VerySmartInvesting: Markets rise after China does not raise interest rates

Monday, December 13, 2010

Markets rise after China does not raise interest rates

Stocks were higher as Dow is flirting with its yearly high reached last month. Dow is up 40, advancers ahead of decliners 3-2 & NAZ gained 6. Banks are on a roll this month. The Financial Index is up almost 20 so far, trying to break above its sideways trading zone it has been in more than a year.

S&P 500 FINANCIALS INDEX

Value	212.46
Change	0.79 (0.4%)

The MLP index shot up almost 2 to 360, breaking above its mid 350s rut it has been in. The REIT index was up a more mild fraction to 318. Junk bond funds were mixed while Treasuries sold off. The yield on the 10 year Treasury bond rose 7½ basis points to 3.37%, its highest level in 6 months. More attention should be paid to this move.

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.63%
U.S. 10-year		3.35%

Alerian MLP Index --- 2 weeks

Dow Jones REIT Index --- 2 weeks

10-Year Treasury Yield Index --- 2 weeks

Oil rose after China refrained from increasing interest rates & a report showed its refineries ran at record levels last month, signaling fuel demand will climb. Inaction & high inflation in China were helping gold prices.

CLF11.NYM

...Crude Oil Jan 11

...89.33

....

1.54

(1.8%)

GCZ10.CMX

...Gold Dec 10

....1,395.80

...

11.50

(0.8%)

Gold Super Cycle Link! Click Here

Photo: Bloomberg

The Organization of Petroleum Exporting Countries (OPEC), supplier of 40% of the world's oil, has been bending its production limits the most in 6 years. The world’s biggest suppliers are ready to pump more crude next year as oil rallies toward $100 a barrel. OPEC (excluding Iraq) pumped almost 27M barrels a day in 2010, exceeding the quotas by an average of 1.9M (the highest level since 2004). Crude rose 12% in 2010 as demand recovered & prices rose to almost $90 for the first time in 2 years. The rally may lead the 12 member group to raise output next year after leaving quotas unchanged at this weekend’s meeting in Quito, Ecuador. Higher prices bring more supply & $100 seems to be the magical price. OPEC has maintained a production target of 24.845M barrels a day since Dec 2008, the longest period that quotas have stayed unchanged since they were first used in 1982. The 11 members with quotas pumped 26.7M barrels a day last month, 1.9M more than targeted. More demand for oil signals improving global economies but can also cause inflation rates to accelerate.

OPEC Cheating Most Since 2004 as $100 Oil Heralds More Supply

General Electric (GE), a Dow stock, will buy Wellstream Holdings by raising its bid for the British oil drilling pipemaker 6% to 800M £ ($1.3B). GE is boosting its presence in the oil services sector, showing that, despite the BP (BP) spill in the Gulf of Mexico this summer, the industry expects deepwater drilling to continue. This would also give GE a strong footing in Brazil, where Wellstream has a manufacturing plant. GE has said energy will be a major area of focus for the company, the world's largest maker of jet engines & electric turbines. Wellstream is one of only 3 main manufacturers of flexible "riser" pipes, which connect drilling rigs to well-heads on the sea floor. GE is down 9¢ after lumbering along in the mid teens for more than a year.

GE to buy Wellstream for $1.3 billion- Reuters

General Electric --- 2 years

Dell (DELL) will buy Compellent Technologies (CML) for almost $1B to gain data-storage technology. DELL is paying $27.75 a share in cash after pre-announcing last week they were in exclusive talks for an acquisition at $27.50 a share. The purchase price is 3% less than the Dec 10 closing price for CML after it had gained 68% in the past 2 months on takeover speculation. DELL fell 38¢. CML will give DELL technology that helps customers store, recover & manage large amounts of data.

Dell to Buy Compellent for $960 Million, a Discount, to Gain Data Storage

Compellent Technologies -- 3 months

Dell --- 2 years

Merger (acquiisition) Mon brought out buyers. Stocks have modest gains but the Dow is essentially at its 2010 high levels. The S&P 500 went thru a key resistance level, another bullish signal. The Senate will have a preliminary vote today on the tax extension bill & that is expected to pass. The Senate is expected to approve the compromise that was worked out last week (including tons of pork) but it faces a fair amount of opposition in the House. Irish bailout remains uncertain, more should be learned later this week. This should be a fun week in the markets.

Dow Jones Industrials --- 2 weeks