Tuesday, December 27, 2011

Markets vacillate on mixed economic news

Stocks hardly moved in light trading.  Dow slipped 2, advancers barely ahead of decliners & NAZ also gained 6.  Bank stocks were weak as the Financial Index has been lumbering along since its sell-off in Aug.

S&P 500 Financials Sector Index

Value176.34One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change   - 1.21     (-0.7%)

The MLP index rose 1½ to 386, 4 below its record highs reached 8 months ago, & the REIT index was up 1+ to 234 (below its yearly high of 253).  Junk bond funds rose as did Treasuries.  The price of oil climbed above $101 a barrel on growing U.S. consumer confidence & tension in the Middle East.  Gold kept sliding, but the yearly chart below shows it has done well  -  up 15% YTD.



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CLG12.NYM...Crude Oil Feb 12...101.24 Up 1.56  (1.6%)

Live 24 hours gold chart [Kitco Inc.]

Every day of the year, the gov has to borrow an additional $4B to keep going.  As a result, the president will ask Congress to raise the debt ceiling another $1.2T,  enough to get the gov thru most of next year.  This comes in line with the deal struck during the summer, authorizing a phased increase of the debt ceiling by up to $2.4T, with $400B of that kicking in immediately & another $500B coming in Sep.  This request would increase the debt limit from its current level of roughly $15.2T to $16.4T.  The gov is expected to come within $100B of the current limit by the end of this week. 

Obama to Seek $1.2 Trillion Increase in U.S. Debt Limit Dec. 30

Oil Extends Longest Rally Since 2010

Photo:   Bloomberg

Oil capped its longest rally in more than a year as Iran threatened to block transportation thru the Strait of Hormuz & confidence among US consumers beat expectations in Dec. Crude rose to the highest level in 6 weeks after Iran’s official Islamic Republic News Agency said the country would bar shipments through the strait if sanctions are imposed on its oil exports.  About 15½M barrels of oil a day (a 6th of global consumption) passes thru the Strait of Hormuz between Iran & Oman at the mouth of the Persian Gulf.  Oil was higher on one of the year’s slowest trading days as many traders are away on holiday.

Oil Extends Longest Rally Since 2010

After crashing 50% in 2008 & enduring another brutal 30% decline in 2011, Dick Bove, a prominent financial sector analyst, is sticking with his picks.  "2012 has every indication for being a gangbuster year in terms of earnings, market share, loan growth, deposit inflows, liquidity, capital growth," Bove said.  He says the process has already begun with European lenders selling packages of loans, credit card portfolios & even entire business units to their rivals in the US.  He is expecting to see continued improvement in trends, including the domestic economy & banking industry earnings that are at 4½ year highs, have risen for 9 consecutive qtrs, and "aren't as dirty (or cluttered with charges) as you think."  Explaining his past bullish calls, Bove offered an explanation for his erroneous "buy" calls this year:  "I failed to understand that the fears in the market concerning banking were so great that the fundamental improvements in the economy, the industry, and companies like Bank of America and Citigroup would simply be ignored."  The very brave might want to think about his predictions for 2012.

  • In a sluggish pre & post holiday period, there is not a lot going on in the markets.  The consumer confidence data sounds good, but that is fluid & can change quickly.  Hearing about Sears closing store is disturbing.  Some of its problems relate to self inflicted wounds, but early indications are that holiday shopping was only so-so.  It looks like retailers are pressing harder for sales, not a good to see when the economy is supposed to be doing well.   For what it's worth, Dow is up 700 YTD, better than other popular averages.

    Dow Jones Industrial Average

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