VerySmartInvesting: Dow rises to new 2010 highs

Tuesday, December 21, 2010

Dow rises to new 2010 highs

Markets are feeling good following more dealmaking & encouraging data on retail sales. Dow is up 46, advancers 2-1 ahead of decliners & NAZ gained 13. Volume remains low in this holiday season. Bank stocks are leading the way up taking the Financial Index to within 1 of its yearly high made 2 weeks ago. After being market laggards for much of the year, bank stocks have resumed their traditional role as market leader in Dec.

S&P 500 FINANCIALS INDEX

Value	211.77
Change	2.27 (1.1%)

The MLP Index is up 1 to 352, but has pulled back from its record high last month & is learning to be a market follower (not leader). The REIT index is up 1 to the 218s, where it was at its highs in Apr. Junk bond funds are mixed & little changed. There is a small amount of buying for Treasuries. The yield on the 10 year Treasury fell 1½ basis points to 3.33%

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.60%
U.S. 10-year		3.33%

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index --- 2 weeks

Oil imports to China may slow into next year, but cold temps in the northern hemisphere are bringing out oil buyers. Oil has been having a nice run in the last 3 months (the graph below just shows the trend). It's pushing $90 & has its eyes on $100. Unfortunately higher oil prices bring increased inflation worries. Gold slipped a tad today, but also has had an excellent run allowing it to set new records above $1400. A link below is provided to learn more about gold.

CLG11.NYM

...Crude Oil Feb 11

...89.55

...

0.18 (0.2%)

GCZ10.CMX

...Gold Dec 10

.....1,383.20

....

2.30

(0.2%)

Gold Super Cycle Link! Click Here

OIL (ETF) --- 3 months

GLD (ETF) --- 3 months

U.S. Retail Sales Growth Accelerated to 4.2% Last Week

Photo: Bloomberg

Holiday retail sales are looking good. Same-store sales at a selection of US retailers posted the biggest holiday jump last week, rising 4.2%. Almost 74% of shoppers completed gift buying last, faster sales growth than the previous 3 weeks. That compared with 56.6% a week earlier, according to a chain-store sales index released today by the International Council of Shopping Centers (ICSC) & Goldman Sachs. 62% of adults expected to spend the same or more on holiday gifts this year than last, according to a National Retail Federation survey.The ICSC is forecasting that holiday sales will rise 3.5-4%, the biggest increase in 4 years. However, longer term this would be rated as an average kind of increase. In addition, online retail business is strong.

U.S. Retail Sales Growth Accelerated to 4.2% Last Week

Photo: Yahoo

TD Bank (TD), looking to accelerate their growth in the US, agreed to buy Chrysler Financial from private equity firm Cerberus Capital Management for $6.3B. This deal is the latest example of a healthy Canadian bank using its muscle to buy US institutions battered by the financial crisis. TD wants to expand its loan business, & said the deal will give it access to technology that can process more than 2M credit applications per year. The auto lending market hasn't taken as much of a hit as other kinds of consumer loans over the last several years & the value of used cars is picking up as the economy improves. TD expanded its US presence with the purchase of Commerce Bancorp in what has been its largest acquisition after buying smaller, troubled banks in the Carolinas & Florida. Earlier this year, TD agreed to buy the risky assets of 3 insolvent Florida banks worth $3.8B. TD didn't have a presence in US 6 years ago, but now has about 1,300 branches compared to about 1,100 in Canada. TD Bank expects to rebrand Chrysler Financial under the TD name by next spring 2011 after the deal closes. The acquisition is expected to add $100M in adjusted earnings in 2012, the first full year of operations. The stock with a 3+% yield is up $1.66 today but has been trading sideways for more than a year.

TD Bank to Buy Chrysler Financial in $6.3 Billion Deal

TD Bank --- 2 years

Markets are in a holiday mood. China is getting involved with European debt problems & may become the sugar daddy to help with the bailouts. Europe needs a lot of help because there will be more bailouts next year. The rest of the week should quiet with a bias to the upside. Dow has been below 10½K for more than a week. but buyers may take it higher so that it can close the year at its yearly highs, values not seen since prior to the Lehman collapse in Sep 2008. Below is a link to my article, just published, at SeekingAlpha on MLPs next year.

After 2 Stellar Years, MLPs Need Rest in 2011

Dow Jones Industrials --- 2 weeks