Stocks Slide Late After More Evidence of Greek Exit from Euro Spooks Markets

The headline really says it all on today's turnaround Tuesday.

With the major averages putting in a nice follow-up to Monday's lift-off, the major indices were set to put in their second winning day in a row. The Dow was sporting a 50-point advance just after 3:00 p EDT when word came out of Greece by former Prime Minister Lucas Papademos, saying that preparations for an exit of Greece from the Euro zone are being considered, and said the scope to renegotiate the ongoing EU and IMF loan program would be "very limited."

That's when a 50-point gain became a 50-point loss in a matter of minutes, though all of the major indices recovered to end the session nearly unchanged.

Overnight, this news will likely sink in a little further and it would be expected that Asian and European market would open tomorrow lower. As word of Papademos' statement spread, the worst victim was the Euro, which fell below 1.27 to the dollar on foreign exchanges.

It is fascinating to watch how this entire Greek drama is being played out, especially in reference to market response. As event have unfolded over the past year to 18 months, market reaction has become one of initial knee-jerking, followed by bouts of disbelief and buying into the dips, though as the situation has turned from bad to worse in Greece, stocks seem more inclined to shrug off any bad news, whereas, earlier, like in September of last year, markets took violent, hefty swings on dispatches from the continent.

What will occur in global markets when the Hellenic state is finally on its own again and officially dismissed from the Eurozone - now a 90% chance according to most euro experts - is anybody's guess, though most investors are girding for the worst case, reminiscent of the Lehman breakdown back in '08, though this time around, there's been plenty of time to prepare.

The other major story of the day concerned Facebook, as the NASDAQ continues attempts at cleaning up the mess that they created. Due to technical issues in their electronic trading system, as of Tuesday morning, some investors still had not received confirmation of their trades and the NASDAQ was talking about raising its own loss provision for bad trades from $3 million to $13 million, as trading desks and market makers toll their losses.

It was also revealed today that Morgan Stanley's analysis arm had downgraded the stock just prior to the IPO, another odd and damaging situation, given that Morgan Stanley (MS) was the lead underwriter on the deal. The firm, by law, is supposed to have a "Chinese wall" between analysts and underwriters, but one has to wonder if the firm was shorting the IPO a la Goldman Sachs. The situation will be investigated, though it's highly doubtful that anything will come of it, in as much as the trades were such a convoluted mess one wonders if officials will ever be able to untangle the mess.

Facebook closed the day at 31.00, a full seven points below Friday's IPO price, with a loss of 3.03 (8.90%). Founder and CEO, Mark Zuckerberg, who was supposed to have bankrolled $18 in paper profits on the public opening of the company, may have to just suffer through life with a measly $15 billion.

Yep, life sure is tough.

Dow 12,502.81, -1.67 (0.01%)
NASDAQ 2,839.08, -8.13 (0.29%)
S&P 500 1,316.63, +0.64 (0.05%)
NYSE Composite 7,532.32, -10.66 (0.14%)
NASDAQ Volume 1,755,814,375.00
NYSE Volume 4,056,273,750
Combined NYSE & NASDAQ Advance - Decline: 2522-3114
Combined NYSE & NASDAQ New highs - New lows: 45-113
WTI crude oil: 91.66, 0.91
Gold: 1,576.60, -12.10
Silver: 28.18, -0.14

TEOTWAWKI Delayed, No Thanks to G8 Memo

After nearly three weeks of relentless declines, US markets perked up to open the week of trading, posting one of the top five gainers of the year.

Catalyst for the day-long progression higher was nothing other than naked speculation on a "buy the dip" fantasy, as the major indices had been beaten down by roughly 7-8% and many stocks hammered down 10-15& since May 1. Traders saw the opportunity for a bounce and they got what they bargained for, due almost entirely to valuation and little else.

The situation in Europe, especially regarding Greece, remains far from resolution, and the G8 meeting, held over the weekend at Camp David, outside Washington, DC, offered a statement that was long on identifying issues but short on solutions. In fact, the statement released for public consumption carried forty paragraphs, mostly gilded in terminology like the commitment to "take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses," and similar non-committal phrases.

One wonders why such meetings of world leaders are even held except to fete the participants on pate de foie gras and roast pheasant. Ostensibly, such confabs do nothing but solidify ties between the various bankrupt, free-spending governments and boost the general propaganda about the world's financial and political condition. Ostensibly, these G8, G10, G20 and Gee, I don't know soirees probably are optically better than the same participants getting together for a round of golf or an afternoon of croquet, tea and biscuits.

