Wednesday, December 15, 2010

Wobbly day for stocks on European debt worries

Overbought stocks fell following a 6 day rally.  Averages had been higher early in the day, then gave up those gains.  Dow lost 19 (finishing near the lows), decliners over advancers 2-1 & NAZ was down a bigger 10.  Bank stocks also sold off.  The Financial Index has recovered a lot in Dec, taking it back to the levels in early May when it was plunging 50 points.


Value207.65One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  -1.78  (-0.8%)

The Alerian MLP Index fell 5½ to the 352s, a very big drop for the index.  It's noticeable even on the chart below for the full year.  The REIT index fell 2½ to the 212s but junk bond funds were firmer.  High yield securities have to be feeling the competitive pressure from rising federal rates.  The 10 year Treasury bond yield rose another 6 basis points to 3.52%, not seen since early May.


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

Alerian MLP Index   ---   YTD

Dow Jones REIT Index   ---   YTD

10-Year Treasury Yield Index   ---   YTD

Oil was flat while gold got a good dose of profit take.  However, it's not far from its recent record levels above 1420.

CLF11.NYM...Crude Oil Jan 11...88.52 ......Up 0.17  (0.2%)

ZGZ10.CBT.....100 oz Gold.... 1,385.60 ...Down 18.10  (1.3%)

** Gold Super Cycle **  

The Senate passed a sweeping tax package that would extend tax cuts, reduce Social Security taxes & extend jobless benefits.  There is also plenty of pork in there for unrelated pet projects.  The bill passed by the Senate, 81-19, would extend tax cuts for 2 years, then Congress will go thru the same anguish at the last minute to deal with that expiration. "I know there are different aspects of this plan to which members of Congress on both sides of the aisle object. That's the nature of compromise," the president said. "But we worked to negotiate an agreement that's a win for middle-class families and a win for our economy, and we can't afford to let it fall victim to either delay or defeat."  House Dems said they expect to vote on the bill tomorrow. 

Senate Passes $858 Billion Tax-Cut Plan, Sends It to House

Ireland's parliament approved a multi billion € bailout package in the face of opposition threats to renegotiate the deal to force losses on some senior bondholders in Irish banks.  The 85B € package was pushed thru with the support of independent MPs & the center-right Fine Gael party.  Under the EU/IMF deal, Ireland faces years of cutbacks & tax increases in return for fresh capital to shore up the banks, preserving full repayment of their senior bonds, those first in line to be repaid in the event of any default.  The gov, the most unpopular in recent history, got the bailout approved by a margin of only 6 votes, prompting an easing in spreads & paving the way for the IMF to approve its 22.5B € portion of the bailout tomorrow.

Ireland passes bailout package despite opposition- Reuters

Bank of America (BAC), a Dow stock, & Citigroup (C) are 2 big banks with stocks that have lumbered along in 2010.  But they have different stories.  BAC has been slipping & sliding, as if it's losing direction.  Meanwhile Citi has attracted buyers in recent months when the gov finished selling all of its shares.  Citi will enter the new year with positive momentum.   

Bank of America   ---   YTD

Citigroup   ---   YTD

Stocks tried to extend the rally but profit taking took its toll late in the day, nothing serious for the bulls.  The biggest shock was the hit that MLPs took.  They have had nothing short of an outstanding rise over the last 2 years (plus 8 distributions along the way), so more dramatic profit taking has to be expected.  Tomorrow eyes will be on Europe to see if Ireland will have its bailout package approved & the Dems in the House to see how much opposition they will mount against the tax extension bill.  Like most bills these days, plenty of pork legislation is added to the main bill, diluting its meaning & adding to the growing federal burden of debt.   

Dow Jones Industrials   ---   YTD

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