Stocks waver on European uncertainty

Italy's new leader struggles to form a government. Yields on Spanish, Italian and French bonds spike. Readings on retail sales and manufacturing come in better than expected. Gold and oil rise.

By TheStreet Staff Nov 15, 2011 8:43AM

TheStreetImage: Wall Street sign (© Corbis/SuperStock)By Andrea Tse, TheStreet

 

Updated at 12:56 p.m. ET

 

U.S. stocks were waffling between positive and negative territory Tuesday as investors weighed upbeat U.S. economic data against negative headline risk out of Europe.

 

The Dow Jones Industrial Average ($INDU) was rising 28.8 points, or 0.2%, at 12,107. The S&P 500 ($INX) was rising 4.5 points, or 0.3%, at 1,255, and the Nasdaq ($COMPX) was adding 17.4 points, or 0.6%, at 2,674.


"Relative to overnight action the stock market has opened well this morning," said Lou Brien, a market strategist at DRW Trading.

 

"Although in the bigger picture the market is still hostage to ongoing developments in Europe, the bounce off this morning's low is based on better than expected data, particularly the retail sales report for October. But as has been the case recently, it appears that volume is light so far on the trading day and the market remains vulnerable to the next headline from Europe; but of course that is a sword that cuts both ways."

 

A slew of U.S. economic reports helped prop up markets. The Labor Department's producer price index fell 0.3% in October. Economists surveyed by Reuters were expecting a 0.1% fall compared with a 0.8% rise in September. Excluding food and energy items, the index was unchanged, compared with a 0.2% increase in the previous month.


The Commerce Department said October retail sales rose 0.5%, beating the 0.3% increase economists had forecast but slowing from September's 1.1% gain. 


The Commerce Department also reported that September business inventories were basically unchanged from August. Economists polled by Reuters expected a rise of 0.1%, compared with an increase of 0.5% the previous month

 

The New York Federal Reserve's Empire State Manufacturing Survey for November showed that the general business conditions index came in at 0.6. Economists polled by Reuters were expecting a reading of -2.10.

 

Despite stronger US economic data, the outlook on Europe's debt crisis continues to be cause for concern. Reports indicate that new Italian leader Mario Monti is struggling to gain support from the country's political parties. An auction of Spanish bonds also failed to reach its goal as yields approached a euro-era high. The auction of 12-month debt yielded 5.022% on average, higher than Spain's 10-year bond yield.

 

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Italian 10-year bond yields increased 32 basis points to above 7.02% reflecting doubts about Monti's ability to improve fiscal worries about Italy, as the Spanish 10-year yield rose 21 basis points to 6.25%.

 

French 10-year bond yields spiked to a record high spread over German bunds amid fears that the eurozone's second largest economy will lose its coveted AAA credit rating.

 

Hong Kong's Hang Seng fell 0.8%, while Japan's Nikkei slipped 0.7%. The FTSE in London fell 0.03%, and the DAX in Frankfurt lost 0.8%. 

 

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"Now that leaders in Greece and Italy have resigned and the countries are working to implement austerity measures, profit taking is setting in as investors reflect on the remaining obstacles ahead," said James "Rev Shark" DePorre, founder and CEO of Shark Asset Management, and a contributor to TheStreet.


"There is plenty to do if Europe is really going to be saved, as we have celebrated so many times recently."


In corporate news, Wal-Mart (WMT) posted earnings from continuing operations of 97 cents a share on revenue of $109.5 billion. Wall Street was calling for a profit of 98 cents on revenue of $108 billion. The stock was falling 2.5% to $57.42.

 

Retailer Home Depot (HD) said its third-quarter net income climbed 12% to $934 million, or 60 cents a share, compared with $834 million, or 51 cents, a year ago. Analysts expected earnings of 59 cents a share on revenue of $17.11 billion. Shares were falling 0.08% to $38.22.

 

Dell (DELL) is expected by analysts to post a profit of 47 cents a share on revenue of $15.66 billion in the third quarter. Analysts are looking for information on how the PC maker has been affected by shortages of hard-disk drives because of heavy flooding in Thailand. Shares were rising 1.4% at $15.54.


Staples (SPLS) reported net income of $326.4 million, or 47 cents per share, in the third quarter, up from $288.7 million, or 40 cents, a year earlier. Revenue of $6.57 billion was higher than $6.54 billion from a year ago, but was short of the analyst consensus of $6.71 billion. The company also lowered its guidance for the year. Staples shares were down 4.7% to $14.64.