Other than the magnificent ramp-job by the re-programmed computer traders, the story of the moment continues to be the Facebook (FB) IPO fiasco, in which computer problems were finally revealed by NASDAQ which caused order and confirmation delays and cost some investors hundreds of thousands and had market makers like Knight and others trading positions the opposite from what they had originally intended.

At the end of the day, it was nothing other than the irresponsibility of the NASDAQ to proceed with the highly-anticipated IPO, when they knew problems were arising from a multitude of HFT participants who were variously long and short within milliseconds of the stock's opening.

The untenable situation worsened at the pre-open and into the opening of regular trading as the stock fell below the original offer price of 38.00, defended vigorously by the underwriters at the close of trading on Friday, but capitulation ensued Monday, with share prices falling under the IPO price at the open without recovering, closing the day at 34.03, down 4.20, an 11% loss.

In any case, today saw TEOTWAWKI (the end of the world as we know it) delayed, no thanks to world leaders, who seem to have less grasp on economic issues than they do their own futures.

Free houses for everyone!

Dow 12,504.48, -135.10 (1.09%)
NASDAQ 2,847.21, -68.42 (2.46%)
S&P 500 1,315.99, -20.77 (1.60%)
NYSE Composite 7,542.88, -115.14 (1.55%)
NASDAQ Volume 1,788,066,375
NYSE Volume 3,738,396,750
Combined NYSE & NASDAQ Advance - Decline: 4602-1024
Combined NYSE & NASDAQ New highs - New lows: 35-180
WTI crude oil: 92.57, +1.09
Gold: 1,588.70, -3.20
Silver: 28.32, -0.39

Stocks Smashed Again; Facebook Flops on IPO

For three weeks running, it's been the same story: stocks down, and today's malaise was particularly embarrassing to the NASDAQ and to the underwriters of the Facebook (FB - which should stand for Fail Badly) on a Friday that most traders would likely rather forget.

The Dow Jones industrials closed down for the 12th time in the last 13 sessions, while the S&P and NASDAQ recorded their 10th down day in the last 12. All of the major averages finished in the red every day this week an occurrence so unique that barely a broker or trader can recall the last time it happened. Even on major declines, there's usually a day or two of snap-back rallies, but the current condition is such that all confidence is being shattered as events unfold without a whimper of defiance from the usual monied or political oligarchs.

For the week, the Dow lost a cumulative 451 points, easily the worst performance of the year; ditto for the S&P and NASDAQ, which lost, respectively, 52 and 155 points, while the NYSE Composite shed 388, the broadest measure taking the worst percentage loss.

As for the Facebook IPO, which priced Thursday night at a robust $38 per share, finished the day ahead a measly 23 cents, one of the poorest showings ever for a major tech stock right out of the box. The trading, which was supposed to have begun at 11:00 am EDT, didn't open until after 11:30, the culprit being the usual "system glitches." Traders reported throughout the day that they were not receiving confirmations of their orders, the earliest of which had bought in at levels of 41 and 42 dollars per share, and were, thus, stuck at whatever price they placed their orders. It was a complete embarrassment for all parties - the company, the underwriters and the NASDAQ - though it's almost certain that newly-minted billionaire Mark Zuckerberg will lose little sleep over today's fiasco.

All told, the week, and especially the last two days, have been particularly painful for all involved, though gold and silver investors have enjoyed two consecutive days of gains after prolonged weakness. With precious metals beginning to show strength again, the dynamics of a failing global economy based on fiat dollars are showing their true colors.

Over the weekend, members of the G8 will be meeting at Camp David, purportedly to issue some kind of proclamation that all is well, or, ostensibly, to hammer out some new paradigm for global economic salvation. With any luck, they'll all agree to go home and do nothing, something for which they're all well trained.

In European news, the woes for the Southern states continued as Moody's downgraded 16 of the nation's banks and Fitch cut Greece's banks to CCC (big surprise there).

The weekend at hand, two words known well to hoarders of gold and silver: keep stacking.

Dow 12,369.38, -73.11 (0.59%)
NASDAQ 2,778.79, -34.90 (1.24%)
S&P 500 1,295.22, -9.64 (0.74%)
NYSE Composite 7,413.01, -67.42 (0.90%)
NASDAQ Volume 2,571,980,000
NYSE Volume 4,450,551,500
Combined NYSE & NASDAQ Advance - Decline: 1470-4143
Combined NYSE & NASDAQ New highs - New lows: 22-345 (worst since March of '09)
WTI crude oil: 91.48, -1.08
Gold: 1,591.90, +17.00
Silver: 28.72, +0.70

Dark Day for Wall Street as Financial System Stressed to Limit

Compared to the preceding twelve days of market meltdown, today's finish qualified as the worst on a number of different levels.

