At a time of record fuel demand, bountiful oil and natural gas, and expanding economies, no stocks are doing worse in the world than energy producers from BP Plc to Hess (HES) Corp.
The MSCI World Energy Index (MXWO) has declined 9.6 percent this year, more than any other group, according to data compiled by Bloomberg. The gauge has climbed 45 percent since equities bottomed in 2009, less than any industry with earnings tied to economic growth. In the U.S., the stocks are at the cheapest levels relative to the Standard & Poor’s 500 Index since 2009.
The divergence reflects the transformation of an industry where growing consumption of energy has been met with even bigger gains in supply. U.S. crude inventories are the highest since 1990 and natural gas prices have lost 38 percent in 12 months amid a glut spurred by hydraulic fracturing. Bears say energy producers, making up about 10 percent of global stocks, will keep equities from advancing. Bulls say the market will rally when their shares rebound.
“The S&P 500 (SPX) will have a tough time making meaningful progress until the energy sector bottoms and begins to move higher,” Jim Russell, the Cincinnati-based chief equity strategist at U.S. Bank Wealth Management, which oversees about $116 billion, said in a phone interview on June 20. “Even though the valuations of the stocks are cheap, the fundamentals have not yet bottomed.”
Stocks Decline
The MSCI World Index slipped 0.2 percent to 1,205.67 last week, while Houston-based Plains Exploration & Production Co. (PXP) and Encana Corp. (ECA), Canada’s biggest natural-gas producer, tumbled more than 9.8 percent. The S&P GSCI commodities gauge slid to the lowest level since 2010, bringing its loss since February to 21 percent, as manufacturing reports for the euro area and China indicated contractions. The S&P 500 fell 1.4 percent at 9:58 a.m. New York time today while the MSCI World lost 1.3 percent.
Energy stocks are trailing the S&P 500 by 43 percentage points since March 2009. Exxon Mobil Corp. (XOM) and Baker Hughes Inc. (BHI) are up less than 45 percent since then, while the U.S. equity gauge almost doubled. In the last bull market, which ended in October, 2007, the industry surged 242 percent, better than any industry and more than double the full index.
That rally occurred as earnings from oil and gas explorers and refiners climbed to 12.9 percent of overall S&P 500 profits in 2007, according to data compiled by Howard Silverblatt, a New York-based senior index analyst at S&P. The proportion has since fallen to 10.7 percent.
Profit Estimates
Energy companies are the only U.S. industry whose earnings forecasts have been revised from growth to contraction in 2012, based on more than 10,000 analyst estimates tracked by Bloomberg. Profits for the group will drop 5.8 percent, the projections show. In January, analysts predicted income would climb 2.2 percent. Earnings in the entire S&P 500 are forecast to grow 7.4 percent this year.
Since 2000, there had been two times when energy shares lagged behind the S&P 500 for four months or more, according to data compiled by Bloomberg. The U.S. equity benchmark fell on every occasion, with losses averaging 12 percent over the next three months. The last time the industry trailed for this long, the five months ended March 2010, the S&P 500 slumped as much as 16 percent from April through July.
Weaker Longer
“The energy sector might be weaker for longer,” Joseph Quinlan, New York-based chief market strategist with U.S. Trust, which oversees $333 billion in client assets, said in a June 20 phone interview. “It’s cyclically driven by weaker global demand and therefore weaker earnings outlook.”
Advances in technology that made it easier to find natural gas have pushed its price down as much as 86 percent during the past four years, reaching the lowest level in a decade in April. Horizontal drilling and hydraulic fracturing, a technology used to get petroleum and natural gas from shale-rock formations, have become standard extraction techniques in America.
The natural gas boom helped the U.S. meet 81 percent of its energy demand in 2011, the highest level since 1992, according to U.S. Energy Department data compiled by Bloomberg. The slump in gas prices prompted companies to try to offset falling profits by boosting spending on oil drilling.
Gas futures rose 6.4 percent last week to $2.625 per million British thermal units on the New York Mercantile Exchange. The contracts have fallen 12 percent in 2012.
Brent Crude
“A very large supply of natural gas is good news in a sense that we are actually getting energy independent as a country,” Dean Junkans, chief investment officer for the wealth management, brokerage and retirement units of San Francisco- based Wells Fargo & Co., which oversees $1.3 trillion in client assets, said in a June 20 telephone interview. “But that probably put pressure on oil price and the stocks of energy companies.”
