Markets surged on reduced tensions for European debts

Stocks shot out of the gate first thing in the AM & never looked back.  Buyers kept the averages high & pushed them to close at the highs for one of the best days in history.  Dow rose 490, advancers ahead of decliners by a tepid 7-1 & NAZ was up 104   Bank stocks led the charge, giving the Financial Index one of its best gains ever, up 10+ to 172. 
The MLP index was up only a fraction in the 368s while the DJR posted a 10+ gain to the 222s.   Sorry for the misleading posting about a modest gain for the REIT index this AM, the Yahoo computer had a hiccup.  Junk bond funds had limited participation in the gains, up about 1%, while Treasuries sold off on easing financial tensions in Europe.  Oil had a good day, but gave up some of the early gains.  Gold surged 33 into the mid 1700s.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.250%
U.S. 10-year	2.072%

CLF12.NYM

...Crude Oil Jan 12

....100.34

... 0.55

(0.6%)

Photo:   Bloomberg

The Federal Reserve (FED) said the US economy grew moderately in recent weeks & hiring remained anemic with housing activity impaired.  This comes from the Beige Book survey of economic conditions around the FED's 12 districts.  It also showed inflation remained subdued & some cost pressures have eased.  The report confirmed a long-standing trend in the recovery: the expansion remains firmly in place, but underlying conditions are too weak to bring down a 9% jobless rate.  "Overall economic activity increased at a slow to moderate pace since the previous report across all Federal Reserve Districts except St. Louis, which reported a decline in economic activity," the FED said.   Manufacturing activity expanded across most of the nation, while bank lending increased slightly from the previous report released a month ago.  Housing, which continues to reel after a 5-year slump, remained a sore spot. The FED described real estate activity as "sluggish" & the commercial property market as "lackluster."

Fed: ‘Slow to Moderate’ Growth in 11 Districts


Owners of long-term unsecured debt in a collapsing bank would be first in line to take losses under draft plans from the EU to protect taxpayers’ money from future bailouts.  Short-term debt, with a less than one-year maturity, and derivatives should only be written down by regulators as a last resort if losses from longer-term debt aren’t “sufficient to restore the capital of the institution and enable it to operate as a going concern,” according to a draft European Commission proposal.  The EU had delayed proposing the law (originally scheduled to be released in Sep) because of market turbulence.  The commission may further delay publication of the measures until the start of next year to avoid them being unveiled at a time when they could add to volatility on financial markets,  Under the proposals, unsecured senior bondholders of banks would take losses only after a lender’s capital & then the rest of its subordinated debt had already been wiped out.  By imposing losses on long-term senior unsecured debt ahead of short-term debt & derivatives, the proposals go against the normal principle in insolvency law that creditors in the same class should be treated equally, according to the EU draft.  The credit mess in Europe is far from over.

EU Writedown Plan Puts Banks’ Long-Term Debt in Firing Line

Photo:   Bloomberg

Lipitor revenue for Pfizer, a Dow stock, begins eroding today when patent protection ends in the US.  Now the company will be rebuilding the world’s biggest drugmaker into a smaller, faster-moving company that focuses on development of biologic drugs & specialty medicines while expanding sales of existing products, such as Lipitor & Viagra, in emerging countries such as China.  “We’re not going to be a one-product company,” said Geno Germano, Pfizer’s president of specialty care & oncology.  “We’re poised to deliver significant new pipeline assets in the coming year, and in coming years.”  PFE is depending on 4 products to generate $4B in 3 years.  Lipitor, the world’s top-selling medicine, last year had almost $11B in sales which may drop as much as 70% next year.  Meanwhile PFE is planning to sell or spin off its animal health & nutritional businesses which generated $5.4B in 2010 sales (8% of revenue).  The stock was up 60¢ (with a 4% yield) on a day when it's hard to find a loser.

Pfizer Needs to Rebuild After Lipitor

PFE   Pfizer Inc.

I just had an article published at SeekingAlpha:

When Big Banks Sink, The Market Cannot Fly

Despite the spectacular gain today, I stand by my thoughts.  Throwing money at the European debt mess will not solve all the problems that have built over the years.  Today was a stellar day for bank stocks, but they were deeply oversold.  Dow is pressing on 12.2K ceiling.  If the bulls want to be in charge, they will have to go thru that ceiling, & soon.

Dow Jones Industrial Average

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