TJX (TJX) reported sales for the third quarter increased 5% to $5.8 billion. Net income for the third quarter was $406 million and earnings per share were $1.06, up 15% from 92 cents last year. The results were in line with the analyst consensus. TJX shares were adding 1.2% to $61.31.


The December crude oil contract was adding 92 cents at $99.06 a barrel. Gold for December delivery was up by $3.10 at $1,781.50 an ounce.

 

The benchmark 10-year Treasury was up 8/32, diluting the yield to 2.031%. The dollar was strengthening against a basket of currencies, with the dollar index up 0.45%.

 

124Comments
Nov 15, 2011 9:36AM
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An auction of Spanish bonds also failed to reach its goal as yield's approached a euro-era high. The auction of 12-month debt averaged a yeild of 5.022%, higher than Spain's 10-year bond yield.
From an investor standpoint, when did 5% become considered such an outlandish high rate of return?  Not that long ago, 5% was a very reasonable rate to expect for a very low-risk investment, especially if you were willing to tie up your cash for a full 12 months.  Hell, you could get a 12 month CD paying 5% just a few years ago.  And now the eurozone is in an uproar because the yields on Italian 10 yr notes have topped the dreaded 7% mark? - Are you freakin' kidding me??  If I'm willing to tie up some cash for 10 years, it's not unreasonable to expect that my investment should double by the end of those 10 years, which would be a 7.2% yield.

And from a borrower standpoint, if you can't afford to pay 7% juice, you probably aren't in a position to be borrowing anything from anyone at any rate.   If you are so leveraged right now that a 2 point rise in interest rates will make you insolvent, you were way overleveraged to begin with.   This applies to both government and private borrowers.  If you have an ARM and you can't afford the payments if your rate were to reset from 4% to 7%, you had no business borrowing the money to begin with.

It's bad enough that all these governments, including our own, went so deeply into debt.  But it's even worse that they continued the charade by assuming that these artificially low, rock bottom rates would last forever.  This is almost worse than those idiots running the public pension plans who were working off of the assumption of a 12% annual rate of return.

As an added bonus, if interest rates were higher, banks wouldn't have to resort to such shady dealings to make a profit.  Think about, when rates started dropping like a rock, banks started making shady loans, they jacked up ATM fees and account fees and late fees and over-the-limit fees, they got into the business of servicing other people's mortgages, investing their own capital in stocks and commodities, buying and selling mortgages, etc...  Now, imagine that a CD pays 5% and a mortgage costs 8% - the bank has plenty of room to make a profit without having to engage in all these extra-curricular activities.
Nov 15, 2011 9:13AM
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Just a matter of time before a "MANIPULATED MIRACLE" will come along and put everything back together again and oil will shoot up over $100 a barrel just in time for Thanksgiving on a "SPECULATED" rise in global economy........ Where have we seen this before!!!!!!!!
Nov 15, 2011 12:32PM
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Where is John Corzine and why is no one demanding his head on a platter?  $600 million worth of client funds that are missing, a thousand people lose their jobs, and no one is demanding that he tells us what he knew and when he knew it.  Has he even been interviewed or interrogated yet?  It's public information that he's lawyered up, but there have been no statements, no suggestions, no apologies to MF Global clients.  The silence is deafening.  And where are the questions for Obama? - Corzine was his #1 fundraiser/bundler.   Not that Obama had anything to do with the bankruptcy, but you'd think someone somewhere might be interested in what Obama thought of the situation.  He was pretty quick to tell us that he thought the cops in Boston "acted stupidly", wonder if he'd say the same thing about Corzine.
Nov 15, 2011 10:31AM
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HMM, How long are we going to have to put up with this pattern? Politicians gaining on American's loss. Common sense tells me.............this is happening on Obama's watch. The republicans were not affecting his performance when he "first" took office and made the decision for health care rather than jobs. Vote him out in 2012..............th​at is.......if we make it until then! Washington is holding Americans hostage controlling their money. I think they call it "big government". Vote for change in 2012, let your voice be heard.
Nov 15, 2011 12:44PM
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If we legalize pot, that would free up a bunch of prison space.  Then we'd have plenty of room to lock up those sickos like Sandusky and throw away the key.
Nov 15, 2011 8:55AM
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With each day that passes, more an more investors are figuring out that Bank of America is currently in the process of a Dodd  / Frank liquidation / bankruptcy.  Buffet's "buy in" was merely a government guaranteed short term loan to hem them stabilize to get the process going.

