Tuesday, December 20, 2011

Markets soar on European hopes

Dow soared 337 to go over 12K & closed near the highs, advancers over decliners 7-1 & NAZ was up 80.  Bank stocks & materials (such as oils) led the way, although it was tough to find a loser.

S&P 500 Financials Sector Index

Value171.99One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change      6.62    (4.0%)

The MLP index rose 2+ to the 377s & the REIT index jumped 7+ to the 228s.  Junk bond funds were mixed & Treasuries sold off in this market rally.  Oil rose for a 2nd day as US builders broke ground on more houses than at any time in the past 19 months & on speculation that further sanctions against Iran will curb supply.  Gold joined in the rally, although it's only back where it was 6 months ago.

AMZ    Alerian MLP Index

DJR   Dow Jones Equity REIT Index

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CLF12.NYM...Crude Oil Jan 12...97.12 ...Up 3.24  (3.5%)

Live 24 hours gold chart [Kitco Inc.]

Ireland’s benefactors should take steps to create a firewall around the nation, as its prospects remain “fragile” amid the escalating euro-region debt crisis, according to the IMF.   The crisis may hamper Irish economic growth, increase the cost of re-entering bond markets & make it harder for the country’s banks to sell off assets.  “Stronger European support for Ireland’s recovery would help sustain fiscal consolidation efforts and reinforce prospects for program success, with positive spillovers for European stability,” the IMF said.  “By enhancing the robustness of Ireland’s program, these and other potential steps would also provide a firewall protecting the euro area against potential shocks.”  Ireland sought a €67.5B ($88.5B) rescue last year, amid concern that the nation’s banking woes would push it into bankruptcy.  With the state seeking to test bond markets in 2012 after a 2-year hiatus, Ireland’s partners should consider a range of extra measures, the IMF said.  “The main thing that would be desirable would be to break this link between the sovereign and the financial system more effectively than has been done so far,” said Craig Beaumont, IMF’s mission chief for Ireland. “The prospects for the program’s success remain positive.”  This situation remains touchy.

IMF Urges European Firewall Around Ireland

CVS Caremark estimated that 2012 adjusted earnings would rise 13-17% & lifted the quarterly div 30%.  The company pegs 2012 adjusted EPS at $3.15-$3.25.   Continuing operations should generate $2.93-$3.03.  Analysts are estimating $3.20.   In 2012, the company expects to buy back the remaining $3B of stock already authorized.  The quarterly div was raised to 16¼¢ (65¢ annualized) & the stock rose 3.24 (9%).

CVS Sees 2012 Profit Bump, Lifts Dividend (Update 1)at TheStreet

CVS       CVS Caremark 

  • Republicans plan House OK of payroll tax cut bill
Photo:   Yahoo

The GOP-run House rejected the Senate plan to renew the payroll tax cut & extend unemployment benefits.  It wants to start bargaining now with the Senate, but leader Reid said he won't negotiate until the House approves the Senate's 2-month package.  The problem is the House does not want to have to go thru these negotiations again in Feb, insisting households should know tax obligations for the next 12 months - not just 2.  House Speaker Boehner says it's time for the president to help the impasse by calling on the Senate to return to DC & bargain with the House over a compromise plan.  The Senate had passed a bipartisan plan to extend expiring tax cuts & unemployment benefits for 2 months, hoping to give negotiators time to agree to a year-long plan.  Today's stock market was not concerned about the goings on in DC.

Boehner: Obama Should Make Senate Bargain on Taxes AP

Italy Sells EU3 Billion of 5-Year Bonds, Highest Since 1997

Photo:   Bloomberg

Italy paid the most in 14 years to sell 5-year bonds as Parliament rushes to pass a €30B ($39B) budget plan that Prime Ministe Monti says will bring down record borrowing costs.  The Treasury sold €3B of the bonds, the maximum, to yield 6.47%, the most since 1997 & up from 6.29% in Nov.  Demand was 1.42X times the amount on offer, compared with 1.47X times last month.  The yield on the benchmark 10-year bond was 6.69% after the auction.   Call this one more fluid debt situation.

Italy Sells Debt at Record Yields as Monti Rushes to Get Budget Approved

Maybe this was an overreaction to oversold  markets.  Markets are hoping that financial difficulties will vanish.  The rejection by the House to extend tax tax cuts & unemployment benefits received zero attention, hard to believe.  Even after the rally, the chart below shows the Dow has not recovered after the big sell-off in Aug.  Dow is knocking on the 12.2K ceiling once again & tomorrow will tell us if it has the strength to blast thru.

Dow Jones Industrial Average

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