Brent crude futures, the benchmark for two-thirds of the world’s oil, averaged $118.45 a barrel in the first quarter, up 12 percent from a year earlier. Oil in New York tumbled below $80 a barrel last week and Brent fell below $90 on concern demand will slow amid rising supplies.
The Organization of Petroleum Exporting Countries has exceeded its output limit of 30 million barrels a day this year as the prospect of sanctions against Iran, the group’s second- largest member, pushed Brent to a four-year high in March. In the U.S., production climbed 1.9 percent to 6.35 million barrels a day in the week ended June 15, the highest level since February 1999, according to a report from the Energy Department this month.
Oil Ratios
The S&P 500 Energy Index (S5ENRS) traded at 5.33 times the price of oil in the second quarter, according to data compiled by Bloomberg. That’s down from the average ratio of 7 in the past two decades.
The plunge in shares of fuel producers has reduced valuations to 9.68 times 12-month earnings, Bloomberg data show. That’s 28 percent below the S&P 500’s multiple of 13.5 and the widest discount since September 2009.
Jonathan Golub, the chief U.S. market strategist at UBS AG, said energy stocks are attractive. He boosted the industry to overweight from market weight, meaning investors should hold the shares more than their weight represented in benchmark indexes.
“We believe oil prices will rebound as macro concerns fade and prices become more closely driven by supply and demand,” Golub, based in New York, wrote in a June 18 note.
BP, Hess
Global oil consumption is forecast to reach a record 89.9 million barrels a day this year, according to the Paris-based International Energy Agency. The world economy may grow 2.3 percent in 2012 and 2.8 percent in 2013, based on the median estimate from economists surveyed by Bloomberg.
BP (BP/), Europe’s second-biggest oil producer, has dropped 12 percent this year. About a third of the 32 analysts covering the London-based BP have cut their 2012 profit forecasts during the past four weeks. That reduced the average income estimate to $1.06 a share, compared with $1.15 last year, according to data compiled by Bloomberg.
Hess fell 28 percent, more than three times the S&P 500 Energy Index. The New York-based oil company reported first- quarter earnings that missed estimates and lowered its oil- production estimate for the Bakken Shale formation in North Dakota. Almost half of the company’s market value has been wiped out in the past 12 months.
Exxon Earnings
Exxon, the world’s largest energy company, said a drop in U.S. natural gas prices hurt first-quarter profit by more than $300 million. Exxon’s production was 51 percent oil and 49 percent gas last year, according to data compiled by Bloomberg.
Six of the 19 analysts tracked by Bloomberg reduced their profit estimate for Irving, Texas-based Exxon in the past four weeks. Per-share income will probably fall 4.3 percent to $8.06, the first annual decline since 2009, analysts’ forecasts show. The stock has slid 6.2 percent from this year’s high in January.
The decline in energy shares has cost investors about $112 billion this year, according to data compiled by Bloomberg. The S&P 500 has rallied 97 percent since a 12-year low on March 9, 2009. Were energy stocks excluded, the benchmark measure would have surged 111 percent to 1,426, exceeding this year’s peak of 1,419.04, according to estimates by Birinyi Associates Inc., a Westport, Connecticut-based research and money-management firm.
“The market is going to continue to be challenged and volatile and energy is one of the components,” Stephen Wood, the New York-based chief market strategist for North America for Russell Investments, said in a phone interview on June 21. His firm oversees $155 billion. “In this environment, energy prices are a consequence, not a cause.”
To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
Egyptian stocks surge on Morsi victory - Financial Times
June 25, 2012 12:37 pm
Stocks head lower as Spain seeks help for banks - AP - msnbc.com
NEW YORK — Europe's latest efforts to quell its financial crisis left investors exasperated Monday, causing steep losses in stock markets on both sides of the Atlantic.
The Dow Jones industrial average dropped 154 points in early afternoon trading to 12,486, a loss of 1.2 percent. The broader Standard & Poor's 500 index fell even more, 1.7 percent.
In Europe, Spain formally asked help for its ailing banking system but its request left many questions unanswered, including how much of the $125 billion loan package offered by other European nations it needed. The uncertainty unsettled markets, pushing borrowing costs higher for Spain's government. Spain's stock market plunged 3.7 percent.
"Right now it's all about Europe, and confidence is pretty low," said Doug Cote, chief market strategist for ING Investment Management. "The policies that they proposing are too little too late."
Energy and bank stocks fell the most. Many analysts believe big banks would be the first to feel the hit of a freeze-up in Europe's financial system if Spain isn't able to convince bond markets that it can rescue its troubled banks. Spain's banks have been hobbled by a collapse of a real-estate bubble, and the country has been inconsistent about how much help it will need to keep its banks intact.
