Corporate Bond Sales Plunge 86%; Stocks Down on Day, Week, Year

After an amazing ride on Thursday, with downside followup on Friday smack in the face of a good jobs report, Stocks Finished Down on Day, Week, Year .

Stocks slumped Friday, with the three major indexes ending in negative territory for the year as investors mulled the Greek debt crisis and the aftermath of one of the most gut-churning days in Wall Street history.

The Dow Jones industrial average (INDU) lost 140 points, or 1.3%, after seesawing in the morning, having gained as much as 59 points and lost as much as 279 points. The S&P 500 index (SPX) lost 17 points, or 1.5%. The Nasdaq composite (COMP) lost 54 points, or 2.3%

All three indexes ended in negative territory for the year. All three indexes also closed lower for the fourth straight session and the second straight week.

On Friday, Nasdaq said it canceled trades on 296 stocks that saw their prices fluctuate by at least 60% between 2 p.m. and 3 p.m. ET on Thursday, including Accenture (ACN), which plunged from $40.13 to just one cent before recovering.

But trades were not canceled for Dow components Procter & Gamble (PG, Fortune 500), which fell 37%, and 3M (MMM, Fortune 500), which lost 22%, contributing 315 of the 998.50 points the Dow lost at its nadir.

Canceled Trades and Best Available Price Execution

Karl Denninger has a nice post about SEC mandated pricing on trades. Please consider Expanding On The Crash Yesterday: NBBO

If the SEC is anything other than a lying sack of squeeze, it must force all brokers to HONOR NBBO from yesterday's trades.

The definition of National Best Bid and Offer - NBBO is:

A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.

So during the collapse yesterday Accenture traded at 0.01, as the below shows:

But Accenture's "Best Bid" was never 1 cent on the NYSE.

It was on some other markets (e.g. ECNs), and transacted there.

That's bogus folks.

That the NYSE was "slowing things down" and looking at orders before releasing matched orders does not excuse the broker's responsibility to get you the best bid or offer. ....

Class Action Lawsuit

This may be very fertile grounds for a class action lawsuit.

Athens Burns in Whiff of 2008

Please consider Credit Mauled in ‘Whiff of ‘08’ as Athens Burns

The 13-month rally in credit markets is unraveling as Europe fails to contain its debt crisis.

Money markets showed banks may be the most reluctant to lend to each other in more than eight months and a derivatives index used to protect against European bank failures soared to a record. U.S. company bond sales are poised for the slowest week this year, while in Europe they all but disappeared, according to data compiled by Bloomberg. Emerging-market and mortgage bonds also tumbled yesterday.

The credit-market rally began as the extra yield investors demand to own corporate bonds instead of government securities started falling from the record 511 basis points reached on March 30, 2009, according to Bank of America Merrill Lynch’s Global Broad Market Corporate Index. It fell to as low as 142 basis points on April 21.

The spread widened 10 basis points to 168 yesterday, the biggest increase since it rose by the same amount on Nov. 20, 2008. The index has returned 23 percent since the peak in spreads last year.

Bond Sales Fall

U.S. corporate bond sales fell 86 percent this week to the lowest this year, Bloomberg data show. Beazer Homes USA Inc., the Atlanta-based homebuilder, and Lennox International Inc., the Richardson, Texas-based maker of heating and air- conditioning systems, led $2.55 billion of debt issuance, compared with a 2010 weekly average of $23.9 billion.

In Europe, corporate bond sales have mostly evaporated as investors retreated from riskier assets, with issuance this week of 1.3 billion euros.

If the corporate bond market has indeed turned, the global equity party is over.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List