US STOCKS-Wall St to open slightly lower after jobs, GDP data - Reuters UK US STOCKS-Wall St to open slightly lower after jobs, GDP data - Reuters UK

Thursday, May 31, 2012

US STOCKS-Wall St to open slightly lower after jobs, GDP data - Reuters UK

US STOCKS-Wall St to open slightly lower after jobs, GDP data - Reuters UK

Thu May 31, 2012 2:21pm BST

* Initial claims rise, ADP below expectations

* GDP revised downward

* Costco slips after same-store sales miss expectations

* Futures up: Dow 21 pts, S&P up 2.1 pts, Nasdaq 1 pt (Adds quote, updates prices)

By Chuck Mikolajczak

NEW YORK, May 31 (Reuters) - U.S. stocks were set for a slightly lower open on Thursday, after data pointed to an economy that may have stalled while investors grapple with the euro zone's debt crisis.

A report by private payrolls processor ADP showed private employers created 133,000 jobs in May, fewer than the expected 148,000 while new claims for unemployment benefits rose by 10,000 for the fourth straight weekly increase. The data comes ahead of Friday's key payrolls report.

Commerce Department data showed economic growth in the United States was slightly slower than initially thought as gross domestic product was revised down to a 1.9 percent annual rate from last month's 2.2 percent estimate.

"The markets have become less optimistic and much more accustomed to seeing numbers that are just not impressive," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"It is clear the markets are pricing in a substantial slowdown moving forward in terms of GDP growth, employment gains, productivity gains - it's not encouraging for bulls."

The S&P 500 fell 1.4 percent on Wednesday, its biggest decline since May 17, as anxiety over the euro zone's fiscal crisis sent investors away from riskier assets and into safe havens such as U.S. Treasury bonds. The CBOE volatility index, a gauge of market anxiety, jumped 14.8 percent, its largest daily gain in almost three months.

European shares, which had steadied, turned negative after the U.S data. The FTSEurofirst 300 was off 0.1 percent.

The European Central Bank increased pressure for a joint fund to guarantee bank deposits in the euro zone, saying the region needed new tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.

The benchmark S&P index is on pace for its worst monthly decline since September on increasing concern over the euro zone's debt crisis and a spate of tepid domestic economic data.

U.S. equities have been closely linked to the fortunes of the euro, with the 50-day correlation between the currency and the S&P 500 at 0.92. Expectations of an Irish vote in favor of Europe's fiscal pact helped the euro recover from a near two-year low against the dollar.

S&P 500 futures rose 2.1 points and were just below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Dow Jones industrial average futures rose 21 points and Nasdaq 100 futures rose 1 point.

Other data on Thursday includes the May index of manufacturing activity from the Institute for Supply Management Chicago at 9:45 a.m. (1345 GMT). Economists in a Reuters survey forecast a reading of 56.5 compared with 56.2 in April.

Retailers will be in focus as they report monthly same-store sales results. Several top retailers reported stronger-than-expected sales in May, as shoppers overcame growing anxiety about the U.S. economy and the job market.

Target Corp advanced 0.7 percent in premarket after posting better-than-expected May same-store sales.

Ciena Corp climbed 5.4 percent to $12.49 in premarket after the network equipment company posted a surprise second-quarter adjusted profit.

Joy Global Inc slipped 4 percent to $56.70 premarket after the mining equipment maker said it expects order rate to moderate and revenue to remain flat for the next few quarters. (Editing by Bernadette Baum, Dave Zimmerman)



Bankia SA : Money flies out of Spain, regions pressured - 4-traders (press release)
05/31/2012 | 05:22pm

Spaniards alarmed by the dire state of their banks are squirreling money abroad at the fastest rate since records began, figures showed on Thursday, and the credit ratings of eight regions were cut.


Spain is the next country in the firing line of the euro zone's debt crisis, with spendthrift regions and shaky banks threatening to blow a hole in state finances and pushing funding costs towards levels that signal the need for a bailout.

The European Commission gave new help on Wednesday, offering direct aid from a euro zone rescue fund to recapitalize Spanish banks and more time for Madrid to reduce its budget deficit.

That helped lower the risk premium investors demand to hold Spanish 10-year debt rather than the German benchmark on Thursday, but it remained close to the euro-era record, at 520 basis points.