Bank of America dropped 4 percent, the biggest fall among the 30 stocks in the Dow Jones industrial average. BofA's stock lost 34 cents to $7.60. JPMorgan Chase fell $1.13 to $34.90 and Citigroup plunged $1.46 to $26.52.
Analysts worry that Europe's piecemeal approach to its spreading government debt crises could backfire, causing the banking system of a large country like Spain's to collapse. That could send shock waves through tightly connected global financial markets.
"It's the same headline risk that we've been dealing with for God knows how long," said Chip Cobb, senior vice president of Bryn Mawr Trust Asset Management in Pennsylvania. "Everybody wants something to happen sooner or later, and nothing's happening."
European leaders are gathering at the end of this week for another summit aimed at reining in the crisis, but market players remain skeptical that Germany will sign off on efforts to quell the crisis.
"What the market wants is action," said Cote. He said investors wanted to see steps toward binding the weak and stronger economies closer together in a fiscal union.
The dollar and Treasury prices rose as investors shifted money into low-risk investments. The yield on the 10-year Treasury note fell to 1.60 percent from 1.67 percent late Friday.
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In other trading, the S&P 500 index fell 23 points to 1,311. All but 13 of the stocks in the index fell, and all 10 of the index's industry groups fell. The Nasdaq composite lost 54 points to 2,838.
Energy stocks were also big losers after the price of crude oil fell again. Crude lost $1.54 a barrel to $78.22, continuing a slump that has brought the price down from $110 in late February. Exxon Mobil fell $1.45 to $80.66.
Energy prices have been falling as traders anticipate that slower growth in China and the lingering government debt crisis in Europe will drag down global economic growth and decrease demand for energy.
European markets closed sharply lower. Stocks are down 4 percent in Italy and 2 percent in both France and Germany. Shares of European banks including Spain's Banco Santander SA and Deutsche Bank AG sank.
Borrowing costs rose for Spain and Italy, a sign of skepticism that those countries will be able to pay their debts. The yield on Spain's 10-year government bond rose 0.16 percentage point to 6.58. That's dangerously close to the 7 percent level past which Greece and Portugal had to seek emergency loans from their European neighbors when their borrowing costs stayed above that level.
Among other stocks making big moves Monday:
— Teva Pharmaceutical Industries rose 6 percent after the drugmaker said a federal court reaffirmed patents protecting its multiple sclerosis treatment Copaxone. The stock rose $2.26 to $40.29.
— Chesapeake Energy dropped 8 percent after Reuters reported that the company colluded with a Canadian rival to suppress land prices in areas that were considered rich in oil and natural gas. The stock lost $1.52 to $17.09.
___
AP Business Writers Bernard Condon and Christina Rexrode contributed to this story.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
US STOCKS-Wall St tumbles on EU summit doubts - Reuters UK
* Spain formally asks for cash to bail out its banks
* May U.S. new-home sales rise to two-year high
* Chesapeake, rival plotted to suppress land prices; shares dip
* Indexes off: Dow 1.3 pct, S&P 1.8 pct, Nasdaq 2.1 pct (Updates to midday)
By Angela Moon
NEW YORK, June 25 (Reuters) - U.S. stocks fell on Monday as investors turned cautious ahead of a European Union summit this week that many fear will do little to calm concerns about the escalating euro zone debt crisis.
Energy and bank stocks led the decline on the S&P 500. U.S. crude futures dropped near last week's eight-month low, and news that Spain had requested help for its struggling banks pressured financial stocks.
The S&P 500 energy sector index was off 2.6 percent and the financial sector index lost 2.2 percent.
Among individual stocks, Chesapeake fell 8.3 percent to $17.06. Reuters reported that under the direction of Chief Executive Aubrey McClendon, the company plotted with its top competitor to suppress land prices in one of America's most promising oil and gas locations.
Spain formally requested euro zone rescue loans for up to 100 billion euros ($125 billion) to recapitalize its banks, saying the final amount of assistance would be set at a later stage. Some market economists say it is merely a prelude to a full bailout for Spain.
Spanish government bonds came under pressure with the 10-year bond yield 18 basis points higher at 6.53 percent, near the 7-percent mark that forced other indebted European countries to ask for bailouts.
