Wednesday, December 28, 2011

Dow retreats from a 5 month high

Dow fell 86, decliners over advancers 4-1 & NAZ dropped 23.  Bank stocks led the selling, taking the Financial Index down 1+ to the 174s.  All this is on light volume.

The MLP index fell back 2½ to the 383s, but remains within spitting distance of the 390 record.  The REIT index fell 2 to 232 but junk bond funds were higher.  Treasuries gained, taking the yield on the 10 year Treasury bond below 2%. Oil fell for the first time in 7 days on reduced concern that Iran will block the Strait of Hormuz.  Gold, under $1600, keeps drifting lower.

AMZ  Alerian MLP Index

DJR   Dow Jones Equity REIT Index

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLG12.NYM...Crude Oil Feb 12...100.60 ...Down 0.74  (0.7%)

GCZ11.CMX...Gold Dec 11.......1,588.60 ...Down 5.60  (0.4%)

Get the latest market update below:

Strong demand for Italian gov debt pushed the country's borrowing costs lower & suggested investors have become less jittery about a possible default.  Italy raised €10.7B ($14B) in a pair of auctions at sharply lower rates than those it was forced to pay just a month ago when investor concerns over the ability of the country to service its massive debts became particularly acute.  The sharp decline in borrowing costs could be a signal that commercial banks from the 17 countries that use the € diverted some of the money they tapped from emergency loans from the ECB last week to buy the bonds of heavily indebted govs.  It may also suggest rising investor confidence in Italy's recent efforts to reduce its long-term debt through a variety of austerity measures.  The average yield on the €9B ($11.8B) 6-month bill was 3.251%, half the 6.504% rate last month.  An auction of 2-year bonds, which raised €1.7B ($2.2B), also saw the yield fall to 4.853% from 7.814% last month.  Italy's benchmark 10-year bond yield in the markets consolidated below the 7%t level, which is widely considered to be unsustainable in the long-run.  This auction was considered encouraging, suggesting that the Italian sovereign debt market has pulled back from the dangerous situation last month.

Italy’s Borrowing Costs Decline at Auction After Government Agrees on Cuts

There is a cost for increased lending to European banks.  German stocks fell as the ECB's balance sheet expanded to a record after it lent financial institution more money last week.  Lending to euro-area banks jumped €214B ($280B) to €879B last week.  Its balance sheet increased €239B to €2.73B.  Excessive borrowing is at the root of all the sovereign debt problems.

German Stocks Fall as ECB Balance Sheet Rises to Record on Loans

  • <p>               FILE - In this Dec. 24, 2011 file photo, a last-minute shopper leaves the Toys R Us flagship store in New York's Times Square. A mall trade group said Wednesday, Dec. 28, 2011, that last minute shoppers gave merchants a solid lift during the final week before Christmas. (AP Photo/Mary Altaffer, File)
Photo:   Yahoo

Last-minute shoppers gave merchants a solid lift during the final week before Christmas. Retail sales rose 4.5% at stores open at least a year for the week ended Sat compared with the same week last year, according to the International Council of Shopping Centers Index.  Gift buyers gained steam in as the season went on.  The store revenue figure rose 0.9% last week from the week before, building on a 3.4% increase the week before that.  The index seeks to estimate sales at 24 major stores.  For the week ended Nov 26, which included the traditional start of the holiday shopping season, stores had the biggest sales surge from the week before since 1993.  The 2 weeks after that showed the biggest percentage decline since 2000.  During the final 2 weeks before Christmas however, sales surged again, by the highest rate since 2005. Stores are expected to benefit when shoppers come back to spend their gift cards, because people often spend more than the cards' value.

U.S. Retail Sales Rose 4.5% Before Christmas

The improved Italian debt auction should have given the markets a lift, but not today.  It's tough to make much of any moves this week with light volume.  Profit taking for MLPs blunted to take the index to a new record high.  Their basics are stable but growing.  Buyers are attracted by high yields in a low yield environment & the tax favored status.  Dow bounced off its interim high & the wishy washy ceiling of roughly 12.2K is holding.  Dow is up 600+ YTD but the S&P 500 is off 3. 

Dow Jones Industrial Average

S&P 500 Index

Get your favorite symbols' Trend Analysis TODAY!  

No comments: