On 5/18/12, Friday, Asia markets tumble lower playing catch up to the U.S. markets. China property prices drop indicating that the property bubble is popping. U.S. futures are on the positive side but turn flat when Fitch downgrades Greece’s rating due to debt concerns stating that failure to form a government in June will result in a probable Greece exit from the Euro union. Germany’s Schauble says that two more years of pain is ahead for Europe. Spain may eliminate short selling on the banks, measures that politico’s typically take as trouble escalates. G-8 leaders begin to assemble for a weekend meeting but Putin does not attend. President Obama, new France leader Hollande and other Euro leaders with a socialistic leaning, pressure Germany to loosen the purse strings. Merkel is likely very lonely at the meetings. German 2, 5 and 10-year bond yields are printing historic lows as money chases into safety.
On Friday, the long-awaited Facebook IPO circus begins the day with Mark Zuckerberg ringing the opening bell for the Nasdaq remotely, from Hacker’s Square at the company’s headquarters. But the hype and party atmosphere disappears as the 11 AM EST trading time comes and goes. FB is not trading. An announcement states that trading will begin at 11:05 AM. That time comes and goes. The minutes tick by. A huge crowd forms in Times Square in New York City at the Nasdaq jumbotron screen. Smiles, laughs and jocularity give way to concerned and worried faces. Finally, FB begins trading at 11:30 AM opening at 42.05. The issue price is 38.00. Tech IPO’s are typically expected to pop 30 or 40% the first day of trading so expectations are that FB will trade in the 50’s and likely a lot higher. A paltry opening price of 42.05 surprises everyone. At 11:39 AM, FB price tumbles lower to print the syndicate price at 38. The underwriter’s come in to support the price at 38. The Facebook IPO performs a faceplant. The underwriters are simply supporting the price to avoid further embarrassment for this hyped up stock. The day ends with FB closing only pennies above 38 at 38.23. The underwriters will not support the price as the days tick along so FB can only be described as a dud. Nasdaq is investigating a problem with delivering trade execution messages for FB. The closing bell rings with many traders still not receiving trade confirmations. The FB IPO is sloppy. After the close, the SEC starts an investigation into the trading of FB on the Nasdaq.
On Friday, in other trading, JPM troubles grow with the stock now negative on the year. HPQ plans on canning 30,000 employees, 8% of its workforce, with an announcement slated for next week. Markets deteriorate as the day plays out, the SPX loses the 1300 level. The Brazil real drops to 3-year lows. Brazil and Russia stock markets are off over 20% from their tops signaling bear markets ahead. The Dow Industrials drop for 12 out of the last 13 days market action not seen since 1974, almost 40 years ago. The SPX drops 4.3% on the week, the worst week of the year. The SPX finishes the day down 10 points to 1295. The Dow lose 73 points to finish the day at 12369. The Nasdaq loses 1.2% today, 35 points, and finishes at 2779. Oil is below 92 per barrel.
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On 5/21/12, Monday, the G-8 meetings come and go without any market affect good or bad. Merkel (Germany) was very lonely at the meeting since the socialistic nations, U.S. included, want to see her loosen the purse strings. Overnight, China hints at more easing and this keeps the futures markets elevated. France and Germany agree to continue talks this week concerning the debt crisis and to find a way to keep Greece in the union. FB tumbles at the open falling under the 38 issue price to print a 33 handle and closes the second day of trading down 11% with egg on its face. The broad indexes move upwards and finish the day with a healthy recovery move. The SPX regains 1300 and finishes at 1316, up 1.5%. The Dow Industrials are up 135 points, 1.1%, closing over 12500. The Nasdaq has its biggest gain for the year up 68 points, a huge 2.5%. JPM is down another 3% today after stopping their stock repurchase plan and continuing to deal with the ongoing trading loss debacle.
On 5/22/12, Tuesday, the OECD (Organization for Economic Co-Operation and Development) says Euro area will contract -0.1% revised from +0.2% only weeks earlier. The OECD says Spain and Italy economies will contract moving forward. The euro is now ten days under 1.30, now slightly under 1.28. The European markets recover following the lead from the U.S. and Asian rallies. The finger-pointing over the FB IPO failure begins today.