Markets continue to react to European headlines as the spiraling debt crisis in Europe could further hurt a slowing global economy. Austerity measures pushed forward by Germany have Greece mired in a long recession. Investors worry Spain could follow Greece's path as Madrid's borrowing costs remain stubbornly high.
"Declining oil prices and near-record low bond yields indicate slowing global growth, while elevated sovereign credit spreads and a strong U.S. dollar suggest the European crisis is nowhere near being resolved," said Mandy Xu, equity derivatives strategist at Credit Suisse in New York.
The Dow Jones industrial average was down 165.48 points, or 1.31 percent, at 12,475.30. The Standard & Poor's 500 Index was down 24.05 points, or 1.80 percent, at 1,310.97. The Nasdaq Composite Index was down 60.61 points, or 2.10 percent, at 2,831.81.
The U.S. Supreme Court said on Monday it will rule on the constitutionality of a 2010 healthcare reform law on Thursday, the last day of the high court term. The Morgan Stanley healthcare payor index dropped 1.6 percent.
A European equity benchmark fell 1.5 percent and the dollar, seen as a safe-haven when European markets are volatile, rose as worries about global growth lingered after last week's soft data on manufacturing worldwide.
New U.S. single-family home sales surged in May to a seasonally adjusted 369,000-unit annual rate, the highest since April 2010, and prices rose from a year ago amid tightening supply. But the European concerns apparently overshadowed any positive impact as a homebuilding index fell 1.6 percent.
Shares of Bristol-Myers Squibb Co fell 4 percent and Pfizer Inc lost 1.6 percent after the companies announced their closely watched blood clot preventer failed to win approval from U.S. health regulators.
Wal-Mart Stores Inc > was the only gainer on the Dow. Walmart Canada said the company is opening of 47 hiring centers across Canada to support its growth plans. (Reporting By Angela Moon; Editing by Kenneth Barry)
Financial Executives: Tax Us Before We Kill Again! - Huffington Post
When an industry is all but begging you to tax it, maybe it's time to pay attention.
Dozens of financial executives, including expats from Goldman Sachs and JPMorgan Chase, have signed a letter suggesting to policy makers in the G20 and Europe that maybe they should impose a small tax on some of the reckless casino bets that banks and hedge funds are constantly making. Not because these people love taxes so much, but because they are apparently not giant fans of financial crises.
"As individuals with first-hand knowledge and significant experience in the financial industry, we urge you to introduce small financial transaction taxes (FTTs)," they wrote. "These taxes will rebalance financial markets away from a short-term trading mentality that has contributed to instability in our financial markets. They also have the potential to raise significant revenue."
They point out that the amount of trading in the world is now 70 times the size of the actual economy. So maybe not all of that trading is quite as beneficial to the world as opponents of transaction taxes, or any other curbs on the economy, would have you believe. In fact, tapping the brakes on financial markets with a tax could loosen high-speed traders' grip on financial markets, making something like a Flash Crash less likely.
"Concerns have been raised that FTTs could damage growth. But a growing body of evidence suggests that by reducing volatility and raising much needed revenue, the overall effect would be positive," the executives wrote.
They also confront the notion that curbs on trading would hinder "liquidity," which the financial industry always trots out whenever you want to regulate it. Liquidity, or the ability to trade stuff quickly and easily, is like a delicate unicorn, according to the anti-regulation view. Tweak its environment even slightly, and we'll all be eating cat food until the world ends.
The executives in the letter point out that enhanced liquidity has not really done the world many favors lately, and it certainly has not stopped investors from becoming ever-less trusting of financial markets.
"Critics have also wrongly associated trading volume with efficiency-enhancing liquidity and failed to sufficiently take into account market resilience and trust that are undermined in a world where very short-term trading dominates the financial system," the executives wrote.
The idea of a financial-transaction tax has been floated repeatedly in the wake of the latest crisis, as a way to maybe put the brakes on the sort of runaway market speculation that tends to end badly, while raising revenue to help pay for the next crisis. Democrats in Congress have proposed a tax that could raise $350 billion in new revenue, according to the the nonpartisan Joint Tax Committee. As you'd expect, Congress isn't exactly rushing to embrace the proposal.
There were hopes last year that President Obama might embrace the idea of a "Robin Hood tax" as a way to highlight his support for Main Street over Wall Street. But so far he has been silent.
The idea has gained a little more traction in Europe, where it is more politically popular. But the trouble is that nobody wants to be the first to impose such a tax, as it risks driving business overseas. So Europe is sort of waiting for everybody else to do it, too. This despite the fact that the U.K., China, Hong Kong and other locales already have small transaction taxes without turning their financial services industries into ghost towns, as John Fullerton of the Capital Institute, a nonprofit group lobbying for reform, has pointed out.