The paucity of buyers produced something of a free-fall right from the opening bell, which accelerated in the final hour of trading. There were a couple of attempts at rallies - at 10:00 am and again just after noon - but both failed horribly as there was no support and traders, many of whom have been in the "buy the dip" camp until recently, sold into the brief upticks.

Volume was also noticeably higher, an indication that the selling has more room to run over the next days and weeks. The causes of today's particular collapsing equity valuations were the same that have dominated the markets over the past three weeks and are no nearer resolution than they were at the beginning of the month.

Greece continues to slide into anarchy and chaos, taking the rest of the EU - and the world - along for the careening ride to oblivion, unemployment fears in the US remain high, global growth may be nearing stall-out speed and an inactive congress and Federal Reserve - both eerily quiet - are doing nothing to alleviate any of the political, tax and regulatory issues.

The 156-point loss on the Dow was the second worst since the slide began on May 2nd, beaten only by the 168-pont decline of Friday, May 4th, the day the BLS disappointed everybody with poor April jobs numbers. That such a massive decline would come nearly two weeks later, without a respite rally in between, displays clearly how weak and uncertain markets are at the present juncture.

Through today's close, the Dow has lost a stunning 837 points since the May 1 close; the NADSAQ, with a loss of more than two percent today alone, has been beaten back 246 points since May 2nd, while the S&P 500 has given back just over 100 points since May 1st, finishing just above the technically-insignificant 1300 mark, though emotionally, the number carries great sentiment weight.

Adding to the existing problems were a couple of key economic data points released today. Initial unemployment claims came in flat for the most recent reporting week at 370,000, still stubbornly high. The Philadelphia Fed manufacturing index, which was supposed to ring up a slightly higher reading, to 8.8, from 8.5 in April, was a sorry disappointment when it printed at a devastating -5.8. And the index of leading indicators, which was expected to post a gain of 0.2%, actually fell by 0.1%, all of this adding up to excessive worry and a rush to get out of equities for the safety of bonds.

The 10-year benchmark bond closed at an historic low of 1.702, which is probably a solid number considering the level of deflation that is expected over the coming months. A yield approaching 2% against an environment of low to no growth - or even a recession or worse - is likely to be a pretty good hedging instrument.

JP Morgan Chase's (JPM) continuing drama with its $2 billion portfolio loss has expanded by another billion according to the NY Times, while the FBI and SEC have both opened inquiries into the trade and CEO Jaime Dimon has been called to testify before the Senate Banking Committee on the matter.

Mr. Dimon, whose firm also faces a number of shareholder lawsuits stemming from the trade, continues to maintain the position in the trade, attempting to slowly unwind the derivative bet from hell while counter-parties turn the screws tighter. It would not be a surprise to see eventual losses from this blunderbust approach the $5 or $6 billion figure, wiping out the entire quarter's profit for the bank with the supposed "fortress balance sheet."

Dimon will have to do some fancy tap-dancing when he appears before the Senate inquiry, because the trade, widely known as the "London Whale" was the furthest it could have been from an outright hedge, being a pure speculation trade, exacerbated by piling in deeper as the losses worsened.

On brighter notes, gold and silver did an abrupt about-face, despite the dollar index continuing to rise and the Euro settling nearly flat on Forex markets, while oil slid again, along with wholesale gasoline prices, which will eventually result in further price declines at the pump.

The widely-anticipated Facebook IPO, slated to hit the street Friday morning, priced at $38 per share, at the upper end of the expected range. While Mark Zuckerberg and others will become instant billionaires tomorrow, the timing for such a lucrative cash-out day could not have come at a worst time. Facebook will almost certainly reward early investors, but the story of one good stock will do little to alleviate long-term, long-standing economic issues that have plagued the markets for weeks.

Greek banks are seeing devastating outflows of capital, as are those in Spain. Europe's descent into economic hell has accelerated and the EU ministers and ECB economists have found now way out.

Widespread defaults, from sovereign nations, to banks, to businesses will be at the top of the news for at least the next six to 12 months.