Bank of Spain data showed a net 66.2 billion euros ($82.0 billion) was sent abroad last month, the most since records began in 1990. The figure compares to a 5.4 billion net entry of funds during the same month one year ago.

Spaniards are worried about the health of their banks, hit by their exposure to a 2008 property crash, and have been sending money to deposit accounts in stronger economies of northern Europe.

Spain's Economy Minister Luis de Guindos however said the data was more a reflection of the troubles of the banking sector to fund itself externally than deposits flying abroad.

The capital flight data predates the nationalization of Spain's fourth biggest lender Bankia in May when it became clear the bank could not handle losses from bad real estate investments, compounded by a recession.

Spain's centre-right government has contracted independent auditors to assess the health of its financial system in an effort to restore faith in its banks.

Spain must lay out its restructuring plans for Bankia to the European Commission (EC), a spokesman for the EU executive arm said on Thursday. He added that a domestic solution to the country's bank crisis would be better than a European rescue.

The government said on Wednesday it would finance a 23.5 billion euro rescue of the bank through the bank fund, FROB but senior debt bankers said that the syndicated bond market is currently closed for Spanish agencies.

REMOVING UNCERTAINTIES

The prospect that Spain might not be able to handle losses at its banks has pummeled shares and the euro, although both regained some stability on Thursday.

De Guindos said that the future of the euro would be at stake in the next few weeks in Spain and Italy, adding that the rumors that Spain was negotiating financial assistance with the International Monetary Fund were "complete nonsense."

"The battle of the euro is being fought right now in Spain and Italy," he said at an event in Sitges, in the north-eastern region of Catalonia.

He also said Germany should help correct imbalances in the euro zone created by a loose monetary policy over the last decade and by the non-respect by Berlin of the stability and growth pact in 2003.

"We need to correct decisions which favored Germany... Germany has to assume its part," he said, adding that decisions in this respect would be taken in the next few days.

The Spanish government also hopes to clear doubts on Friday about how it plans to ease financing problems among its 17 autonomous regions.

Treasury ministry sources said a mechanism to back the regions' debt would be agreed at the weekly cabinet meeting and figures showing they were on track to meet their spending cuts targets would be released.

Fitch Ratings downgraded eight regions on Thursday, warning that a failure from the government to adopt new measures would result in further ratings cuts.

Spain's Deputy Prime Minister Soraya Saenz de Santamaria was meeting U.S. Treasury Secretary Timothy Geithner and International Monetary Fund Director General Christine Lagarde in Washington on Thursday.

The deputy PM will outline Spain's measures to tackle its crisis during the meetings, which were scheduled before Spain's situation reached boiling point, a government spokesman said. ($1 = 0.8069 euros)

(Writing by Julien Toyer; Editing by Diana Abdallah)

By Nigel Davies and Sonya Dowsett



Stocks close out worst May in two years - Chicago Sun-Times
Story Image

Traders work on the floor of the New York Stock Exchange Wednesday, May 30, 2012. Fearing a financial rupture in Europe, investors around the world fled from risk Wednesday. In the United States, where concerns about Europe have already wiped out most of this year's gains for stocks, major averages fell more than 1 percent. The Dow Jones industrial average was down as much as 184 points. European stocks lost even more, and the euro dropped below $1.24, its lowest point since the summer of 2010. (AP Photo/Richard Drew)

Updated: May 31, 2012 4:23PM

NEW YORK (AP) — They sold in May and went away, all right.

With a disappointing finish on Thursday, the stock market closed what was by some measures its worst month in two years. Over five dismal weeks, Facebook fizzled, a debt crisis in Europe loomed, and nobody was in the mood to buy.

When May was mercifully over, the Dow Jones industrial average and other major indexes had erased most of the strong gains they built up through March and held on to in April.

“The sentiment has changed,” said Craig Callahan, co-founder and president of ICON Advisers in Denver. “Any time the market dips like this, it erodes some confidence. It scares people out of the market. All of the above, May has done that.”

The Wall Street adage that investors should “sell in May and go away” may not be sound strategy all the time — many financial advisers say it’s foolish — but this year it looked like good advice.