The idea of a transaction tax was most notably raised by John Maynard Keynes in the wake of the Great Depression. He wrote at the time that speculation isn't necessarily bad, but "the situation is serious when enterprise becomes the bubble on a whirlpool of speculation." One of these days the world might actually take his advice. Maybe after the next crisis?
Stocks, Euro Decline Before EU Summit as Treasuries Gain - Bloomberg
Stocks slid, while the euro weakened and Treasuries rose, amid concern a meeting of European leaders this week will fail to halt a debt crisis that threatens to drag U.S. corporate earnings to the first decline since 2009. Oil slumped while agricultural commodities rallied.
The MSCI All-Country World Index (MXWD) fell for a third day, losing 1.5 percent at 2 p.m. in New York, and the Standard & Poor’s 500 Index retreated 1.6 percent. The euro dipped below $1.25 for the first time since June 13. The 10-year Treasury note yield declined six basis points to 1.61 percent, and the German bund yield fell 12 basis points. The Spanish 10-year yield increased 26 basis points. Oil tumbled 1.1 percent while corn and soybeans surged on concern dry weather will hurt crops.
Failure by leaders at the summit to come up with measures to shore up the weakest countries may be “fatal” for the euro, billionaire investor George Soros said yesterday, while German Chancellor Angela Merkel rejected joint euro-area bonds or bills in a speech today. Greek Prime Minister Antonis Samaras, who is recovering from surgery and won’t attend the summit, accepted the resignation of Finance Minister Vassilios Rapanos today.
“Expectations in Europe are really low and usually by this stage, when we’re going into one of these summits, there’s normally a bit more hope around,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “They like to take things to the brink in order to engineer the outcomes they want,” he said. “It’s a pretty risky game to pursue, but it’s not the first time it’s happened.”
Market Leaders
The S&P 500 extended declines after last week’s 0.6 percent retreat. Stocks resumed losses today after briefly trimming declines when Commerce Department data showed demand for new U.S. homes rose more than forecast in May, with purchases climbing 7.6 percent to a 369,000 annual rate.
Indexes of energy, financial and technology shares lost more than 2 percent to lead declines in all 10 of the main industry groups in the S&P 500 today. Bank of America Corp., Intel Corp. and Hewlett-Packard Co. lost at least 2.9 percent for the biggest declines in the Dow Jones Industrial Average as all 30 stocks retreated except for Wal-Mart Stores Inc.
Alcoa, the largest U.S. aluminum producer, is scheduled to report second-quarter results on July 9 to start the earnings season for Dow companies. Profits at S&P 500 companies fell 1.1 percent in the April-June period, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.
Earnings Pessimism
Earnings pessimism is reaching levels last seen during the global financial crisis of 2008 and 2009, based on company guidance. Fifty-nine corporations issued profit projections that trailed analyst estimates during the 20 days through June 22, or 3.1 times the number of those that exceeded them. The ratio has been greater than 3 for eight straight days, the longest stretch in three years. It was at least that high the majority of the time between October 2008 and April 2009, climbing to 11.5 in December 2008, the data show.
The Stoxx Europe 600 Index (SXXP) dropped 1.5 percent. Unicredit SpA and BNP Paribas SA led a selloff in banks, both falling at least 5.5 percent. Nokia Oyj lost 11 percent amid speculation Samsung Electronics Co.’s earnings may miss some analyst estimates. Shire Plc slumped 11 percent after regulators approved a generic version of its second-biggest selling drug.
Spain’s IBEX-35 Index sank 3.7 percent and Italy’s FTSE-MIB Index tumbled 4 percent, the most in two months, while Greece’s ASE Index sank 6.8 percent to lead losses in 24 developed markets tracked by Bloomberg.
Dollar Climbs
The euro sank 0.6 percent to $1.2498 after dipping as low as $1.2471. The shared currency lost 1.6 percent against the yen and weakened against 10 of 16 major peers. The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, jumped 0.3 percent.
Policy makers should create a European Fiscal Authority to purchase sovereign debt in return for Italy and Spain implementing achievable budget cuts, Soros said in London. Funding would come from European Treasuries backed by each euro member, he said.
Germany’s Merkel, speaking to a conference in Berlin today as Spain announced it would formally seek aid for its banks, dismissed “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” saying that they ran against the German constitution.
