More Losses For European, US Markets; Apple Misses Big on Earnings, Revenue

As per the usual, US stocks pared much of their losses in the final fourty minutes of trading, the Dow shaving its decline in half, with the other major indices following suit.

The trend has been lower for three straight sessions, with the Dow losing somewhere in the vicinity of 100 points a day. Catalysts for the declines are various and diverse, from poor US data - the Richmond Fed manufacturing index came in at -17 on expectations of -1, the lowest level since April 2009 - concerns over the Spanish government needing a bailout, or Moody's lowering the outlooks for Germany, the Netherlands and Luxembourg to negative late Monday.

Even China got some play as their flash PMI number rose to the best level in five months, though at 49.5, still showed contraction. The blip from the Far East was seen as a positive, though more than likely, a minor one, as one month's data surely does not make a trend and data from China is widely regarded as highly unreliable.

In Europe, most of the stock indices took losses, though not as heavily as on Monday. The mood on the continent is extremely guarded, as yields on benchmark 10-year notes in Spain and Italy have hovered around or exceeded the 7% mark.

Here in the states, the 10-year yield continues to fall, as predicted by Paul Craig Roberts and other astute economists (see yesterday's post), to a record low yield of 1.39, while the 30-year bond closed at 2.46, also a record low.

Market conditions and sentiment appear to be quickly worsening, with the advance-decline line negative for three straight days and the new highs - new lows metric having reversed to negative on Monday and continuing to worsen with Tuesday's session.

Commodities were mostly lower, with the notable exception of oil, which continues to be boosted by ongoing uncertainty over Iran, though the corn and soybean futures markets were notably nixed, as slack demand seems to be trumping even the effect of the worst drought since the 1950s.

All of the data and market moves seem to be pointing toward Friday's initial reading of second quarter GDP, slated for release at 8:30 am EDT on Friday. Forecasts range from 0.3% to 1.7% growth, though estimates have been coming down from a variety of sources in recent days and third quarter and second half GDP outlooks have been routinely revised lower.

As it turns out, however, the biggest news of the day came may have come after the markets had already closed, when Apple (APPL) reported a fiscal third quarter earnings miss that sent the stock markedly lower.

From the LA Times:

The technology giant said profit rose 21% to $8.8 billion, or $9.32 per share, on revenue of $35 billion, up 22% from a year earlier. The results were less than what analysts had expected. Shares plummeted in after-hours trading, falling $34, or nearly 6%, to $566.78.

Analysts surveyed by Thomson Reuters had estimated that Apple would post earnings per share of $10.36 on revenue of $37.2 billion. A year earlier, the Cupertino, Calif., technology behemoth reported record quarterly revenue of $28.6 billion and record profit of $7.3 billion, or $7.79 a share. That was a 121% increase over its third-quarter 2010 earnings per share.

If Apple, the bellwether for all tech stocks and a major component of the S&P 500 and NASDAQ 100, cannot beat lowered expectations, then perhaps the idea that a global deflationary slowdown is well underway might finally dawn on not ony the wizards of Wall Street but the average Joe and Jane Sixpacks, who likely already have gotten the memo, having not enough income to afford an iPad or iPhone, essentially spending whatever income they have on survival items like food and fuel.

Good grief! Can it get any worse?

We already know the answer to that.

Dow 12,617.32, -104.14 (0.82%)
NASDAQ 2,862.99, -27.16 (0.94%)
S&P 500 1,338.31, -12.21 (0.90%)
NYSE Composite 7,590.61, -79.92 (1.04%)
NASDAQ Volume 1,735,519,125.00
NYSE Volume 3,853,596,750
Combined NYSE & NASDAQ Advance - Decline: 1484-4064
Combined NYSE & NASDAQ New highs - New lows: 118-210
WTI crude oil: 88.50, +0.36
Gold: 1,576.20, -1.20
Silver: 26.81, -0.23

Why There Probably Won't Be a Stock Market Crash

With US stocks suffering back-to-back losses of more than 100 points Friday and Monday on the Dow, conventional thinking might be assuming that the market has hit a short term top and they may well be correct.

Others continue to ponder the overall fate of the entire fiat-money global financial system and wondering when it's going to implode, if ever. Many have been waiting since 2008 for a full reset, but policy changes, bailouts, stimulus and interest rate manipulation have managed to keep the carnage contained, at least in the US.

Today in Europe, it was something of a different story, as many national equity exchanges were victims of among the worst losses of the year. Most indices were down more than two percent, with the Greek Athex Composite Share Price Index falling more than seven percent on pronouncement by the IMF in Der Spiegel magazine that the world's fail-safe lender of last resort may not help Greece in any further restructuring or servicing of debt.

