Trader's Highlight
Posted byDJI- NEW YORK, NEW YORK, July 23 (Reuters) - U.S. stocks fell for a second straight session on Monday, as Spain appeared closer to needing a national bailout and poor corporate results weighed on the market.
Still, stocks ended well off the day's lows, rebounding from their initial plunge. Stocks appeared to stabilize as the S&P 500 approached its 50-day moving average of 1,332.98, a technical support level that could trigger more losses if convincingly broken.
Overall, three stocks fell for every one that rose on the New York Stock Exchange on Monday, a signal that the afternoon rebound was concentrated among larger-cap shares. On the Nasdaq, about four stocks fell for every one that rose.
"The sell-off this morning was overdone, and obviously, the market felt that way, too," said Eric Green, senior portfolio manager and director of research at Penn Capital Management in Philadelphia, which oversees $6.5 billion.
"Nothing incrementally negative came out, but obviously, we're still worried about the situation there."
The Spanish region of Murcia looked set to follow Valencia in tapping a government program to keep its finances afloat. Local media reported half a dozen regions were ready to follow suit.
Valencia's move contributed to a 1 percent drop in the S&P 500 on Friday. The benchmark index had appeared on track to exceed those losses on Monday, falling as much as 1.8 percent before recovering some of those losses.
The International Monetary Fund dismissed a weekend news report in German weekly Der Spiegel that it may refuse to continue supporting Greece as it prepares for talks with the new Greek government on its international bailout.
After the closing bell, Texas Instruments Inc shares dropped 1.4 percent to $26.44 in extended trading following the company's results. Texas Instruments reported a drop in its second-quarter profit and sales.
With 23 percent of S&P 500 companies having reported results, 67.5 percent have posted earnings above expectations, although many analysts have cut their forecasts in recent weeks, allowing for easier beats. Over the past four quarters, 68 percent of companies beat estimates.
The high-profile earnings disappointments have taken a toll on third-quarter estimates. Third-quarter S&P 500 earnings growth is now expected to come in at 0.9 percent, down from 3.1 percent at the beginning of the month.
The Dow Jones industrial average fell 101.11 points, or 0.79 percent, to close at 12,721.46. The Standard & Poor's 500 Index declined 12.14 points, or 0.89 percent, to 1,350.52. The Nasdaq Composite Index shed 35.15 points, or 1.20 percent, to close at 2,890.15.
At its session low, the Dow was down as much as 239.16 points, or 1.9 percent, at 12,583.41. The S&P 500 fell as low as 1,337.56, down 25.1 points, or 1.8 percent, at its session low. The Nasdaq had touched a session low at 2,852.88, down 72.42 points, or 2.5 percent from Friday's close.
Energy shares slumped as fears of a global slowdown prompted investors to sell oil as U.S. crude fell 3.8 percent. Chevron Corp dropped 1.1 percent to $107.95. The NYSE Arca oil index lost 1.7 percent.
The CBOE Volatility Index jumped 14.4 percent to 18.62 at the close. According to the VIX Open Interest Put-to-Call ratio, VIX options traders are holding only 50 puts for every 100 calls outstanding on the VIX. The last time this ratio hit this level was early August of 2011, just before a huge volatility spike that lasted nearly four months, he said.
The euro slid to a two-year low against the dollar and a near 12-year trough against the yen, pressured by fears that Spain may eventually need a full sovereign bailout.
The yield on the Spanish 10-year bond was last at 7.496 percent, well over what analysts consider a sustainable level.
Volume was light, with about 6.13 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.
NYMEX- NEW YORK, NEW YORK, July 23 (Reuters) - The euro fell to a two-year low against the U.S. dollar and a nearly 12-year trough against the yen on Monday on fears Spain was closer to needing a full-scale bailout that the euro zone cannot afford.
Ten-year Spanish bond yields jumped as high as 7.596 percent, the highest since the euro was created in 1999. That saw the euro drop for a fourth straight day against the dollar to hit a low of $1.2067, the weakest since June 2010.
