On 5/11/12, Friday, overnight the JPM news roils global markets with Asia and Europe lower. The euro falls to a three-month low. The Greece market continues printing at 20-year lows. The Spain market is near nine year lows. Some financials are starting to approach levels not seen since 2009. Commodities have lost the 2012 gains. China industrial data disappoints showing that global growth is slowing. JWN, Nordstrom’s, a barometer on how strong the wealthy continue to spend, disappoints on earnings hurting the retail sector. JPM starts the day down 6% and finishes the day down over 9%. This is a huge move for a stock that is widely owned and serves as a core position for many large investment houses. The SEC is now investigating JPM so the story will have legs for weeks, perhaps months to come. The markets moved higher early in the day but by the close moved back to flat. The markets posted a second weekly decline. Oil is at its lowest level in a year losing over 2% this week with WTIC at 96. Gold loses 4% this week. After the close, Fitch downgrades JPM. S&P rating agency lowered JPM’s rating from stable to negative due to the two-billion dollar trading loss. The rating agencies are now worried that JPM appears to be pursuing a much riskier and more aggressive trading strategy than originally thought.
On 5/12/12, Saturday, media reports that Facebook’s long anticipated 5/18/12 (next Friday) debut as a public company may become derailed due to regulatory approval delays. Wall Street deals always have a way of coming together so FB will likely begin trading next Friday as scheduled.
On 5/13/12, Sunday, China announces a triple R cut to help stimulate growth. The futures reaction is muted, however, with U.S. markets surprisingly unimpressed.
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On 5/14/12, Monday, the China triple R cut affect is muted as China and Asia markets sell off. The dominating news overnight is Greece and Spain. Talk of a Greece exit from the euro is now under serious consideration. German Finance Minister Schaeuble says that Europe “can’t force Greece to stay in the euro.” Spain banks are borrowing record-breaking funds from the ECB to stay afloat. Merkel (Germany) suffers a set back as support drops for her party; voters turning against her policies. This triple whammy is sending the euro under 1.29, as Greece and Spain yields blow out. MS lowers estimates on European banks which are down from 2 to 6%. Bankia is down over 7% today. Greece 10-year yield blows out over 25% and Spain is climbing above 6.28%. Italy is moving towards 6%. Money is running to the perceived safer haven countries; Netherlands, U.K., Finland, U.S. and Germany. Germany continues to print record low 10-year yields, now sporting a 1.46% handle. The U.S. 10-year yield is dropping under 1.80%. U.S. futures markets tumble lower. The Spain market is down well over 20% off the top signaling a crash profile. Worries surface over potential bank runs in Europe.
On 5/14/12, the U.S. markets open for trading. Keystone’s SPX:VIX Ratio Indicator drops under 68 signaling a large day on tap. The retail sector tumbles lower dragging the markets lower. The SPX finishes the day down 15 points, -1.1%, closing under 1340. The Dow Industrials are down 125 points, -1.0%, closing under 12700. After the close, Moody’s downgrades 26 Italian banks.
On 5/15/12, Tuesday, Euro GDP growth numbers are generally weak although Germany reports far stronger growth than expected bouncing the DAX higher. France growth is flattish but Italy’s growth is worse than expected. HD earnings disappoint. Retail Sales data is lackluster hinting that the warm winter did pull sales forward. Futures are up strongly all morning long but minutes before the open Greece announces that new elections will be required. Futures tank as European markets give up all gains today and turn negative. The opening bell rings and markets move sideways all day trailing lower late day but then recovering by the close.
On 5/16/12, Wednesday, Housing Starts print over 700K which is a surprisingly stronger number than expected. The wealthy are continuing to build their dream homes rather than selecting from the existing inventory. The opening pop does not last and markets sell off. The FOMC Minutes do not instill confidence in the afternoon and the markets take on a worsening negative vibe. The buzz surrounding Facebook’s Friday public offering grows. WTIC oil has dropped from the 110’s to the low 90’s over the last two weeks.
On 5/17/12, Thursday, the ECB stops lending to Greece stressing that the debt crisis problems need to be solved by the politicians and to not immediately look to the ECB to save the day. The euro drops under 1.27. European banks are weak. JPM drops 4% today as rumors grow that JPM’s losses over the bad trade may now exceed 5 billion dollars. After the close, Facebook is priced at $38 per share at the top of the projected range. The FB hype reaches fever’s pitch. Moody’s cuts ratings on 16 Spanish banks citing recession, bad property loans, and high unemployment as large negatives. Spanish bank deposits continue to drop and bank bad loan ratio’s are at historic highs. The fear of bank runs in Spain, Greece and all of Europe continue to escalate.
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 5/20/12, Sunday, a communiqué is released from the G-8 summit that says……………
On 5/21/12, Monday, markets react to the G-8 meetings and to developments in Europe and China over the weekend. The focus returns to Europe now that the FB IPO circus has left town.
On 5/22/12, Tuesday, Existing Home Sales.
On 5/23/12, Wednesday, New Home Sales.
On 5/24/12, Friday, Consumer Sentiment. Markets close for a three-day holiday weekend.
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On 5/28/12, Monday, markets are closed in Observance of Memorial Day.
On 5/29/12, Tuesday, U.S. markets reopen for trading. Consumer Confidence.
On 5/31/12, Thursday, EOM. GDP.
On 6/1/12, Friday, Jobs Report. ISM Manufacturing Index.
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On 6/17/12, Sunday, Greece elections.
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