VerySmartInvesting: Tax extension uncertainties leave markets mixed

Monday, December 13, 2010

Tax extension uncertainties leave markets mixed

Late day selling brought stocks to about where they started the day. Dow was up 18, advancers slightly ahead of decliners but NAZ fell 12. Bank stocks also sold off in the PM, taking the Financial Index back into the red.

S&P 500 FINANCIALS INDEX

Value	211.41
Change	-0.26 (-0.1%)

The Alerian MLP Index rose almost 2 to 360, needing just 6 more to set yet another record. The REIT index was about even in the 217s after I posted an Instablog article on SeekingAlpha.com this AM that REITs were heading higher next year. Junk bond funds were weak today but Treasuries rallied during the day. The 10 year Treasury yield only added 1 + basis point to 3.28% (down from 3.37% earlier in the day).

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.60%
U.S. 10-year		3.28%

Alerian MLP Index --- 6 months

Dow Jones REIT Index --- 6 months

10-Year Treasury Yield Index --- 6 months

Optimistic thoughts about oil drove it towards $90, but it couldn't hold. Gold also had a good gain, preparing for another assault on its record levels above 1420, up from 1100 at the start of this year.

CLF11.NYM

...Crude Oil Jan 11

...88.55

.....

0.86

(0.9%)

GCZ10.CMX

...Gold Dec 10

....1,396.70

...

12.40

(0.9%)

$$$Gold Super Cycle$$$

Click Here

Smart money anticipated market gains on days of when the Federal Reserve (FED) began purchasing Treasuries, according to an analyst. Most of the 47% rally during the past 2 years came on days when the FED pumped money into markets through bond buying. Since the $1.7T first round of quantitative easing began on Dec 5, 2008, the S&P 500 Index has climbed 267 points on the 211 days when the FED was adding stimulus, compared with only 128 points on the 297 days when it wasn’t. The data may bolster Ben Bernanke's assertion that his asset purchases are inducing investors to buy higher-yielding securities, even though puchases by the FED don’t go directly into the stock market. Data compiled by Bloomberg show the S&P 500 gained an average of 0.16% on buying days during the past 2 years, 4 times the 0.04% on non-purchase days. This gives you something to think about! Tomorrow the FED will have its final meeting of the year. No dramatic changes are expected, but every word in their announcement will be examined carefully (as usual).

Stocks Rally With Bernanke Bond Buying in Data Showing QE Buoying S&P 500

Price targets for Apple (AAPL) keep getting bumped up & the stock follows along. An analyst (see the link below) boosted his target from 330-355. Others talk about targets of 400+. The idea is AAPL will keep selling more, and more and more. But I've heard that before, especially before the market plunged 10 years ago. AAPL is getting hit with a ton of competition for the iPhone & iPad, If nothing else, competition has to hurt its very high profit margins on these products The chart looks beautiful & the stock shot up 4+ to the 325s, but late day selling reduced the gains to 1+ in the 321s (good enough for a record close).

Apple: BMO Ups Target To $355; 60M iPhones in FY11at Barrons.com

Apple --- YTD

There is a lot of bullish enthusiasm in the markets. The S&P 500 is trying to top 1255, its peak before the crash in Sep 2008. Bloomberg TV listed forecasts for the S&P 500 next year & everyone expects another year of gains. But some are worried when everybody agrees about rising markets, they must be mising something. DC still needs to pass the tax extension, that's uncertain. And the Irish bailout will be decided in a few days. Investors are embracing risk once again which stock markets welcome.

Dow Jones Industrials --- 6 months