The Dow lost 820 points for the month, its worst showing since May 2010. That month, investors were spooked by a one-day “flash crash” in stocks when a large trade overwhelmed computer servers.

This May, stocks limped to the finish. The Dow closed down 26.41 points on Thursday to end the month at 12,393.45. It declined on all but five of 22 trading sessions.

The Standard & Poor’s 500 index dropped 2.99 points to close at 1,310.33. It fell 6.3 percent in May, its worst month since September. The Nasdaq composite index fell 10.02 points to 2,827.34, and had its worst month in two years.

On Thursday, investors latched on to a sliver of good news in the morning: May sales from retailers like Target and Macy’s looked healthy, and sent stock futures higher.

Then the government offered two unpleasant pieces of economic data. The number of people applying for unemployment benefits rose to a five-week high, and economic growth from January through March was slower than first thought.

Underscoring the crisis in Europe, the head of the European Central Bank, Mario Draghi, told European leaders that the setup of the 17-country euro currency union was unsustainable “unless further steps are taken.”

The Dow was down as much as 103 points and up as much as 70 before ending slightly lower. Energy companies were the worst performers for the day and the month. The price of oil, which ended April at almost $105, ended May at $86.53.

Worried about Europe and the weaker readings on the U.S. economy, investors continued a stampede Thursday into U.S. government bonds, which they see as a safer place to put their money.

The yield on the benchmark 10-year U.S. Treasury note tumbled to its lowest level on record, 1.54 percent. The yield rose later in the day to 1.57 percent. It was 1.62 percent on Wednesday.

The 10-year Treasury yield was 1.55 percent in November 1945, after the end of World War II, when government price controls kept interest rates down to preserve financial stability.

In the stock market, the “sell in May” strategy posits that investors can make more money by sitting out the summer and early fall, when prices tend to languish.

The math is compelling. From 1926 through last year, the S&P 500 rose an average 4.3 percent in the six months of May through October, versus 7.1 percent in November through April.

The problem, critics point out, is that stocks move widely above and below their averages from year to year.

One researcher, Larry Swedroe of Buckingham Asset Management, found that “sell in May” beat an ordinary strategy of buying and holding stocks if you started investing in 1960, 1970 and 2000, but not if you started in 1950, 1980 or 1990.

But this time, at least, it would have worked. Investors who bought stocks exactly according to the Dow last Nov. 1 and sold them on April 30 would have gained 13 percent. Investors who held on through May would have seen those gains cut in half.

For the calendar year, the limp May left the Dow up 1.4 percent, the S&P up 4.2 percent and the Nasdaq up 8.5 percent. Two months ago, all three indexes were up more than twice as much.

The month’s most spectacular market blunder was Facebook, which debuted on the Nasdaq exchange May 18 at $38 a share. By Thursday’s close it had fallen more than $8 from there.

The stock’s first day was complicated by technical problems at the Nasdaq, and questions later emerged about whether Morgan Stanley, which helped take the company public, had offered some clients better information about the stock.

JPMorgan Chase stock lost 23 percent of its value during the month after the bank disclosed a surprise trading loss of $2 billion or more — a black eye for CEO Jamie Dimon, who has built a reputation as a master of risk management.

Then there was Europe. Troubles in Greece dominated headlines for much of the month, but Spain has been the market’s albatross this week. It will have to spend almost $24 billion to bail out one of its biggest banks.

There is still no agreement over how to solve the crisis: Stronger countries like Germany want governments to cut spending, but voters in weaker countries like Greece have shown they are in no mood for more fiscal pain.

On Thursday, the European Union demanded that Spain provide more details about how it plans to finance the overhaul of its banking sector.

Spain’s key stock market index was flat, while Greece rose nearly 3 percent. Borrowing rates for Spain fell somewhat, suggesting investors were feeling a little better about that country’s finances.

“Greece is a failed chemistry experiment,” said Michael Strauss, chief investment strategist at the Commonfund investment firm in Connecticut. “But we are more worried about Spain because of its size and the scope.”

Strauss said he advised clients to take money out of stocks in early spring, when the S&P was above 1,400, or about 90 points higher than where it closed Thursday.

Strauss expects the index to return to 1,385 before the year is over, though he cautioned those gains might not last.

