Tuesday, June 15, 2010

Stocks jump on hopes of weathering the storm in Europe

Markets kept rising all day bringing them to the best levels in a month. The most favorable reason seems to be that Europe didn't fall apart, it's still in business. Otherwise, there was no dramatic news to suggest markets would have such strong gains. Dow rose 213, advancers over decliners 5-1 & NAZ was up 61. Bank stocks led the charge bringing the Financial Index back to the door of 200 (which has not proven all that significant in recent months).


Value199.02One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change4.98 (2.6%)

MLPs continued strong. The Alerian MLP Index rose 3½ to the 304s, the highest level in more than a month. The Dow Jones REIT Index gained almost 5 to the 208s, again the highest in a month. Junk bond funds were up about 1%, but are typically off around 10% from recent highs. The VIX dropped 2¾ to the 25s, lowest level in a month. Treasuries sold off. The yield on the 10-year Treasury bond increased 3½ basis points to 3.31%.

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 months

Enthusiasm from the stock markets brought out buyers for oil, it closed near 77. But gold also had a strong gain which is basically a bet against improving economies.

CLN10.NYM..Crude Oil Jul 10..76.94 ..Up 1.82

GCM10.CMX..Gold Jun 10..1,232.10 ..Up 9.90

Gold Super Cycle! Click Here

The European Union told Spain & Portugal they need to cut budgets & implement spending cuts to reach their "ambitious" deficit targets for 2011. "The targets are appropriately ambitious and imply substantial fiscal consolidation," the EU said. “Spain and Portugal are expected to specify measures in their 2011 budgets amounting to 1.75% and 1.5% of GDP, respectively, in order to attain the new targets.” These measures will be needed to prevent the Greek debt crisis from spreading to other countries. Spain has pledged to cut its deficit to 9.3% of GDP in 2010 & 6% in 2011. Portugal said it would reduce its budget shortfall to 7.3% of GDP in 2010 & 4.6% in 2011.

Spain, Portugal Must Specify Budget Steps, EU Says

BP (BP) temporarily stopped collecting oil from its leaking well in the Gulf of Mexico after a fire aboard a collecting vessel. The fire was atop the derrick of the Discoverer Enterprise, the drillship that’s been collecting about 15K barrels a day from the well for the past week. There was no damage as a result of the fire & recovery is expected to resume today. This disaster gets worse by the day. BP was up 73¢ on a strong day.

BP Suspends Oil Spill Recovery After Ship Fire

BP --- YTD

American Airlines (AMR) & Delta Airlines (DAL), the largest US carriers, forecast Q2 gains of at least 17% as rising demand buoys fares. Passenger revenue for each seat flown a mile will climb about 20%, Delta said. American parent said revenue on the same basis from its main jet operations would increase at least 17%. Encouraging words about the airline business is helping fuel stock markets gains today. Their stocks gained around 3-4%.

U.S. Airlines See `Dramatic' Business Travel Recovery

The € went up to about $1.23¼. It's still weak, but above the recent lows which sends positive signals to stock markets around the world. Tonight the pres tells the country how to solve the oil mess (after its dragged on for almost 2 months). There will be a call for more regulation of energy companies. He will probably push the financial overhaul regulation that is working its way thru congress. It's difficult to figure why markets were so strong just prior to learning about more gov controls. But Dow & NAZ have had nice rebounds in the last week while junk bonds (stocks with high yields) have only had limited gains & gold has done well. Markets are trying to have it both ways!

Dow Jones Industrials --- 2 months

Nasdaq --- 2 months

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