It's been 41 years since then-president Richard M. Nixon closed the gold window and nations have been trading on pure fiat - backed only by promises - ever since. The promises now broken, the era of debt-money is quickly drawing to an unseemly and devastating end.

Real estate, precious metals and cash are all that stand between personal devastation for not millions, but billions of people worldwide. All paper assets, including stocks, bonds, letters of credit and contracts will be blown away by winds of economic chaos and change.

Dow 12,442.49, -156.06 (1.24%)
NASDAQ 2,813.69, -60.35 (2.10%)
S&P 500 1,304.86, -19.94 (1.51%)
NYSE Composite 7,480.75, -112.07 (1.48%)
NASDAQ Volume 1,915,098,500
NYSE Volume 4,597,205,500
Combined NYSE & NASDAQ Advance - Decline: 915-4734
Combined NYSE & NASDAQ New highs - New lows: 31-310 (1-10 on the wrong side; never good)
WTI crude oil: 92.56, -0.25
Gold: 1,574.90, +38.30
Silver: 28.02, +0.82

Volume Up, Stocks Down As Malaise in May Exhibits the Results of Bad Karma

With higher and higher volumes showing up on individual stocks as well as the major averages virtually every passing day, the idea that there's something basically wrong with the markets and the global economy is beginning to build into a self-defeating, repeating, cyclical tailspin.

The major indices did another midday about-face, in classic bear market fashion, even though economic data in the US was relatively positive.

Housing starts were up - at an annualized rate of 717K on expectations of 675K, though building permits were lower than anticipated. That stocks, especially those of home builders, would rally on such news was not unexpected, though just because somebody puts a shovel in the ground does not necessarily imply that these newly-constructed homes will eventually be bought, much less completed.

However, two more broad measures of the economy were also positive. Industrial production grew at a rate of 1.1% in April, while capacity utilization for the month printed at 79.2%, a very strong and encouraging number.

Investors simply cannot shake the co-mingled issues of Europe, especially Greece, the falling Euro and rising dollar, all of which contributes to what could be a tough state of affairs for many of the US markets' global entities, which ship and sell around the world. Exports from the US will be especially damaged as the weaker foreign currencies and stronger US dollar make for pricier goods in faraway markets where demand has been slowing.

Following along the same logic, commodity prices are trending lower as well, which would help companies' bottom line cost structures and help keep them competitive, though traders are not confident there will be strong enough demand to produce meaningful pricing power and sustainable profit margins.

Underlying all these concerns are three major issues: Greece and the Euro, the upcoming presidential and congressional elections, and, political implications of US policy: the expiration of tax cuts at the end of 2012 along with uncertainty regarding President Obama's health care bill (now in the hands of the US Supreme Court) and a closetful of unwritten regulations, many of them centered on the financial industry through the Dodd-Frank legislation.

Further below the surface lies the uncertainty regarding the Fed's next move, as Operation Twist, aka QE3, expires at the end of June. Thus far, Fed chair Ben Bernanke nor any of the Fed's governors have hinted whether further easing would be forthcoming, and, at the end of the day, that is simply a nightmare scenario for the general economy and the banks, because without easy money, the fears are that global commerce will grind to a halt.

Markets hate uncertainty, and there's an abundance of that commodity in the flow right now, so there's no reason to believe that stocks will do anything but decline as profits are taken and few new positions are being staked out until there is resolution on some of these issues.

In the meantime, consumers are enjoying a bit of relief at the pump, as oil has fallen in just the past two weeks to its lowest level since December of last year and show no signs of bottoming. At the same time, housing prices keep declining and therein lies the conundrum of deflation. Everything costs less, but nobody is willing to pay now, because prices will likely be lower in a few days, weeks or months.

Obviously, there's no quick fix to any of this and behind closed doors, the leaders of the world's great nations and their central bankers are scared stiff.

The bad karma that's been spread worldwide by the political and monetary leaders is coming full circle it seems.

Dow 12,598.55, -33.45 (0.26%)
NASDAQ 2,874.04, -19.72 (0.68%)
S&P 500 1,324.80, -5.86 (0.44%)
NYSE Composite 7,592.80, -43.01 (0.56%)
NASDAQ Volume 1,842,974,250
NYSE Volume 4,254,574,000
Combined NYSE & NASDAQ Advance - Decline: 1843-3756
Combined NYSE & NASDAQ New highs - New lows: 76-255
WTI crude oil: 92.81, -1.17
Gold: 1,536.60, -20.50
Silver: 27.20, -0.88