On 5/23/12, Wednesday, European leaders meet in Brussels. A run on Greek banks is now a major worry. The euro breaks down thru 1.26 and prints lows not seen since summer 2010. Conversely, the dollar prints highs not seen since summer 2010. U.S. markets tumble lower but the critical SPX 1292-1295 support level holds. At lunch time, rumors surface that Europe may announce a plan that backs bank deposits. This is aimed at preventing bank runs. Markets immediately recover and move higher on the happy talk and by the close move back to a flat day. The Dow Industrials were down nearly 200 points earlier in the day. The market reaction is odd since it is not the deposit insurance that worries the people; it is the future value of their money. Runs on the bank are a major worry for Greece as well as Spain. The smart money has been moving funds out of Greece for the last two years and now Ma and Pa sucka’s are finally coming up to speed. Folks are taking their euro’s and sending them out of the country for protection since they may wake up one day and the drachma is back with a devaluation of their savings. If runs on the banks occur the banks will become illiquid in quick order. There will be no stopping the mayhem. During the Argentina crisis, the step was taken to freeze all accounts to prevent withdrawals but this resulted in riots and chaos. Once the money is frozen people turn to animal behavior and start to throw bricks thru windows and set fires. European concerns are reaching a crescendo now. The Greece elections are 6/17/12 and the next Euro Summit is 6/28/12. The FOMC meeting is in between, on 6/20/12, so this period is very important for the global markets and economy. Keystone’s Inflation-Deflation Indicator continues to signal Deflation. After the close, HPQ reports great earnings and announces that 27,000 workers will be cut, 8% of its workforce, which sends the stock higher AH’s. Stockholders love layoffs since this indicates a move to a more lean and mean company, so stock price typically moves higher.
On 5/24/12, Thursday, HSBC Flash China PMI is 48.7 continuing a half year string of economic contraction numbers. France and Germany PMI’s are weak as well. U.K. GDP drops more than expected. The Euro Summit ends with leaders no closer to solutions. Agreement was reached to keep Greece in the union but on the Eurobond concept, Germany continues to say “Nein!” The socialistic countries want access to Germany’s money. Greece 10-year yield has now blown out above 30% as the country crumbles. Portugal, Spain, Hungary and Italy, the most troubled nations, all see their yields climb higher. The Netherlands and Finland print record lows, serving as safe havens, and Germany remains uber low with a 10-year yield now in the 1.3%’s. The shorter duration German notes are now at zero percent so investors are throwing money at Germany fully expecting and agreeable to no return; they simply are searching for safety and do not want to lose the money they have. TIF earnings are weaker than expected signaling that the luxury retail boom around the world is over but the retail sector enjoys buoyancy anyways. Markets stumble sideways leaking lower but Germany says perhaps they can be persuaded concerning Eurobonds. The encouraging news sends markets higher to close near the highs for the day.
On 5/24/12, Friday, France-Germany and Spain-Germany 10-year spreads are decreasing which indicates some calmness returning in Europe. France 10-year yield drops to record low 2.49%. Italy’s Monti says Eurobonds can be placed in a short time frame and the majority of Euro nations favor Eurobonds. Obviously he leans to the France side as the other nations do, voicing their opinion of what Germany should do with their money. Markets weaken in front of the opening bell with the futures turning negative and drifting lower. A Euro official says it is foolish to not be prepared for a Greek exit. The markets are jerked around on every headline that comes across the wires. These are not free markets but rather casino’s where bets are placed daily on the Euro news flow, a far cry from the stock markets of years ago; these are not your Grandfather’s markets. The euro drops under 1.25 just before the opening bell when news hits that Spanish banks are having more serious funding issues. Markets drift lower all day long closing moderately lower as the three-day holiday weekend begins. The SPX recovered this week moving up 1.7% to close the week at 1318.
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On 5/28/12, Monday, markets are closed in Observance of Memorial Day. Spanish 10-year yield climbs higher towards the 6.5% level after a bailout of Bankia occurs recapitalizing this trouble bank. Spain-Germany 10-year yield spread hits a euro record high. Bulls are keeping equity markets buoyant, however, on news that Greece elections are moving more towards a bailout-friendly government (staying in the euro).
On 5/29/12, Tuesday, U.S. markets reopen for trading. Consumer Confidence.
On 5/30/12, Wednesday, Challenger Jobs Report. Fed speak.
On 5/31/12, Thursday, EOM. GDP.
On 6/1/12, Friday, Jobs Report. ISM Manufacturing Index.
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On 6/6/12, Wednesday, Beige Book.
On 6/7/12, Thursday, Chairman Bernanke speaks 10 AM.
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On 6/13/12, Wednesday, PPI, Retail Sales, 10-Year Note Auction.
On 6/14/12, Thursday, CPI, 30-Year Bond Auction.
On 6/15/12, Friday, Consumer Sentiment.
On 6/17/12, Sunday, Greece elections.
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On 6/19/12, Tuesday, Housing Starts, FOMC Meeting begins.
On 6/20/12, Wednesday, FOMC Rate Decision and Press Conference-any mention of QE3? If so, a rip-roaring equity rally will begin.
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On 6/26/12, Tuesday, Consumer Confidence.
On 6/28/12, Thursday, Euro Summit. GDP.
On 6/29/12, Friday, Consumer Sentiment.
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