May’s results are a familiar template. In both 2010 and 2011, the market rose for several months before falling in May because of concerns about debt in Europe.

Linda Duessel, market strategist at Federated Investors in Pittsburgh, argued that this May’s declines were only natural after the run-up at the beginning of the year.

“After you get a good run, you get a correction,” Duessel said. “Corrections are a very normal part of the cycle.”

Among the stocks making big moves Thursday:

— Talbots, the women’s clothing chain, rose $1.15, or almost 90 percent, to $2.44 after announcing that it will be bought by a private company, Sycamore Partners.

— TiVo, the maker of digital video recorders, fell 42 cents, or 4.7 percent, to $8.54 after posting a first-quarter loss.



Stocks on track for worst month of the year - KSAT 12
NEW YORK (CNNMoney) -

U.S. stocks finished in the red Thursday, ending a wretched month on a weak note.

"May is always a difficult month for the market, and this month has lived up to that reputation," said Fred Dickson, chief market strategist at D.A. Davidson, noting that the market has suffered declines in May for three out of the last four years.

This month's sell-off was sparked by escalating concerns about the eurozone debt crisis, with Spain and Greece keeping contagion worries front and center, as well as fears about a slowing U.S. economy. CNNMoney's Fear & Greed Index, which measures investor sentiment, has remained firmly in "extreme fear" territory for more than two weeks.

The Dow and S&P 500 dropped more than 6% in May. In fact, the Dow only booked five positive days this month. The last time this occurred was in January 1968. Meanwhile, the Nasdaq has declined more 7%.

The Dow and Nasdaq logged the worst monthly performance since May 2010, when investors were spooked by the Flash Crash, while the S&P 500 posted its biggest monthly loss since September 2011.

As stocks have tumbled, investors have rushed toward the safety of U.S. Treasuries, pushing the 10-year yield to record lows.

Thursday's market moves were driven by a batch of weak U.S. economic data, including reports on initial jobless claims and regional manufacturing, which cast a cloud over hopes that the domestic economy is improving.

Meanwhile, gross domestic product growth for the first quarter was revised lower to a 1.9% annual rate.

The Dow Jones industrial average finished down 26 points, or 0.2%. The S&P 500 lost 3 points, or 0.2%, and the Nasdaq shed 10 points, or 0.4%.

"The market environment is very fragile, and investor nerves are very fragile," said Dickson. "We're seeing immediate reactions to pieces of economic data and incremental news regarding Europe's banks and broader fiscal problems. Lacking a positive fundamental background, buyers are stepping back even though market valuations look compelling."

Investors also continue to keep tabs on Europe's debt crisis.

Worries about Spain not being able to fund bank bailouts, which could reach a cost of as much as €100 billion, continue to build. The yield on 10-year Spanish debt soared to 6.6% Wednesday, but retreated slightly Thursday.

The International Monetary Fund said it will begin its annual economic review of Spain next Monday.

Investors are also keeping a close eye on Greece, ahead of the country's elections next month, amid concerns that Greek voters could reject austerity measures, which would force their country out of the eurozone.

U.S. stocks also fell sharply Wednesday on heightened concerns about Europe's debt crisis.

Economy: A report on private-sector hiring from payroll services firm ADP showed a gain of 133,000 jobs, less than the 157,000 forecast by economists.

Additionally, the number of people filing for first-time unemployment benefits in the U.S. rose 10,000 to 383,000 in the latest week, which was higher than the expected 368,000 forecast by analysts.

The latest batch of jobs reports came before the government's closely watched monthly jobs report, which is due Friday. Analysts surveyed by CNNMoney expect that the U.S. economy added 150,000 jobs in May, including 12,000 government cuts. The unemployment rate is expected to stay at 8.1%.

The Chicago Purchasing Managers Index, which tracks manufacturing activity in much of the Midwest, fell for a third straight month to 52.7, the lowest level since May 2009. The index was expected to come in at 57 for May, up from 56.2 in the month prior. The report is seen as an indicator of what will happen with the national reading on manufacturing from the Institute of Supply Management, due Friday.

Foreclosures accounted for for 26% of home sales during the first three months of the year, according to a report released Thursday by RealtyTrac.

Companies: Shares of Joy Global fell after the mining equipment maker easily beat forecasts but lowered its guidance.

