Wednesday, December 1, 2010

New month begins with enormous gains

Stocks were red hot.  They started higher & kept rising during the trading day.  Dow finished up an impressive 249 closing near the highs, advancers ahead of decliners less than 4-1 (the spread should have been wider given the strength of the averages) & NAZ rose 51.  Bank stocks contributed to the advance but the Financial Index continues to slosh around the 190s where it has been for months.


Value198.19One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  4.06  (2.1%)

The Alerian MLP Index fell 1 to the 356s in a strong market, hurt by the large public offering of units from Enterprise Products (EPD).  The REIT index rose 2 to 217.  Junk bond funds were up around 1%, a good gain for them.  Treasuries sold off on one of their worst days ever,  The yield on the 10 year Treasury bond shot up an enormous 17 basis points to over 2.96%, the highest since Jul, as reports showed the US economy strengthening & concern eased that the European debt crisis is spreading reduced the appeal of US securities as a safe haven. The € bounced off its 10 week low, up 1½ pennies to $1.31½. 

Treasury yields:

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

Alerian MLP Index   ---   6 months

Dow Jones REIT Index   ---   6 months

10-Year Treasury Yield Index   ---   6 months

Oil rose to the highest level in almost 3 weeks on greater-than-forecast growth in US private employment & Chinese manufacturing & on signals the European Central Bank will act to prevent the spread of the region’s debt crisis.  Gold did not participate in the major advances but is within 20 of setting new record highs.  This will be the 10th consecutive year of price gains for gold, the button below is available for those who want to learn more.

CLF11.NYM...Crude Oil Jan 11...86.69 ...Up 2.58  (3.1%)

GCZ10.CMX...Gold Dec 10...,1,389.00 ....Up 4.00  (0.3%)

$$ Gold Super Cycle $$  

GM’s November U.S. Sales Rose 11% as SUV Demand Gains

Photo:  Bloomberg

All major automakers but Toyota reported strong US sales increases in Nov as the slow-motion recovery continued to gain traction.  Ford (F), General Motors (GM), Chrysler, Nissan, Hyundai & Honda each reported double-digit increases. Only Toyota (TM), which has been hurt by a string of safety recalls, had a sales drop.  Improved auto sales mean that consumers with jobs are starting to spend again, a good sign for the broader economic recovery. Hyundai had the biggest increase, up 45% from the same month last year. Nissan sales were up 27%, followed by Honda at 21% & Ford with a 20% gain. Chrysler had a 17% increase, while GM reported sales up 11% from Nov of last year (a month marked by consumer paralysis due to high unemployment). TM sales dipped 3%.  GM reported increased showroom traffic toward the end of the month, after its IPO on Nov 18. J.D. Power and Associates is predicting that Nov U.S. sales overall will rise about 15%, while consumer website predicted sales will increase 17%.  Increased sales likely are due to a combination of rising confidence & pent-up demand as people replace vehicles they have kept for longer than normal.

GM, Ford U.S. Sales Rise as SUV, Truck Demand Increases

Enterprise Products Partners (EPD), the largest MLP, announced a public offering of 11½M units at a price of $41.25. In addition, EPD granted the underwriters an option to purchase up to 1¾M additional units to cover overallotments (if any). EPD will use the net proceeds, after expenses, of $459M (including exercise of the over-allotment option), to temporarily reduce borrowings under its multi-year revolving credit facility.  There is still good demand for buying these large public offerings of MLPs.

Enterprise Products Partners L.P. Announces Pricing of Public Unit OfferingBusiness Wire

Enterprise Products Partners  --  6 months

The markets had one of their best days in a long time.  Dow blasted thru the Apr ceiling of 11.2K & now has its eyes on taking out the yearly high of 11.4K reached one month ago.  Treasuries sold off badly.  Their higher yields will raise the cost of borrowing for about everybody & MLP buyers may be looking for higher yields (lower prices) when investing in MLP units.  Asia markets should have a good session in a few hours following the lead in the US.  European debts problems are not going away soon.  Even though the auto industry is on the mend, housing is stuck in the mud, despite today's data.  I'm skeptical about how long this enthusiasm can last.

Dow Jones Industrials   ---   6 months

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