Traders and analysts say the euro looks poised to take out the key $1.20 threshold. A break beneath that could see the currency head towards its June 2010 low of $1.1875, which marked the weakest since March 2006.
"With the 10-year yield above 7 percent and quickly approaching 8 percent, we're at that moment where it starts to look a lot more real than it was even just a few weeks ago," said John Doyle, foreign-exchange strategist at Tempus Consulting in Washington, referring to a full-scale sovereign bailout for Spain.
The euro extended declines against the dollar in late Monday trading after Moody's Investors Service changed its ratings outlook to negative for Aaa-rated Germany, the Netherlands and Luxembourg, citing uncertainty about the euro zone's ongoing debt crisis.
The ratings agency said it saw an increased chance that troubled euro zone countries such as Spain and Italy would need more support, the burden of which would fall on the highest-rated states.
Adding to pressure on the euro was a weekend report that the International Monetary Fund may refuse to contribute further funding for Greece. The IMF dismissed the report, saying it was “supporting Greece in overcoming its economic difficulties.”
The European Central bank, the European Commission and the International Monetary Fund -- known as the troika -- will arrive in Athens on Tuesday to push for further cuts needed for the country to qualify for further rescue payments.
The euro last traded at $1.2135, down 0.2 percent. After closing at $1.2156 in New York on Friday, it "gapped" lower to open at $1.2120 in Asia on Monday morning, signifying the market perceived the value of the euro had dropped over the weekend in response to events in the euro zone.
Some $6.46 billion of euros have changed hands on Reuters Dealing through the Monday session.
Against the yen, the euro hit 94.22 yen, a level not seen since late 2000, and last was off 0.3 percent to 95.11.
Weakness in the euro was seen across the board as it also hit a record low versus the Australian dollar, a more than 3-1/2-year low against sterling and a 9-1/2-year low versus the Norwegian crown.
Spain's Economy Minister Luis de Guindos ruled out a full-scale financial rescue on top of the 100 billion euros already earmarked for the country's banks.
Ashraf Laidi, chief global strategist at City Index Ltd. in London, said some economists estimate a second bailout for Spain could amount to as much as 300 billion to 400 billion euros.
FUNDING STRAINS
Tiny Murcia was on course to be the second Spanish region to request help from the central government, and media reported half a dozen local authorities were ready to follow in the footsteps of heavily indebted Valencia, which rattled markets on Friday.
Catalonia, Spain's biggest region by gross domestic product, also has the highest debt. It said this week it had not decided whether to tap the funding mechanism, though it is seen as an increasingly likely candidate.
Axel Merk, portfolio manager of the $500 million Merk Hard Currency Fund in Palo Alto, California, said the market is pricing in the reality that "the Spanish government is now clearly on the hook for the regions’ debt.
"Spain’s central government is expected to bail out its regions – and in return may ask for a bailout itself," he wrote to clients. "As long as debt is merely shuffled around, the euro zone crisis won’t be solved."
Italy may be under similar pressure, with a newspaper quoting unnamed government specialists as saying that 10 Italian cities including Naples and Palermo face problems managing their finances.
The dollar fell to a seven-week low of 77.95 yen, before rebounding to 78.43, little changed on the day.
Japan's vice finance minister for international affairs was reported as saying the country will not exclude any options when responding to excessive currency moves, although traders said the authorities were unlikely to consider intervening while the dollar held above 76 yen.
CBOT SOYBEAN, Chicago Board of Trade soybean futures fell sharply on forecasts for crop-friendly rains in portions of the U.S. Midwest crop belt and on falling
equities markets.
* Midday weather updates still indicate some rain for corn and soybean crops in the northern U.S. Midwest this week and there is a better chance for crop-friendly weather in the extended outlooks, an agricultural meteorologist said on Monday.
- "There will be some rains in the north early this week and the southwest should see some light rain late in the week, which would be the first significant rain since June," said Andy Karst, meteorologist for World Weather Inc.
- Meteorologists said the showers won't be "drought busters" but "it will h elp some crops that aren't already dead," Karst said. Karst also said the midday weather updates indicate a better chance for showers and cooler weather in the Midwest in early August.
