Wednesday, November 30, 2011

Markets soar on coordinated action by central banks to ease debt crisis

Dow vaulted 418, advancers over decliners 11-1 & NAZ jumped 89.  As has been the case all year, bank stocks led the way. 

S&P 500 Financials Sector Index

Value 168.70 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    6.88    (4.3%)

The MLP index rose 2 to 370 & the REIT index was fell a farction in the 212s. Junk bond funds were up 1-2% while Treasuries dropped, pushing 10-year yields to the highest in 2 weeks, after central banks cut the cost of emergency dollar funding for European banks.  Gold is also having a good day, rising to the highest level in 2 weeks.

AMZ   Alerian MLP Index

DJR  Dow Jones Equity REIT Index

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLF12.NYM....Crude Oil Jan 12...101.16 .....Up 1.37  (1.4%)

GCZ11.CMX....Gold Dec 11......1,744.50 ...Up 31.10  (1.8%)

Click below for the latest market update:

ADP Says U.S. Companies Added 206,000 Workers in November

Photo:   Bloomberg

Private sector job growth accelerated in Nov as employers created the most jobs in nearly a year.  The ADP National Employment Report showed private employers added 206K jobs this month, surpassing expectations for a gain of 130K jobs in a year.  The gov Nov labor report on Fri is expected to show a rise in overall nonfarm payrolls of 122K & a rise in private payrolls of 140K.  It's important remember that the ADP report is not always accurate in predicting the outcome.  The Oct private payrolls growth was revised up to an increase of 130K from the previously reported 110K.  Meanwhile, a different report showed the number of planned layoffs at US firms edged down marginally in Nov, though job cuts for the year so far have surpassed 2010's total.  Employers announced 42.5K planned job cuts this month, down 0.7% from 42.7K in Oct according to Challenger, Gray & Christmas.  But with just one month left in 2011, employers have announced 564K cuts for 2011, exceeding 2010's total of 530K.

ADP Says U.S. Companies Added 206,000 Workers

  • <p>U.S. dollar, euro and Swiss franc bank notes are seen in a bank in Budapest August 8, 2011. REUTERS/Bernadett Szabo</p>
Photo:   Yahoo

The world's major central banks acted jointly to provide cheaper dollar liquidity to European banks facing a credit crunch as the euro zone's sovereign debt crisis threatened to bring financial disaster.  The surprise move by the US Federal Reserve, the ECB, the Bank of Japan & the central banks of Britain, Canada & Switzerland recalled coordinated action to steady global markets in the 2008 financial crisis.  In a related move, Italy's central bank started emergency cash tenders for banks which have been squeezed particularly hard in recent weeks as borrowing costs have soared towards 8% (unaffordable in the long term).  "We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," Economic & Monetary Affairs Commissioner Olli Rehn said.  Euro zone leaders have agreed belatedly on one half-measure after another but have failed to restore confidence & face a crunch moment at a Dec 9 Brussels summit seen as a make-or-break moment for the €.  Finance ministers agreed on plans to leverage the European Financial Stability Mechanism (EFSF), but could not say by how much because of rapidly worsening market conditions, prompting them to look to the IMF.  This is called a financial crisis.  Italian & Spanish bond yields resumed their climb towards unsustainable levels as markets assessed the rescue fund boost as inadequate.  Strong stock markets are ignoring uncertainty about how these moves will play out.

Fed Lowers Interest Rate on Dollar Swaps

  • <p>               This Nov. 27, 2011 photo, shows a home with a sale pending sign in Palo Alto, Calif. The number of Americans who signed contracts to buy homes jumped in October to the highest level in a year. (AP Photo/Paul Sakuma)

Photo:   Yahoo

Signed contracts to buy homes jumped in Oct to the highest level in a year, after 3 months of declines & isn't enough to signal a housing recovery.  The National Association of Realtors said its index of sales agreements rose 10.4% last month to a reading of 93.3 (100 is considered healthy).  The last time it was that high was in Apr 2010, one month before a federal home-buying tax credit expired.  Contract signings usually indicate where the housing market is headed, but a growing number of buyers have canceled contracts after appraisals showed the homes were worth less than the bid.  A sale isn't final until a mortgage is closed.  However the market remains depressed & this could be the worst year for sales since the housing bubble burst.  Sales of previously occupied homes could end up being the fewest since 1997 & sales of new homes are headed for the worst year on records dating to 1963.

Pending Sales of U.S. Existing Homes Up 10.4%

Markets are having a sensational day on the moves by the central banks.  It may be a bit early to say that all problems relating to the debt mess are over.  Even with today's enormous gain, Dow is just barely in the black for Nov.  If it's serious about taking off from here, it must get above 12.2K (250 above present levels).

Dow Jones Industrial Average

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