BAC below 6 today.  This time for good.....

Perhaps Buffet will just buy them out outright once the price is low enough.

Nov 15, 2011 2:01PM
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Anyone care to comment specifically and with contrast / comparison arguments based on fact  how the USA is better off because of  criminalization and outlawing Hemp? Consider this Factual Personal experience which seems to follow the narrow focus here:

As a long time Hospice Volunteer, I have seen first hand the therapeutic benefit. A fairly young person (I will call them Pat - mid 30's) with only a few weeks to live was dying of stomach cancer, and smoked pot to control nausea. The first couple visits, Pat avoided his illegal medication because I was there, and Pat didn't want to cause trouble. It was heartbreaking to watch Pat try to drink even water; Pat would wretch and gag, and often throw up after a few swallows - solid food was out of the question. One day, Pats spouse/caregiver wanted to attend a family function that would take most of the day, and I was asked to stay over.

 

After several hours, pat tried to drink the liquid lunch that was prepared, but absolutely nothing would stay down. I've never felt so helpless watching the misery the cancer caused. Finally, Pat confessed and invited me to wait outside while Pat smoked the medicine. Afterward, the results were obvious; not only was Pat able to keep some nourishment down, but Pat actually looked reasonably comfortable - something I had not seen up to this point.

 

We then talked about the 'medicine' and how it actually worked compared to the liquid prescription 'pills' that came up faster than they went down. Pat was in no way mentally debilitated, and actually more alert and coherent with the nausea and pain temporarily controlled. It was like a tremendous weight had been lifted off Pat's shoulders. I explained that during Hospice training, we were told this issue may come up, and to use our best judgment; legally, they could make no other recommendation on how a Volunteer handled the situation, except we should not join in.

 

Pat died a couple weeks later, and I came away with a new understanding of how misguided laws and regulations can can cause misery and pain, and deny a dying person comfort and relief by outlawing a simple activity that can measurably improve the quality of a diseased and/or soon to be ending life. Where is the compassion and where is the humanity in criminalizing such an effective, proven, and well known medication? I think I know who the real criminals are now... 

Nov 15, 2011 9:53AM
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Well, this must save time. Just reissue the same story about (pick your country) in Europe's  bond problems and the U.S. market is opening lower, day after day.
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The Chinese are saying the PIIGS problem is now turning into a FROGS problem. France has now joined the troubled Euro zone countries in major trouble now. So the problem has morphed into a France,Roma,Other smaller EU countries,Greek and Spain problem.

The sad things is there is not enough money in the global economy to save the Euro. They are now going to need 5 trillion plus euros and they only have 440 billion euros to bail themselves out with. 

Seems like Europeans living high on the hog and frogs (no pun intended) on borrowed money is about to come to a sudden and painful stop.

Expect the new non elected leadership in Italy and Greece to put the screws to their standard of living. 
Nov 15, 2011 2:10PM
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Over the years, I've read a lot about hemp and it's uses, also watched documentaries, when they were interesting....Like China-M and a couple others have mentioned, Hemp is a very useful material Worldwide and has hundreds of uses....Well at least quite a few.

Because of synthetics, hemps usage around the world has dwindled.

 

Randolph Hearst and The DuPonts, had a lot to do with the outlawing of Hemp by connecting it to the close cousin marijuana or as some might say "one in the same."

These two and a few others had the Greatest influence in the Prohibtion of any member of the family Cannabis.

Hearst had HUGE timber holdings and paper mills and The Duponts were big into the synthetic replacement business........Need​ I say more...Yes, some need to do their research. 