Naturally, after the Dow was down 239 points in early trading, IMF officials reversed their opinion, saying that they would indeed be there for the Greeks, just as they have all along. This is now the accepted method of moving markets - by word of mouth, rumor and denial - and part of the reason why the economic collapse has more resembled a train wreck in slow motion.

Along those lines, a couple of columns by the estimablePaul Craig Roberts and Nomi Prins have received a great deal of attention as they examine the libor-rigging scandal and how that effectively kept banks and governments in collusion from complete collapse.

In the first article, from July 14,
The Real Libor Scandal, Roberts and Prins assert that the banks which "fixed" the libor rate were the main beneficiaries in something of a quid pro quo for the assistance they received from various governments and central banks:

Indicative of greater deceit and a larger scandal than simply borrowing from one another at lower rates, banks gained far more from the rise in the prices, or higher evaluations of floating rate financial instruments (such as CDOs), that resulted from lower Libor rates. As prices of debt instruments all tend to move in the same direction, and in the opposite direction from interest rates (low interest rates mean high bond prices, and vice versa), the effect of lower Libor rates is to prop up the prices of bonds, asset-backed financial instruments, and other “securities.” The end result is that the banks’ balance sheets look healthier than they really are.

Governments were also beneficiaries of a lower libor, as they could sell their bonds at rates below inflation while still maintaining enormous budget deficits:

In other words, we would argue that the bailed-out banks in the US and UK are returning the favor that they received from the bailouts and from the Fed and Bank of England’s low rate policy by rigging government bond prices, thus propping up a government bond market that would otherwise, one would think, be driven down by the abundance of new debt and monetization of this debt, or some part of it.

In a follow up to the first article, The Libor Scandal In Full Perspective Roberts expands upon the concept of ever-lower interest rates on government bonds into a full-blown indictment of government in collusion with the libor-fixing insolvent banks on charges of fraud:

As the Federal Reserve and the Bank of England are themselves fixing interest rates at historic lows in order to mask the insolvency of their respective banking systems, they naturally do not object that the banks themselves contribute to the success of this policy by fixing the LIbor rate and by selling massive amounts of interest rate swaps, a way of shorting interest rates and driving them down or preventing them from rising.

Roberts goes even further, demonizing Robert Rubin, whose actions to dismantle regulations in the US such as the Glass-Steagle Act put into motion over-leverage by the banks which resulted in the 2008 crisis and continue to this day:

As villainous as they might be, Barclays bank chief executive Bob Diamond, Jamie Dimon of JP Morgan, and Lloyd Blankfein of Goldman Sachs are not the main villains. The main villains are former Treasury Secretary and Goldman Sachs chairman Robert Rubin, who pushed Congress for the repeal of the Glass-Steagall Act, and the sponsors of the Gramm-Leach-Bliley bill, which repealed the Glass-Steagall Act. Glass-Steagall was put in place in 1933 in order to prevent the kind of financial excesses that produced the current ongoing financial crisis.

The articles are both "must read" material which outline the persistent fraud necessary to keep the fiat money crisis from imploding completely, with scenarios for its eventual collapse, not from within, but from outside.

As the stock markets are kept afloat at higher-than-usual levels by manipulators within the around the system, so too, the bond markets are manipulated, often by the very same people.

With powerful institutions plotting and defrauding the public on both sides of all trades, there's little wonder that every time there's an event which causes even a hint of panic, the authorities rush in to save the day, and with it, the global economic system from the carnage which eventually will engulf it all.

Dow 12,721.46, -101.11 (0.79%)
NASDAQ 2,890.15, -35.15 (1.20%)
S&P 500 1,350.52, -12.14 (0.89%)
NYSE Composite 7,670.54, -89.05 (1.15%)
NASDAQ Volume 1,586,828,750
NYSE Volume 3,576,762,250
Combined NYSE & NASDAQ Advance - Decline: 1242-4363
Combined NYSE & NASDAQ New highs - New lows: 113-202 (reversal)
WTI crude oil: 88.14, -3.69
Gold: 1,577.40, -5.40
Silver: 27.04, -0.26

Stocks Lower on Gloomy European Outlook

Stocks opened Friday's session in the red and added to their losses throughout the day as the major indices all ended with sizable losses on continuing concerns over European debt issues.

The main culprit was once again Spain, where the benchmark 10-year bond surpassed 7% once again amid renewed concerns that the EU bailout of their dead banking system would hit significant snags in execution.

The session ended four straight days of gains for US stocks.

