Monday, December 5, 2011

Markets manage to hold gains after S&P European credit warning

Dow finished with a gain of 78 (almost 100 below the earlier highs), advancers over decliners 5-2 & NAZ up 28. Bank stocks also slid back, with the Financial Index closing 2 below the earlier highs.

S&P 500 Financials Sector Index

Value	176.79
Change	3.65 (2.1%)

The MLP & REIT indices lost early gains, finishing with only modest gains. Junk bond funds were mixed to higher & Treasuries recovered early AM losses with minimal changes. Oil declined, reversing earlier gains as it was reported that S&P will put France & Germany on “creditwatch negative.” Investors, unsure about gold, sold in the PM (shown in the graph below).

AMZ Alerian MLP Index

DJR Dow Jones Equity REIT Index

Click below for the latest market update:

Treasury yields:

U.S. 3-month	-0.005%
U.S. 2-year	0.252%
U.S. 10-year	2.035%

CLF12.NYM

....Crude Oil Jan 12....

100.85

...

0.11

(0.1%)

Photo: Bloomberg

The IMF agreed to release a €2.2B ($2.95B) disbursement to Greece, part of a 3-year IMF-EU bailout package. "The executive board of the International Monetary Fund today completed the fifth review of Greece's economic performance under a program supported by a three-year Stand-By Arrangement for Greece," the IMF said. The disbursement brings to €20.3B paid to Greece under the €30B loan agreed in May 2010 & is part of a bigger €110B rescue package for the country. The approval of the latest aid followed assurances by Prime Minister Papademos & his new unity gov that the country would stick to terms of a debt reduction deal. So far so good, but this deal remains iffy.

IMF releases 2.2 billion euro in aid for Greece Reuters

Automakers Gain Speed at Year-End as U.S. Shoppers Return

Photo: Bloomberg

Demand is recovering for the auto industry faster than anticipated, as carmakers are headed toward their best annual performance in 3 years with sales of 12.8M vehicles. US buyers are replacing their cars after delaying new vehicle purchases as long as possible, & they are snapping up hybrids as consumer confidence in the economy jumps. As a result, automakers haven’t had to resort to fire-sale prices to goose demand. Spending on marketing promotions averaged less than $2700 per car, down about $74 from a year ago. Consumer confidence surged in Nov by the most in more than 8 years, & the portion of consumers planning to buy a new vehicle within 6 months climbed to the highest since Apr. The average age of cars & light trucks on the road has risen to 10.6 years old. What is needed to have consumers start to buying more houses, needed to give the economy a significant lift.

Automakers Set for Best Year Since 2008 as U.S. Shoppers Returning: Cars

The € turned lower against the $ in late day trading on reports that S&P is warning all 17 countries that use the € that their credit ratings may be lowered. The € fell a ¼ of a penny to below $1.34. That was after Angela Merkel & Nicolas Sarkozy said they support a new European Union treaty that would punish countries that overspend, meant to prevent another debt crisis. Traders worry that Europe's debt crisis could lead to a collapse of the €.

Euro falls on Europe downgrade warning report AP

The day started of in la-la land, What could possibly go wrong as long as financial leaders had good thoughts? That was fine, but S&P rained on their parade. Greece got its money so it can get by until the next crisis. Italy is a much bigger disaster waiting. The gov has good intentions, but it is has a lot to accomplish. Now the major countires with investment grade ratings will have to look over their shoulders before throwing bailout money around. The financial ministers meet at the end of this week & nobody knows what they will accomplish. It might be a bit early to celebrate with a market rally. Meanwhile, Dow was turned back at its 12.2K ceiling but able to hold above 12K. The bulls will accept that.

Dow Jones Industrial Average