Friday, January 14, 2011

Bank stocks lead markets higher

Dow (up 55) closed at a 2½ year high, decliners over advancers 3-2 & NAZ gained 20.  Bank stock were leaders, taking the Financial Index to its highest levels since late Apr 2009.


Value 224.95 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   3.36  (1.4%)

The Alerian MLP Index gained ½ in the 372s to another record high.  It's up 9 YTD although 3 of that came from the opening surge on Jan 3.  REITs were a little stronger, gaining 1½ to the 225s.  Junk bond funds slipped although new issuers are having no trouble selling their offerings (see below).  Treasuries pulled back in the PM, taking the yield on the 10 year Treasury bond up 3 basis points to 3.33%.  . 

Treasury yields:

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

Alerian MLP Index   ---   1 year

Dow Jones REIT Index   ---   1 year

10-Year Treasury Yield Index   ---   1 year

Oil was little changed as US industrial output rose more than forecast in Dec & China moved to cool its economy, threatening the pace of fuel-demand growth in the largest energy-consuming country.  Gold fell to the lowest price in 7 weeks on speculation that European Union leaders will stabilize the region’s economy, eroding the appeal of the metal as a haven. The chart shows that the current contract has been trading sideways in recent months, today's drop put it at the low end of its range.

CLG11.NYM...Crude Oil Feb 11...91.52 .....Up 0.12  (0.1%)

GCF11.CMX....Gold Jan 11......1,360.40 ...Down 26.50  (2.0%)
$$$Gold Super Cycle$$$  

GCF11  (Jan 11 contact)  --  3 months

U.S. Stocks Fluctuate on Economy Data

Photo:  Bloomberg

The S&P 500 had the longest weekly rally since 2007, led by good earnings from Dow bank JPMorgan (JPM). The S&P 500 rose 0.6% to 1293 & is up 1.5% this week, extending its 7th straight weekly gain, the longest since May 2007. The Dow added 55 to the highest level since Jun 2008.  The S&P 500 is up an amazing 90% from its Mar 2009 low amid gov measures to stimulate the economy & corp profits that beat predictions. S&P 500 companies posted higher-than-estimated results in all 3 qtrs for 2010 & predictions are that profits will increase 14% in 2011.

U.S. Stocks Rise as S&P 500 Extends Longest Rally Since 2007

Junk-rated companies are selling debt with less protection for investors as high-yield bond offerings soar to more than double last year’s weekly pace.  MGM’s CityCenter Holdings issued $600M of notes that can pay interest in cash or additional debt, the largest such offering in more than a year & CommScope sold $1.5B of bonds with covenants that permit a “disturbingly high” amount of new debt,.What used to be marginal companies are having no trouble selling debt. Investors are snapping up speculative-grade corporate bonds as the economy shows signs of strengthening, reducing risk that the neediest borrowers will default on debt payments. $1.28B has been pumped into high-yield mutual funds last week, an all-time high. Sales in the US junk bonds rose to $13.3B, compared with the $5.41B weekly average in 2010. Returns this month of 1.3% compare with 0.28% on investment-grade company bonds.  Lowering investment standards are always troubling. 

Junk Borrowers Turn Tables With Looser Terms: Credit Markets

Markets are making steady gains. Dow advanced more than 110 this week in mini spurts.  Returns on early earnings releases are good, but short of great otherwise the markets would truly be flying.  MLPs are into their reporting season.  Enterprise Products (EPD) raised its distribution, the units were up 43¢ to near their record high in Nov.  Earnings season should take stocks & MLPs higher, although the wide acceptance of risky debt raises concerns longer term.  Speculative investing is strong!  Markets will be closed on Mon for the national holiday.

Dow Jones Industrials   ---   1 year

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