Networking equipment maker Ciena reported earnings that blew past analysts' estimates and issued a forecast in line with expectations, lifting shares.

Shares of TiVo fell after the DVR maker reported a larger-than-expected quarterly loss after the bell Wednesday.

Shares of Facebook hit a fresh low of $26.83 but managed to recover, ending the day up 5% at $29.60.

World Markets: European stocks ended mixed. Britain's FTSE 100 rose 0.2%, the DAX in Germany rose 0.3% and France's CAC 40 dropped 0.1%.



World stocks mixed ahead of Ireland referendum - Journal-News
By PAN PYLAS, The Associated Press Updated 8:31 AM Thursday, May 31, 2012

LONDON — Global stocks recovered their poise Thursday, though ongoing unease over Europe's crisis kept sentiment in check on the last day of a month that has seen renewed turmoil across all financial markets.

Over the past month, the financial and political problems afflicting Greece, Spain and the 17-country eurozone as a whole have weighed heavily on world markets. U.S. stocks are set to suffer their first negative month since last summer, oil prices have slid and the euro has fallen to a near two-year low against the dollar.

"As we round off the worst monthly performance since last August, equities are marginally higher," said Mike McFudden, head of derivatives at Interactive Investor. "However, in the absence of decisive action to stem the rot in the eurozone sellers should reconvene soon enough."

In Europe, the FTSE 100 index of leading British shares was up 0.7 percent at 5,335 while Germany's DAX rose 0.3 percent to 6,289. The CAC-40 in France was 0.6 percent higher at 3,033.

Wall Street was poised for a solid opening with both Dow futures and the broader S&P 500 futures up 0.3 percent.

The debt crisis in Europe will likely remain the main focus of attention in the markets in June too, not least because Greece goes to the polls again in a general election that is widely-viewed as a referendum on the country's continued use of the euro.

Though opinion polls show that four in five Greeks want to retain the euro, others show that there's a split in support for parties that support the country's international bailout commitments and those that don't. The worry in the markets is that the anti-austerity parties will win, prompting a halt in Greece's bailout, which could lead to its bankruptcy and eventual exit from the eurozone.

Though Greece is the epicenter of the debt crisis, Spain has been a growing source of worry over recent weeks. Its banking system is under the microscope, especially after Bankia, the country's fourth-largest lender, last week announced it needed €19 billion ($23.8 billion) in state aid.

Investors are worried that Bankia's woes might be replicated across Spain's banking sector, which has suffered badly from the collapse of the construction sector. An economic recession and unemployment at almost 25 percent are fueling concern that the country will become the fourth euro country to be bailed out after Greece, Ireland and Portugal.

The problem for the eurozone is that Spain's economy alone is double the size of the three countries already bailed-out, and investors are skeptical whether a rescue operation can be mounted. The yield, or interest rate, on Spain's ten-year bond is around the 6.5 percent mark, and not far from the 7 percent threshold that is considered to be unsustainable in the long-run and eventually forced the other three bailouts.

Increasing numbers of experts say that the euro, in its current form, cannot survive.

"We may just be approaching the endgame where either the eurozone and/or the European Central Bank takes action to stem the bleeding or the whole thing collapses, with the trigger point being the trend in Spanish bond yields," said Gary Jenkins, managing director of Swordfish Research.

Ireland will hold a referendum on Thursday to decide whether the country should adopt Europe's newly-agreed fiscal treaty to put tough controls on governments' budget spending. The referendum is expected to approve the treaty, but similar polls were proved wrong when Ireland voted to reject the EU's last two treaties in 2001 and 2008.

A "no" vote would mainly damage Ireland itself, because its existing loans will run dry by the end of 2013 — and the treaty restricts future access to the EU's rescue fund to those nations that accept the new budget rules. Other eurozone countries would still be able to adopt the treaty even if Ireland rejects it.

In the currency markets, the euro recouped some recent losses, trading 0.2 percent higher at $1.24. On Wednesday, Europe's single currency fell to $1.2368, its lowest level since July 2010.

Earlier, Asian stocks fell sharply, tracking developments in Europe and the U.S. the previous day.

