up 1%.
Soybeans were up 100%.
Wheat were up 37%.
Cotton were up 2%.
July soybeans ended up 5.5 cents at $9.44.

Livestock
The USDA said that net sales of beef totaled 15,700 tons last week, down 2% from the four-week average. August cattle fell 1.05 to 90.47, pressured by the lower stock market and concerns about the larger economy.

Coffee
July coffee ended down .85 at $1.3165, pressured by concerns about Europe and talk of a larger coffee crop in Brazil this year.

Energies
The U.S. Department of Energy said that underground supplies of natural gas were up 76 billion cubic feet last week to 2.165 trillion cubic feet. Supplies are now up 4% from a year ago. July natural gas closed down 6.1 cents at $4.185.

July crude oil fell $1.68 to $70.80, hurt by today’s liquidity crunch and concerns that Europe’s problems will lead to a reduction in the world’s demand for oil.

Metals
Gold has been considered a safe haven from Europe’s problems lately, but August gold closed down $4.50 at $1,190.40 with investors favoring cash.

Currencies
Japan’s Cabinet Office said that real GDP was up 1.2% in the first quarter of 2010 and up 4.2% from a year ago, less than expected. The June yen closed up .0181 at 1.1106.

The Australian economy has been an impressive performer, but liquidation continues in the June Australian dollar, closing down 1.41 cents today at 82.55, the lowest close in eight months.

Statistics Canada said that its composite index of leading indicators was up .9% in April, the 11th consecutive increase. The June Canadian dollar dropped 1.54 cents to 93.90, the lowest close in three months.

The U.K.’s Office for National Statistics said that retail sales volumes were up .3% in April and up 1.8% from a year ago, a little more than expected.

The June euro jumped up 1.92 cents to $1.2568, helped by talk that Germany and France will work together to support the euro and the Euro zone.