Dow 12,822.57, -120.79 (0.93%)
NASDAQ 2,925.30, -40.60 (1.37%)
S&P 500 1,362.66, -13.85 (1.01%)
NYSE Compos... 7,759.59, -90.16 (1.15%
NASDAQ Volume 1,817,595, 880
NYSE Volume 3,925,898, 500
Combined NYSE & NASDAQ Advance - Decline: 1679-3870
Combined NYSE & NASDAQ New highs - New lows: 179-91
WTI crude oil: 91.83, -1.14
Gold: 1,582.80, +2.40
Silver: 27.30, +0.09

On Wall Street, Ignorance is Bliss

Take a look at the figures that came out this morning and somebody, please, anybody, explain why stocks are higher today:

Initial unemployment claims came in at 386,000, well above the consensus estimate of 365,000. There is no significant jobs creation in the United States, period.

Existing home sales were 4.37 million (annualized) in June, down from 4.62 million in May and below the estimate of 4.65 million. The housing market has not bottomed, will not bottom this year and probably won't bottom next year.

The Philadelphia Fed manufacturing index read an abysmal -12.9 in July, which is marginally better than the -16.6 posted in June, but still horrible, by any standards.

The Conference Board's Index of Leading Indicators fell by 0.3 for June, again, below consensus.

This data all came on top of what's been a pretty pessimistic prior two weeks of data, yet the major indices all opened positive and floated above the unchanged line all day. The Dow Jones Industrials are up 842 points since July 4th, on essentially nothing but rumors and vapors.

Wall Street continues to disregard basic economic data that shows the economy is stalling out. They may be able to do that for a time, but they will not escape the eventual outcome.

Dow 12,943.36, -34.66 (0.27%)
NASDAQ 2,965.90, -23.30 (0.79%)
S&P 500 1,376.51, -3.73 (0.27%)
NYSE Composite 7,849.84, -18.75 (0.24%)
NASDAQ Volume 1,687,888,625
NYSE Volume 4,002,177,750
Combined NYSE & NASDAQ Advance - Decline: 2704-2843
Combined NYSE & NASDAQ New highs - New lows:
WTI crude oil: 92.66, +2.79
Gold: 1,580.40, +9.60
Silver: 27.22, +0.12

The No-Reason Rally; Debt Ceiling Fight Again?

Cause and effect doesn't always work for markets, at least not in any recognizable fashion when it comes to the intricacies of the US stock exchanges.

There was little news to move markets on Wednesday, but, after a slow start, the speculators moved stocks up substantially on little else but positive momentum, caused by an absence of any overtly bad news, especially from Europe.

It's a little bit like whistling past the grave, these bouncy, out-of-the-blue rallies, because the US economy is pretty much stalled out, and corporate profits are slowing, as evidenced by lowered expectations this quarter.

Even though most companies are still beating their estimates, many have experienced quarter-to-quarter or year-over-year weakness and a slowing of their growth, which is not any good way to be investing for the long-term, but, most of the money being circulated through the markets is very, very short term.

Since money has to go somewhere and there's still plenty of it sloshing around, stocks still are the preferred vehicle of choice for the control crowd that moves markets and individual stocks. Bond yields are abysmally low, precious metals have stalled and commodities aren't for everyone, thus, stocks get bid up, especially two days before monthly options expiration.

Once this earnings season winds down - in another two weeks or so - the markets will be looking for a catalyst for their next move, though it's hard to see from where any positive one might emerge. Conditions in Europe are dire, China is slowing, and the US is pretty much running in place.

August could be pretty scary, though probably not as bad as last year, when the US bumped up against the debt ceiling and had its credit rating lowered. On the other hand, the rhetoric is already heating up in congress over raising the debt ceiling again. The IMF suggested the US raise the debt limit "soon" and House Minority Whip Steny Hoyer told Republicans he would like a vote in the House in the "very near term" on the debt ceiling, though Majority Leader John Boehner has suggested that the limit not be raised without offsetting budget cuts.

So, perhaps the coming months may be deja vu all over again.

Dow 12,908.70, +103.16 (0.81%)
NASDAQ 2,942.60, +32.56 (1.12%)
S&P 500 1,372.78, +9.11 (0.67%)
NYSE Composite 7,831.09, +36.32 (0.47%)
NASDAQ Volume 1,793,354,500.00
NYSE Volume 3,613,047,500
Combined NYSE & NASDAQ Advance - Decline: 3393-2128
Combined NYSE & NASDAQ New highs - New lows: 346-62
WTI crude oil: 89.87, +0.65
Gold: 1,570.80, -18.70
Silver: 27.10, -0.22