Markets Lower, Closing News 6/10/11

The Dow closed below 12,000 for the first time since March 18 as markets all finished lower on the day.  The sell-off was triggered by Chinese trade data this morning and news that Germany is insisting on private investor involvement for the Greek bailout, threatening the ECB’s ability to deliver the bailout package.  Today’s slide also closed out the sixth straight week of declines, the longest stretch since 2002.

The Fed announced that QEII will wind down on June 30th as originally planned, ending any speculation that it could be extended.  There were also newly proposed banking regulations, which will require all banks over $50 billion in assets to be subject to annual stress tests to insure they have enough capital before getting dividend payouts approved by the Fed.

China announced this morning a trade surplus of $13.1 billion in May, which disappointed investors.  While the surplus was up from the $11.4 billion reading in April, it was well below the $18.6 billion that many analysts were expecting.  The weak number showed that Chinese imports grew faster than expected, and sparked fears that China may raise its interest rates again.

Saudi Arabia announced this morning that it is raising output to 10 million barrels per day, a 1.2 million increase from the announced 8.8 million bpd in May.  The decision was made just days after OPEC announced its members could not come to a consensus  decision on raising output.  Oil fell 2.53% to $99.30 per barrel.

German Finance Minister Wolfgang Schaeuble reiterated today that Germany is still requesting that private investors help fund a second Greek bailout, and that a debt swap take place extending Greek debt maturities.  The stance taken by the Germans is strongly opposed by the European Central Bank, sparking fears that the two parties will not agree on the terms for a second bailout package.

CNBC had an interview with Arnold Palmer this morning which one – made me very thirsty, and two- reminded me of one of the best "This is Sportscenter" commercials.

Market Indices/Statistics:

  • Dow closed down 172.45 pts/-1.42% to 11,951.91
  • S&P closed down 18.02 pts /-1.40% to 1,270.97
  • Nasdaq closed down 41.14 pts/-1.53% to 2,643.73
  • 27 of the 30 Dow stocks closed lower / 3 closed higher
  • All 10 S&P 500 sectors closed lower
  • Energy was the worst performing sector (down 1.84%)
  • The VIX is up 1.00 pts to 18.77
  • Oil is up $2.63 to $99.30
  • Nat Gas is up $0.090 to $4.764
  • Gold is down $9.60 to $1,533.70
  • Euro vs. Dollar down $0.0175 to $1.4332
  • Dollar vs. Yen down $0.02 to $80.34

Companies in the News:

Pandora increased their IPO value today from $109 million to $161 million.  The deal is now expected to be 14.6 million shares priced at $10-12, up from 13.6 million shares at $7-9 each.

Big Banks, Citi (+0.40% to $37.92), JP Morgan (+0.17% to $41.05), Morgan Stanley (+0.80% to $22.69), Bank of America (+1.41% to $10.80) and Goldman Sachs (+1.79% to $135.92), all traded higher today despite the Fed announcement regarding the stress tests, because CNBC reported that the extra capital charge on big banks will be 2-2.5%, lower than the 3% originally speculated.

Steel stocks traded higher after Morgan Stanley published a report this morning indicating that a recovery for the entire sector is imminent.  US Steel (+1.43% to $43.33), AK Steel (+3.57% to $15.22), Nucor (+0.78% to $39.98) and Reliance Steel and Aluminum Co. (+1.80% to $47.95) all closed the day in the green.

Regal Entertainment Group shares finished lower today (-0.83% to $11.94) despite an upgrade from Caris & Co. RGC was boosted to buy from average, and Caris & Co. sees the 12-month price target as $16.00 per share.

MEMC Electronic Materials also traded lower (-3.52% to $8.76) after Stifel Nicolaus downgraded MEMC from buy to hold.  Stifel cited their negative outlook on the entire solar wafer industry as the reason for the change.

Earnings:

Shares of RealD Inc. tumbled today (-13.17% to $20.90) despite beating estimates for its Q4 earnings.  RLD reported Q4 earnings per share of $0.08 after the bell last night vs. estimates of a $0.15 loss.  Shares fell because RLD announced it sees gross margins of 72-75% for 2012, down from 81-84% in 2011.

Altria Group shares are also lower (-1.64% to $27.01) after the company announced it will take a one-time charge of about $630 million for the second quarter related to its leveraged lease transactions.

Coming Monday:

Economic Reports: None; Earnings from: OMNOVA Solutions Inc. and Quanex Building Products Corp.