Japan's Nikkei 225 index tumbled 1.1 percent to close at 8,542.73, its lowest finish since mid-January. Hong Kong's Hang Seng lost 0.3 percent to 18,629.52 and South Korea's Kospi was down marginally at 1,843.47.

Oil prices recovered modestly too, with benchmark oil for July delivery up 14 cents to $87.96 per barrel in electronic trading on the New York Mercantile Exchange.

_____

Pamela Sampson in Bangkok contributed to this report.

___

May 31, 2012 12:24 PM EDT

Copyright 2012, The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.



Materials Stocks Have Taken a Beating, But I’m Still Bullish - Investorplace.com

It’s been night and day for materials stocks in 2012. Many stocks in this sector popped early in the year, but have dropped hard recently to right where they were back in December.

So what’s going on? Simply put, many investors are worried the recovery is running out of gas — or worse, that it never was a recovery at all.

As America struggles, regions of Europe slip into recession and China starts to slow down, many are afraid materials companies will see already meager demand dry up and send these companies even lower.

That’s nonsense.

Consider this: Alcoa (NYSE:AA) hasn’t traded under $8.40 since May 2009. And ArcelorMittal (NYSE:MT) hasn’t traded this low since 2004!

Do we really think these companies are worse off now than back then? Do we really want to ignore that when Alcoa was last priced this low in 2009, as demand was weak and the company was restructuring, it delivered a 35% gain across the next 12 months?

I just don’t get it. Yes, there are many risks to the global economy out there. Yes, we’ve known about weak aluminum and steel demand for years. Yes, we’ve been on the eurozone death watch for months. The story of China’s slowdown, the softness in housing … I get it.

But what’s new here?

Rather than focus on old headlines, I’m interested in the momentum that Alcoa and ArcelorMittal are gaining compared with their crisis-level lows. And you should be too, now that shares are priced at the same levels or lower.

Consider that Alcoa slashed its global work force by 13% in 2009, laying off a massive 13,500 workers. ArcelorMittal also laid off thousands of workers in 2009, cutting output to just 70% of capacity back then and regularly idling facilities to bleed down oversupply ever since.

The restructuring has made both companies soundly profitable once more. And believe it or not, they actually are seeing glimmers of growth.

Alcoa has seen nine straight quarters of year-over-year revenue increases. ArcelorMittal has seen seven in a row. Admittedly, both stocks are forecast to see slight earnings declines in 2012 compared with 2011 if forecasts hold — but those numbers are light-years ahead of 2009. Also, both AA and MT are right around 52-week lows, so it’s hardly like you’re buying a top before a flop.

More good stuff for ArcelorMittal: The steel giant has a forward P/E of less than 5 right now — and a 4.5% dividend to boot!

And for Alcoa: Aluminum buyers in Japan, Asia’s largest importer, just agreed to pay a record premium to aluminum producers next quarter as the nation continues to ramp up its industries and rebuilds in the wake of the disastrous earthquake and tsunami last year. This reinforces my belief that between baseline demand and minimal output, base metal prices like aluminum and steel have nowhere to go but up.

There are risks in these stocks, to be sure. Lingering conflicts between management and union efforts at ArcelorMittal threaten disruptions to the business or increased labor costs. And Alcoa posted its first quarterly loss since 2009 in its fiscal fourth quarter as metal prices tumbled.

There also are some bigger-picture risks to acknowledge for these stocks and the sector in general:

  • Materials stocks are volatile, so even if we see a rally in these stocks across the next few months, it might not last long — as we saw with the jump in the first eight weeks of the year that evaporated just as quickly.
  • Inflation and the dollar can have a big factor on metal prices and the profitability of these companies. Many people (justifiably) think that the dollar’s current strength is simply due to the disaster in Europe rather than the merit of the U.S. itself, and it will only take a few more stupid debt ceiling headlines to change that in a hurry.
  • As many will point out, some of the previous rallies in equities were based on Fed action or sentiment rallies, so investing based on logical assumptions or fundamental trends might never amount to anything.
  • Then there are the Armageddon scenarios where a eurozone meltdown obliterates the global economy — but if you believe that’s the case, frankly, you should be building a bunker instead of reading this article.

However, even with those factors in play, I think the bottom line is that materials stocks like Alcoa and ArcelorMittal are the ultimate cyclical stocks. When the economy ramps up, construction rebounds and durable goods are in demand, these companies will take off.