- "It looks cooler and wetter in the Midwest Aug. 4-7 and we've added some rain for the eastern Corn Belt for July 30 to Aug. 1st," he said.
- A Reuters poll indicated another decline in soybean condition ratings in the USDA's weekly crop progress report to be released late on Monday.
- Another Reuters poll showed an expected decline of 15 percent from record high prices for soybeans by the end of the year but still at an end-of-year record high of $15.40, up 28.5 percent from the close of 2011.
- Goldman Sachs on Monday pegged U.S. soybean yield per acre at 39.5 bushels and raised its three-month forecast for soybean prices to a record $20 per bushel.
- August was above all key moving averages. The nine-day RSI was at 68.
FCPO- SINGAPORE, SINGAPORE, July 23 (Reuters) - Malaysian crude palm oil futures dropped to the lowest in more than a month on Monday, tracking broader financial market weakness on fresh concern over Spain's ability to avoid a costly bailout that could worsen the euro zone debt crisis.
Risky financial assets including crude oil and grains futures suffered declines as investors liquidated their positions on concern that the debt crisis could stall global growth and damp fuel and food demand.
Half a dozen local governments were ready to follow in the footsteps of Valencia, which on Friday said it would need help from Madrid, Spanish local media reported.
Relentless heat in the U.S. grain belt continued to destroy soybean crops and tighten soybean oil supply, but analysts said investors took cues from macroeconomic factors instead.
"It's been two weeks that we've been talking about the U.S. weather, so the weather risk has already been factored in unless we hear something new coming from El Nino," said Ker Chung Yang, commodities analyst with Phillip Futures in Singapore.
"There's news about Valencia seeking a bailout that has pushed Spanish bond yields to new high and that could weigh on the market."
The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange lost 1.7 percent to close at 2,990 ringgit ($943) per tonne. Prices earlier touched a low at 2,969 ringgit, the lowest since June 22.
Traded volume stood at 27,369 lots of 25 tonnes each, higher than the usual 25,000 lots.
Traders said the weak sentiment was due in part to slow exports and higher production in No.2 producer Malaysia, which could boost palm oil stocks after they fell to a 14-month low in June.
Malaysia's palm oil exports fell 23 percent over the July 1-20 period from a month earlier, said cargo surveyors Intertek Testing Services and Societe Generale de Surveillance.
Exports to China slowed by more than half for the period on high stockpiles and a slowdown in demand after China's economy showed signs of slowing, said a Singapore-based trader.
But the market is also watching for signs of El Nino returning to Southeast Asia as the hot and dry weather could hurt palm oil output for top producers Indonesia and Malaysia.
In other markets, crude oil prices slipped towards $103 per barrel on Monday as investors sold off riskier assets and fled for the perceived safety of the dollar on fears that Spain will be unable to avoid a costly sovereign bailout.
Concern over the euro zone debt crisis also weighed on other vegetable oil markets.
By 1005 GMT, the most active U.S. soyoil for December delivery was down 1.7 percent and the most active January 2013 soyoil contract on the Dalian Commodity Exchange had lost 2.2 percent.
REGIONAL EQUITY- BANGKOK, July 23 (Reuters) - Southeast Asian stock indexes closed lower after light volume trading on Monday as investors sold risk assets amid concerns Spain might require a full sovereign bailout, while Thai shares fell nearly two percent on PTTEP's capital raising plan.
The Thai benchmark SET index finished down 1.9 percent, its biggest percentage drop in one day since June 1. Energy explorer PTT Exploration and Production Pcl dropped 4.8 percent to its lowest close in six weeks.
Other markets also came under selling pressure with Jakarta stocks ending down 1.8 percent at a one-week low and Philippine stocks dropping 1.4 percent to their lowest close in almost a month.
Singapore's Straits Times Index was down 1.1 percent at a one-week low. Malaysian shares and Vietnam's stock index fell 0.4 percent and 0.6 percent, respectively.
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