Nov 15, 2011 11:58AM
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Why keep teasing us consumers? Just let the dam Oil rise to $150.00 a barrel and be done with it and completely ruin this economy and then watch the rich start bitc^ing when they have to pay over $10.00 a gallon to fill up their Hummers and BMW's and Austin Martins. As for the poor among us, It won't really matter as we all have never forgot how to ride our bicycles to get anywhere on this plant called earth and we can survive with a can of 3 in 1 oil.
Nov 15, 2011 12:19PM
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As bad as our economy is, the Greedy Bastards on Wall Street are intent on pushing oil over $100 a barrel with no basic fundamentals to justify it. Keep raising prices and I guarantee you that you will not like where it takes you as we the consumers will once again cut back on spending and any recovery that we had will be snuffed out by your stupidity and Greed. Remember people, our representatives in Washington that we voted in are not looking out for our best interests as they sit on their arses and let the speculators rape us with high prices. They are taking care of themselves and their rich millionaire friends on Wall Street and Big Oil. Come next election, vote these bums out on the street where they belong.
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Yea right.  Worry about Europe, heck we gave    $16,000,000,000,000.​​ 00    TRILLION DOLLARS out in the last 4 years, and are looking at over 4 Trillion a year now.  Dont put your head in the Sand,  WE ARE IN REAL BAAAAD  TROUBLE.   Lets face it now..........
The way our leaders see it as long as Buzz Bernanke can "prints monies to infinity and beyond" money is no object. They will just print their way out of debt.

And you should be happy your $300,000 house after they prints some more money will be worth $600,000 as the dollar would have lost half of it's value. Gas will go up to $10 a gallon.

That is the cool thing about printing money. Your currency can always drop in value. Soon instead of 77 yen to the dollar it will be 77 dollars to the yen. Only trouble is Japan is "prints monies to infinity and beyond" also so we are having a who can prints more monies war. We are winning as it use to be 80 yen to the dollar. 
Nov 15, 2011 11:30AM
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Well we've got PIIGS and Frogs, when are the rest of the animals going to attack. I knew they'd finally get us for putting them on the restaurant menu.
    Look out for the next revolt movement:  OCCUPY BARNYARD.

Nov 15, 2011 1:36PM
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Criminalizing hemp had the same effect as prohibition; it turned many honest, valued, law abiding citizens (taxpayers) into criminals and a burden on society, and made the Real criminals rich(er) and more powerful. It also unjustifiably serves as a wonderful scapegoat and diversion to avoid and redirect valid arguments. Hemp is a hearty crop with many useful and cost efficient uses other than ingestion (or burning) for euphoric effects. The most outspoken against Hemp are often the least well informed on the harm it does TO America, rather than what it could do FOR America.  
Nov 15, 2011 11:52AM
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One of the Houses the Three Little Pigs built, was made out of Hemp.

 

Big Bad Wolf just burned it down and all had a good time doing it.

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The benchmark 10-year Treasury was up 17/32, diluting the yield to 2.002%. The dollar was strengthening against a basket of currencies, with the dollar index up 0.42%.
How low can the yield go on the 10 year Treasury ?? 2 percent is pretty low and they are now running out of math like they did on the Fed Rate which is at zero now. 

Can it be that Bernanke will break the zero interest rate and create a T-bill with negative interest where you have to pay the government to hold the T bills for them???


Nov 15, 2011 12:45PM
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Where is John Corzine and why is no one demanding his head on a platter?  $600 million worth of client funds that are missing, a thousand people lose their jobs, and no one is demanding that he tells us what he knew and when he knew it.  Has he even been interviewed or interrogated yet?  It's public information that he's lawyered up, but there have been no statements, no suggestions, no apologies to MF Global clients.  The silence is deafening.  And where are the questions for Obama? - Corzine was his #1 fundraiser/bundler.   Not that Obama had anything to do with the bankruptcy, but you'd think someone somewhere might be interested in what Obama thought of the situation.  He was pretty quick to tell us that he thought the cops in Boston "acted stupidly", wonder if he'd say the same thing about Corzine.
Right after this story broke, I posted that nothing would come out of this.  Corzine is protected by the most powerful and corrupt man on the planet.  Obama and his sleazy crew will simply ignore this story.    With the media under control of the Obama Left, most Americans will not even hear about this story again in a few days.  A month from now, this story will be gone. 
Nov 15, 2011 10:50AM
Nov 15, 2011 12:26PM
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I find the pending decline and collapse fascinating to behold. China is flipping the script. After centuries of being taken advantage of, they will soon be in a situation where all they will need to do is sit back and collect the debt payments of Europe and the USA. They will be collecting trillions in revenues on the backs of our (and our children's, children) labor. They will also gain in recapitalization. Recapitalization (in the business world) means swapping debt for equity. That is, investors give-up bonds (debt) in exchange for equity (ownership). When you give-up equity, you give-up sovereignty, independence and liberty. It will be interesting to see how this all unfolds.

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