I, for one, think that a year or two from now we will be in a true self-sustaining recovery — and that means AA and MT are bargains.

Maybe you think it’s a Pollyanna outlook to expect that a recovery is coming at all in the next few years, or maybe you think it’s na├»ve to say Alcoa and Arcellor Mittal have “right-sized” themselves enough to weather any short-term difficulties in the next six months. If so, I would love to hear from you and have you make your case. Please share your thoughts below in the comment section or drop me a line at editor@investorplace.com.

But to me, I think it’s a relatively low-risk investment to tread water in AA or MT and wait for sunnier times to lift shares. That’s why I personally own Alcoa stock and think AA is your best stock to hold for the rest of 2012.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace​​.com or follow him on Twitter via @JeffReevesIP. As of this writing, Jeff Reeves owned a position in AA.



US STOCKS-Wall St closes dire month with a whimper - Reuters

Thu May 31, 2012 4:50pm EDT

* S&P 500 posts largest monthly loss since September

* U.S. data raises concerns about Friday's payrolls number

* Indexes down: Dow 0.21 pct, S&P 0.23 pct, Nasdaq 0.35 pct

By Rodrigo Campos

NEW YORK, May 31 (Reuters) - U.S. stocks fell modestly on Thursday to close out the worst month since September as investor sentiment sank on Europe's deepening credit problems.

The broad S&P 500 index fell 6.3 percent in May, its largest percentage drop since September. The Dow's 6.2 percent drop and Nasdaq's 7.2 percent loss are their largest monthly declines in two years.

Spain was at the center of the latest European developments as markets judged Madrid's government would sooner or later have to ask for outside help for its banks. A report, later denied, of possible plans to assist Spain with its troubled banks helped Wall Street nearly erase losses of 1 percent in the afternoon.

Market participants cited month-end rebalancing as also supporting stocks due to money managers buying more shares to make up for the declining value of equities during May.

However, the continuing worry over Europe and a batch of disappointing U.S. economic figures weighed on the market. Jobless claims rose for the seventh week in eight, putting investors on edge before Friday's U.S. monthly payrolls report.

"Europe is the main issue, no question about it, but you have a supporting cast from the U.S. data," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.

The Dow Jones industrial average dropped 26.41 points, or 0.21 percent, to 12,393.45. The S&P 500 Index fell 2.99 points, or 0.23 percent, to 1,310.33. The Nasdaq Composite lost 10.02 points, or 0.35 percent, to 2,827.34.

Shares of U.S. Steel dropped 5.1 percent to $20.30 and Cliffs Natural Resources fell 6.1 percent to $47.78 as energy and materials company shares led declines on the S&P 500.

Commodity prices fell with the euro at 23-month lows against the U.S. dollar. The greenback weakened sharply versus the yen, a sign that investors were moving money into perceived safe havens.

Private payroll growth accelerated only slightly last month and claims for jobless benefits rose last week, suggesting the labor market recovery was stalling.

A disappointing number in Friday's report would further damp market sentiment, but it could also bring back talk of further stimulus by the U.S. Federal Reserve.

Shares of TJX Cos rose 2.7 percent to $42.46 after the low-price retailer was among those to report sales at stores open at least a year that beat Wall Street forecasts.

Ciena Corp climbed 14.1 percent to $13.55 after the network equipment company posted a surprise second-quarter adjusted profit.

Joy Global Inc slumped 5.1 percent to $55.86 after the mining equipment maker cut forecasts.

Facebook Inc shares hit a fresh intraday low of $26.83 before bouncing back to close up 5 percent at $29.60. The social networking company has fallen in six of its nine trading sessions.

In other data, the Commerce Department said first-quarter economic growth in the United States was slightly slower than initially thought and the Institute for Supply Management-Chicago business barometer fell in April to its lowest level since September 2009.

Almost 8 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, sharply above the daily average of 6.83 billion so far this year.

Declining issues beat advancing issues on the NYSE by 1552 to 1430 while on the Nasdaq 13 issues fell for every 12 that rose.



