Monday, July 18, 2011

Stocks Drop, Metals Pop, BofA a Major Flop

As the debt crisis in Europe evolves, worries over the US debt ceiling non-negotiations continue to complicate matters for traders. Fear is pervasive on the Street and the pace of progress (what little there is) seems to suggest that congressional Republicans and President Obama are on a collision course in which the August 2 deadline for raising the debt ceiling might come to pass without a resolution, or, at least one with any real teeth.

The stalemate over raising the debt limit has been pushed by the Tea Party faction in the House of Representatives, and it's done nothing but squander time and any understanding between the opposing factions. Talks have broken down twice in the past two weeks and lawmakers seem to be no closer to a deal than they were a month ago.

What's at stake should the deadline pass without a resolution to raise the debt limit would be the credit rating of the US, which has been threatened by ratings agencies Moody's and Standard and Poor's. Even if a deal is somehow worked out, the wrangling over the issue has sent the wrong message: America looks more like a third world country than the leader of the free world.

The arguing and posturing has helped to stall the economy because businesses don't want to make major moves - like hiring or opening new facilities - with so much uncertainty in the air, and that has taken its toll on stocks.

The week started off the same way last week ended, on the wrong foot, with stocks down sharply at the open and plummeting to the lows of the day by noon. The Dow was down 180 points at that point and the NASDAQ had shed some 46 points before bargain hunters (read: morons or the PPT) stepped in to shore up the losses. None of the major indices saw even a glint of the positive side. In fact, closing levels were near the high points of the day.

Dow 12,385.16, -94.57 (0.76%)
NASDAQ 2,765.11, -24.69 (0.89%)
S&P 500 1,305.44, -10.70 (0.81%)
NYSE Composite 8,135.53, -91.51 (1.11%)

Decliners led advancers by a wide margin, 5363-1213. The NASDAQ recorded 36 new highs and 71 new lows, while the NYSE had 37 new highs and 93 new lows. The combined total favored new lows, 164-73. With that indicator flipping over again and no progress on any economic front, the recently-resumed slide in stocks should lengthen and deepen. Volume was sluggish, and that's being generous.

NASDAQ Volume 1,726,375,125
NYSE Volume 4,103,216,500

Commodities were led by gold, which broke through the $1600 mark, finishing at $1,602.40, up $12.30 on the day. Silver was up more than 3%, rising $1.27, to $40.34. The ascent of the metals over the past two to three weeks has been a resounding note of no confidence in the fiat money system and general financial malaise caused and exacerbated by central bank intervention.

Crude oil continued doing its odd two-step, as WTI finished down $1.31, to $95.93. Of course, this one-off loss will likely be offset by gains tomorrow. Such is the way rigged markets function. In the end, there will be no summer relief for drivers who are paying close to $4 per gallon. The nationwide average for a gallon of unleaded regular remains high, at $3.68, with ten states over $3.77.

Bank of America continues to be the least-loved stock or bank in the nation. Shares of the beleaguered financial institution fell to yet another 2-year low, closing at 9.72 as reports emerge that the company needs to raise $50 billion in order to become a healthy, functioning bank again. One can only imagine how the bank's books would look had they not been bailed out in 2008 by the federal government (taxpayers). Some - this writer included - still believe it would have been better to allow BofA to go into default and bankruptcy and have the huge bank broken up into smaller parts.

The jury is still out on that one, though it still appears that those favoring bankruptcy for the biggest banks may have been on the right track all along. BofA still may not make it through to 2012 and beyond. They are broke, busted and insolvent and are a primary reason for the suffering of millions of Americans who have lost homes and jobs because so much effort was spent by the government to help the bank, rather than actual citizens.

After the close, IBM reported second quarter earnings with an EPS of $3.09, ahead of analysts' estimates of $3.03. The company raised guidance for the full year to “at least $13.25″ per share, up from a prior estimate of “at least $13.15″ per share.

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