U.S. stocks extended a global drop as concern grew that the rally has outpaced the prospects for economic growth. The yen and the dollar strengthened, oil tumbled and yields on Treasury three-month bills turned negative for the first time since financial markets froze last year.
There was some bearish chat from 2 of the markets heavy hitters. Bill Gross, who runs the world's biggest bond fund at Pacific Investment Management Co., said the "systemic risk" of new asset bubbles is rising as the Federal Reserve keeps interest rates at record lows while queen of the banking analysts, Meredith Whitney, said Thursday that bank stocks are "grossly overvalued."
So after largely ignoring a plethora of disappointing data earlier in the week, markets look decidedly weaker overnight (even though the data was perhaps ironically somewhat more encouraging). European bourses were weaker from the open and lost further ground after US markets opened. Some negative broker commentary from Bank of America / Merrill Lynch on the tech sector didn't help matters.
But I suspect that the accumulation of disappointing construction sector reports of late, culminating in yesterday's US housing starts and permits data, means that investors are reluctant to drive markets to new highs this side of Christmas. According to the MBA, 14.41% of mortgages are now at least one payment overdue or already in the foreclosure process. 2 Year Treasury Bond yields have hit 2009 lows today, as sure sign that traders think the odds on that overhyped V-shaped recovery becoming a W have shortened considerably.
Today, after a quiet start, market talk of a Ukranian default has sent the stocks firmly into the red. ECB commander in chief JC Trichet also made some comments to the effect that the sluice gates in Frankfurt will eventually have to shut and the banks weaned off the methadone of more or less unlimited liquidity. US house builder DR Horton has come in with a big miss and is off 7% while retailer Gap is trading up on a 25% increase in profits while department store chain Dillard's is up 4% after a broker upgrade from Deutsche to a buy.
Today's Market Moving Stories
- Overnight, Asian stocks fell for a fourth day, the longest losing streak since July, and the South Korean won led regional currency declines after companies from Dell (off 6.4% pre market) to Sony (down 2,.5%) posted results that disappointed investors. The won lost 0.3 percent to 1,160.2 after reaching a two-week low. Australia's S&P/ASX 200 Index slid 1.3 percent after the initial share sale of Rio Tinto Group's coal unit raised less than expected.
- U.K. house prices will probably fall next year, and it may take until 2014 to return to the levels at the 2007 peak of the country's biggest housing boom, according to a Bloomberg survey. Nine of 14 economists and real estate brokers surveyed said they foresee a decline in 2010 after a surprise rebound this year. They predict an average drop of about 1.6 percent, with estimates ranging from a loss of 10 percent to a rise of the same magnitude. British Land , Hammerson , Redrow and Taylor Wimpey are all weaker today on the back of this.
- A recovery in U.S. housing will have to wait at least until next year. The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record. New home sales may begin to pick up by the start of the so-called spring selling season, said Toll Brothers Inc., the largest U.S. luxury homebuilder. Existing house sales may take longer.