Bank stocks hurt after surprise $2B JPMorgan loss - Yahoo Finance

WASHINGTON (AP) -- JPMorgan Chase stock lost more than 8 percent of its value Friday after the bank, the largest in the United States, revealed a monster $2 billion loss in a trading group that manages the risks the bank takes with its own money.

More than three years after the financial crisis, the surprise disclosure quickly revived debate about whether banks can be trusted to handle risk on their own.

Sen. Carl Levin, D-Mich., chair of a subcommittee that investigated the crisis, said the loss was "just the latest evidence that what banks call 'hedges' are often risky bets that so-called 'too big to fail' banks have no business making."

The head of the Securities and Exchange Commission, Mary Schapiro, told reporters that the agency was focused on the JPMorgan loss but declined to comment further.

Some analysts were skeptical that the trading was designed to protect against JPMorgan's own losses, as CEO Jamie Dimon contended Thursday in a conference call with stock analysts and reporters.

The analysts said the bank appeared to have been betting for its own benefit, a practice known as "proprietary trading."

Dimon said the type of trading that led to the $2 billion loss would not be banned by the so-called Volcker rule, which is still being written and is expected to ban certain types of trading by banks with their own money.

The Federal Reserve said last month that it would begin enforcing that rule in July 2014. Bank executives, including Dimon, have argued for weaker rules and broader exemptions.

JPMorgan has been a strong critic of provisions that would have made this loss less likely, said Michael Greenberger, former enforcement director of the Commodity Futures Trading Commission, which regulates some derivatives.

"These instruments are not regularly and efficiently priced, and a company can wake up one day, as AIG did in 2008, and find out they're in a terrific hole. It can just blow up overnight," said Greenberger, a professor at the University of Maryland.

On Friday, bank stocks were hammered in Britain and the United States, partly because of fear that the JPMorgan loss would lead to tougher regulation of financial institutions.

JPMorgan stock was down 8.2 percent in early trading on Wall Street. It was down more than $3, and by itself shaved 25 points off the Dow Jones industrial average, which was up about 30 points on the day.

In Britain, shares of Barclays and Royal Bank of Scotland were down more than 2 percent.

JPMorgan stock was the hardest hit, but its American counterparts suffered, too: Morgan Stanley was down 4 percent, and Goldman Sachs and Citigroup each lost more than 3 percent.

Stock analysts said that bank stocks were hurt mostly because of regulatory fear, not because there was reason to believe other banks would discover similar losses.

"The regulatory and political environment is already a headwind, and clearly this doesn't help," Deutsche Bank said in a note to clients.

The trading loss was an embarrassment for JPMorgan, which came through the 2008 financial crisis in much better health than its peers. It kept clear of risky investments that hurt many other banks.

The loss came over the past six weeks in a portfolio of the complex financial instruments known as derivatives, and in a division JPMorgan says was supposed to control its exposure to risk in the financial markets.

"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," Dimon told reporters on Thursday. "There were many errors, sloppiness and bad judgment."

Bloomberg News reported in April that a single JPMorgan trader in London, known in the bond market as "the London whale," was making such large trades that he was moving prices in the $10 trillion market.

Dimon said the losses were "somewhat related" to that story, but seemed to suggest that the problem was broader. Dimon also said the company had "acted too defensively," and should have looked into the division more closely.

The Wall Street Journal reported last month that JPMorgan had invested heavily in an index of credit-default swaps, insurance-like products that protect against default by bond issuers.

Hedge funds were betting that the index would lose value, forcing JPMorgan to sell investments at a loss. The losses came in part because financial markets have been far more volatile since the end of March.

Partly because of the $2 billion trading loss, JPMorgan said it expects a loss of $800 million this quarter for a segment of its business known as corporate and private equity. It had planned on a profit for the segment of $200 million.

The loss is expected to hurt JPMorgan's overall earnings for the second quarter, which ends June 30.

"We will admit it, we will learn from it, we will fix it, and we will move on," he said. Dimon spoke in a hastily scheduled conference call with stock analysts. Reporters were allowed to listen.

JPMorgan is trying to unload the portfolio in question in a "responsible" manner, Dimon said, to minimize the cost to its shareholders. Analysts said more losses were possible depending on market conditions.

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AP Business Writer Pallavi Gogoi contributed to this report. Daniel Wagner can be reached at www.twitter.com/wagnerreports.


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