Thursday, December 2, 2010

Markets add to yesterday's gains

Stocks shot up out of the gate & continued rising.  Dow is up 93 (nearly its yearly highs of 10.4K made a month ago), advancers ahead of decliners 5-2 (a moderate ratio) & NAZ was up 22.  Banks are leading the way. The Financial Index went over 200, as it has so many times in recent months.


Value 201.49 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   3.30  (1.7%)

The MLP index rose a fraction in the 357s, flattish (near its record highs) in the the last month.  The REIT index was also up a fraction, but in the 217s.  Junk bond funds were mixed but Treasuries sold off again.  The yield on the 10 year Treasury bond rose 3 basis points, knocking on the magic door of 3%!  Keep in mind that the Federal Reserve is buying Treasuries which should help bid up Treasury prices.

Treasury yields:

U.S. 3-month
U.S. 2-year
U.S. 10-year

Alerian MLP Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10-Year Treasury Yield Index   ---   2 weeks

Oil rose to the highest level in more than 2 weeks after the European Central Bank said the bank will delay its withdrawal of stimulus measures & after US retailers reported sales that topped projections. The € was up ½ a penny to almost $1.32.  Gold continues resting but the bulls have their eyes on 1400, they want to take out the record highs.

CLF11.NYM...Crude Oil Jan 11...87.20 ...Up 0.45  (0.5%)

GCZ10.CMX...Gold Dec 10....1,388.90 ...Up 1.60  (0.1)

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New claims for unemployment aid rose 26K last week to 436K, according to the Labor Dept. The previous week's claims were revised up slightly to show applications had tumbled 31K to 410K. These figures are often volatile in Nov with 2 holidays, Veteran's Day & Thanksgiving.  The 4-week moving average of claims fell to 431K, a 2-year low.  Applications for jobless benefits need to stay below 425K for several weeks to signal robust hiring.  Analysts  are estimating employers will add 145-180K jobs in Nov & the jobless rate will stay stuck at 9.6%.  The economy added 151K jobs in Oct, the first increase in total payrolls in 5 months & private companies were responsible for all of the new jobs. But the increase in hiring still wasn't strong enough to lower the unemployment rate.  Overall this data is moderately encouraging.

Jobless claims rise, but trend shows improvement AP

Pending Sales of U.S. Existing Homes Rose Record 10%

Photo:  Bloomberg

More Americans unexpectedly signed contracts to buy previously owned homes in Oct as the index of pending home resales jumped a record 10% after dropping 1.8% in Sep, according to the National Association of Realtors.  Compared with Oct 2009, pending sales were down 22%.  Rising foreclosures & unemployment near 10% indicate the industry will take years to rebound. And low mortgage rates are ticking up with the rise in  yields on the 10 year Treasury. The Beige Book report, released yesterday by the Federal Reserve, said,  “Housing markets remain depressed, with several Districts reporting further weakening during the past 6 weeks.”

Pending Sales of U.S. Existing Homes Rise a Record 10%

Index of pending home sales 1 year

One-Year Chart for MoM % (USPHTMOM:IND)

Foreclosures - 1 year

One-Year Chart for Home Foreclosures           To (HOMFCLOS:IND)

House Dems are pressing ahead to extend tax cuts for middle- income taxpayers over the objections of Reps who say that passage would harm the economy. The House is expected to vote today on a bill that would continue the tax cuts on the first $200K of an individual’s annual income & the first $250K for a married couple, even as some Dems signaled that they might vote with Reps. Unless Congress acts to extend the cuts, taxes will increase across the board on Jan 1.  Higher payroll taxes are certain because the IRS has printed new tables.  Even if the measure passes the House, the Senate is expected to block its passage because it would amount to a tax increase for high earners.  A bill to extend present taxes is not going anywhere.

U.S. Bill to Extend Middle-Class Tax Cuts Likely to Stall After House Vote

Markets are treating all news is good news, indicating the bulls are in command.  Market breadth is lagging market gains (i.e.more stocks should be participating).  But the ones dependent on a recovering economy are doing the best (banks & industrials).  Tomorrow the jobs report for Nov will be reported which will determine if buyers will take the Dow to new yearly highs.

Dow Jones Industrials   ---   2 weeks

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