Spanish Bank
Spanish banks may have their credit ratings cut by Moody’s Investors Service for a second time in less than six weeks after the nation’s sovereign rating was lowered, said three people with knowledge of the situation.
Cyprus said today it will seek a financial lifeline from the euro area’s firewall funds, becoming the fifth of the euro’s 17 member states to seek a bailout.
A visit by the international creditors to determine how far Greece has slipped behind on budget targets that underpin access to the international funds was suspended. Greek President Karolos Papoulias will represent the country at this week’s summit as Samaras convalesces after surgery for a detached retina. Finance-Minister designate Rapanos resigned after being hospitalized on June 22 for nausea and dizziness.
‘Similar Symptoms’
“I think I speak for all of us when I say, ‘We feel your pain,’” Ed Yardeni, president and chief investment strategist at Yardeni Research Inc. in New York, wrote in a note to clients. “We are all starting to show similar symptoms as we suffer through the never-ending insanity of the European financial crisis and the latest round of emergency summits.”
The Italian two-year yield climbed 54 basis points to 4.33 percent, with the similar-maturity Spanish yield advancing 42 basis points. The Belgian five-year note yield dropped four basis points to 2.00 percent as the government sold 2.8 billion euros ($3.5 billion) of 2017, 2022 and 2032 bonds. Germany sold 2.045 billion euros of 12-month bills, while France auctions as much as 8.4 billion euros of short-dated securities.
The 30-year U.S. Treasury bond yield declined eight basis points to 2.68 percent.
The S&P GSCI Index of commodities added 0.5 percent as 16 of 24 raw materials tracked by the gauge advanced. Corn and soybeans rallied more than 3.4 percent. Much of Iowa and Illinois, the biggest U.S. corn and soybean-growing states, will be mostly dry until at least June 29, according to the National Weather Service.
Oil Retreats
Oil dropped 1.1 percent to $78.89 a barrel in New York, erasing earlier gains of as much as 1.2 percent, as tropical Storm Debby shifted away from offshore energy installations.
The MSCI Emerging Markets Index (MXEF) slipped 1.4 percent, falling for a third day. The Shanghai Composite Index slid 1.6 percent to the lowest close since Jan. 16. The ISE National 100 Index fell 1.6 percent in Istanbul. Turkey is weighing a response after Syria shot down one of its warplanes in international airspace, Foreign Minister Ahmed Davutoglu said.
Egypt’s EGX30 Index jumped 7.6 percent, the most since February 2008, after Mohamed Mursi, the Muslim Brotherhood candidate, was declared the country’s first freely elected president.
To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Michael P. Regan in New York at mregan12@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
Stocks to Bottom This Week: Charles Nenner - Yahoo Finance
Last March with the S&P500 over 1,400 Charles Nenner came on Breakout and told viewers not to chase stocks, lest they be exposed to a correction of 10 - 15% over the next few months. Three months later stocks are coming off a correction of almost exactly 10%, sparing those who listened to Nenner quite a bit of pain.
With stocks bonds and gold careening between hope and greed every few days Nenner updated his views and price targets for each of the Big Three.
Stocks
Having been true to his word and taken money off the table in stocks 3 months ago, Nenner is looking to start getting long again this week. Focused on cycles and momentum Nenner sees a cyclical low coming in the next few days. He's a buyer anywhere from 1,280 to 1,230 on the S&P 500 but cautions those who are looking for a chance to buy and hold profitably.
"People looking for major moves are going to be disappointed," he says. Timing and trading are key as he thinks stocks are going to be locked into a 5-10% range for an extended period.
Bonds
"First people lost their shirts on the stock market then the gold market." says Nenner. "I'm afraid that now they're going to lose a lot of money on their bond positions."
Of course people have been taking the other side of the bond bet for the better part of three decades, only to see yields drop to previously unthinkable lows. You have to squint to see the change but Nenner says yields have already bottomed. Bonds may fluctuate on their way but the trader is taking, building and holding as a "core position" the ProShares UltraShort Lehman 20+ year Treasury ETF (TBT).
Gold
Those unfortunate souls who lost their shirts on gold buying it at $1,900 may ultimately get bailed out by the markets but not before getting hung out to dry for a little while longer. In the near term Nenner says the cycle is going lower until the end of August or early September.
Nenner's downside target for gold is $1375 to $1325 but he's a buyer in size there; his long-term target remains $2,500.
Stocks close at two-week low, more weakness eyed - The Guardian
TEXT-Fitch affirms Principal Financial Group - Reuters
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