Wednesday, December 15, 2010

Markets rise on optimism by US CEOs

Dow gained 32 to a new yearly high, advancers ahead of decliners 5-4 & NAZ gained 7. Bank stocks are higher, but just inching up as shown by the Financial Index.  According to a survey, US CEOs are the most optimistic in over 4 years.


Value 209.70 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   0.27  (0.1%)

The Alerian MLP Index dropped 1 to 357 & continues to remain close to 355 as it has done for almost a month.  After a stellar run in the last 2 years when the index has more than doubled (not to mention growing distributions), MLPs need a rest.  The REIT index was up a fraction in the 215s, little changed from yearly highs reached 7 months ago.  Junk bond funds were mixed again.  Treasuries finally found buyers (the Federal Reserve is one of them).  The yield on the 10 year Treasury bond fell 4 basis points to 3.42%, up more than 1 percentage points off recent lows.

Treasury yields:

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

Alerian MPL Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10-Year Treasury Yield Index   ---   2 weeks

Oil slipped but remains near its 2 year highs.  Gold declined for the first time in 3 days.

CLF11.NYM...Crude Oil Jan 11...87.86 .....Down 0.42  (0.5%)

GCZ10.CMX...Gold Dec 10....1,389.60 ...Down 14.00  (1.0%)

Gold Super Cycle Link! Click Here

Builders are feeling pessimistic over the housing market's prospects in the near future.  The National Association of Home Builders said its reading of builder sentiment remained unchanged in Dec at 16 (readings below 50 indicate negative sentiment about the market). The last time the index was above 50 was in Apr 2006. The report reflects a survey of 416 residential developers nationwide.  The reading for current sales conditions was unchanged from the prior month at 16. The index measuring foot traffic from prospective buyers slipped one point to 11, while the index for sales expectations over the next 6 months held steady at 25.  Housing continues in its depression, a major drag on the high unemployment rate.

U.S. Homebuilder Confidence Unchanged in December Amid Depressed Demand

Index of builder confidence - 1 year

One-Year Chart for Market (USHBMIDX:IND)

Germany stiffened opposition to expanding gov financed aid for debt-plagued euro nations, leaving the European Central Bank (ECB) to shoulder the bulk of the burden of fighting the crisis.  Germany yesterday put the spotlight on the ECB by endorsing a possible boost in its capital.  Discord between Germany & the ECB  on the eve of a European Union summit evokes the tensions during the first phase of the debt crisis, when Germany held out for more than 2 months before consenting to a loan package for Greece.  This has the prospects of a stalemate which could increase market tensions  The € weakened after Moody’s said it may cut Spain’s Aa1 credit rating after the country lost its top rating in Sep. The currency declined a fraction of a penny to $1.33½. Problems are not limited to Ireland & Spain, core countries are also at risk.  Yesterday Standard & Poor’s cut the debt outlook for Belgium, which is stuck with a caretaker gov 6 months after inconclusive elections & Belgian bonds fell.

Germany Stiffens Opposition to Aid Boost in Face-Off With ECB

The Senate is expected to easily pass the $858B tax extension bill, then it's off to the House where it faces stiff opposition.  But odds favor the House passing the legislation when all is said & done. Stocks rose, sending the S&P 500 higher for a 7th day in its longest rally since 2006.  Growth prospects in the US overshadow concerns Europe’s debt crisis will worsen. But the Standard & Poor500 Index rallied yesterday above 1245 (the last closing level before Lehman Brothers collapsed in Sep 2008) before paring its gains, failing for a 2nd day to surpass the key resistance level.  The chart below shows the Dow is rising to levels just prior to the Lehman collapse.

S&P 500   ---   3 years

Dow Jones Industrials   ---   2 weeks

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