Friday, December 10, 2010

Markets meander on indecisive developments

Dow is up 5, decliners barely ahead of advancers & NAZ gained 4.  Markets are awaiting developments on the domestic scene & overseas. Bank stocks inched higher, keeping their positive momentum alive for the month.


Value 209.93 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   0.11  (0.1%)

The MLP index rose 1 ot the 357s, still trading sideways for weeks & the REIT index gained 1 to the 216s.  Junk bond funds edged higher.  Treasury 10-year notes dropped, pushing the yield toward its biggest weekly increase this year, as increases in US exports & consumer confidence sapped demand for the safety of gov debt. The yield on the 10 year Treasury bond rose 4 basis points to 3.26%, remaining close to the 3.33% reached earlier this week. 

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 fell as confidence among US consumers increased to the highest level in 6 months, strengthening the dollar & curbing the appeal of commodities. Gold futures fell, heading for a weekly loss, as concern that China may tighten monetary policy eroded demand for precious metals.

CLF11.NYM...Crude Oil Jan 11...87.78 ......Down 0.59  (0.7%)

GCZ10.CMX...Gold Dec 10.....1,373.10 ...Down 19.00  (1.4%)

Gold Super Cycle Link! Click Here

US consumer sentiment rose more than expected in early Dec while an index of current conditions jumped to its highest level in almost 3 years.  The Thomson Reuters/University of Michigan's preliminary Dec reading on the overall index on consumer sentiment was 74.2, up from 71.6 in Nov, the highest level since Jun & the 3rd-highest level since the start of 2008  The median forecast was only 72.5.  In contrast, the reading was above 95 in the middle of 2007.  At the same time, the survey's barometer of current economic conditions rose to 85.7 versus 82.1 in Nov (above a forecast of 83.1). It was also the highest reading since Jan 2008, just after the economic downturn began.  The survey's gauge of consumer expectations rose to 66.8, above Nov's 64.8 & slightly higher than a predicted reading of 66.4.  This favorable data did not influence stock trading.

U.S. Michigan Consumer Sentiment Index Rose in December

Consumer sentiment - 1 year

One-Year Chart for Univ. of Michigan Sentiment (CONSSENT:IND)

Current conditions - 1 year

One-Year Chart for Situation (CONCPSIT:IND)

Consumer expectations - 1 year

One-Year Chart for Expectations (CONCEXP:IND)

Demand for junk bonds continues strong as they are becoming a haven for fixed-income investors after mounting losses in gov, investment-grade corp & municipal debt.  Gains of 0.8% this month on high-yield, high-risk bonds compare with losses of 1.9% for Treasuries (& bigger losses on longer dated debt), 1.5% on high-grade company notes & 1.4% on state & local debt. Relative yields on junk bonds versus higher-rated corporates narrowed to 388 basis points a level that hasn’t been breached in 3 years. High yields have become more important than concerns for safety.  Also considered as stocks with high yields, they are a play on a recovering economy.

Junk Bonds Buck Debt Slump With Tightest Spreads Since '08: Credit Markets

The International Monetary Fund (IMF) postponed consideration of a proposed 22.5B € loan to Ireland ($30B) until after the Irish government’s debate on the rescue package & it will not take action until after the Irish parliament’s vote, scheduled for Dec 15 (i.e. Dec 16 is the earliest that it could receive approval by the IMF board).  The EU & IMF agreed on an 85B € ($113B) rescue package on Nov 28, 7 months after a 110B € bailout for Greece. The European Central Bank has stepped up buying bonds from the region’s most-indebted countries to prevent the debt crisis from spreading. This is another lingering problem that refuses to go away. 

IMF Postpones its Decision on Ireland Loan Package Until Dec. 16 or Later

These sideways markets are no fun to watch.  Just look at the Dow chart below.  But they are waiting for direction, primarily from DC & that could be a long way off.  On the tax debate, Reps & Dems have dug in their heels which means a final outcome could go down to the the wire at year's end or drag on until the Reps take over the House in Jan.  Even gold is resting after it leaped to a new record high early this week

Dow Jones Industrials   ---   2 weeks

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