Wednesday, June 6, 2012

Biggest gain in 2012 for markets on hopes for more stimulus

Stocks jumped higher at the opening & kept rising all day.  Dow finished at its highs, up 286, advancers over decliners almost 7-1 & NAZ added 66.  Bank stocks were in demand & the Financial Index shot up 5+ to the 187s.

The MLP index rose 6 to the 363s & the REIT index was up almost 5 to 250, quite a day for oversold sectors.  Junk bond funds only inched higher while Treasuries tumbled on response to the Euro debt crisis.  Oil participated in the rally with a limited gain & gold sold off in the PM.

JPMorgan Chase Capital XVI (AMJ)


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Treasury yields:

U.S. 3-month

0.081%

U.S. 2-year

0.258%

U.S. 10-year

1.652%

CLN12.NYM....Crude Oil Jul 12...85.07 ...Up 0.78  (0.9%)

GCM12.CMX...Gold Jun 12.....1,618.70 ....Up 3.50  (0.2%)

Live 24 hours gold chart [Kitco Inc.]




The Federal Reserve Building in Washington

Photo:   Yahoo

A Federal Reserve (FED) survey found that the US economy grew moderately in most regions of the country this spring & companies kept hiring, a hopeful sign after a series of gloomy data released last week.  The survey shows growth in each of its 12 bank districts from Apr 3 - May 25.  Growth was moderate or modest in 10 districts, steady in the Boston district & slowed in the Philadelphia region.  Hiring was steady or rose modestly, according to the "Beige Book."  That's in contrast to the jobs report last week, which said employers adding the fewest jobs in a year during May & the unemployment rate ticked up to 8.2%.  It was the 2nd positive reading on the economy this week.  Yesterday, another survey found that the service sector expanded at a slightly faster pace than in the previous month.  The industries surveyed cover about 90% of the economy including health care, retail, construction & financial services.  Manufacturing & home sales improved in most districts, as did residential & commercial construction.  Auto sales were strong & businesses sought more loans, which could signal expansion plans. Small & medium-sized banks in the New York district reported the most broad-based increase in loan demand since the mid-1990s.  But the survey also pointed to some weakness in the economy.  Consumer spending was flat or increased only slightly in almost all districts.  That could restrain growth.  Americans received little in the way of pay raises.  Weak wage growth could also dampen consumer spending in the coming months.  Still, gas prices have dropped sharply since peaking at the start of Q2 which allows consumers & businesses latitude to spend more freely.  Those report will be one of many discussed at the next FOMC meeting. 


Fed Survey Finds U.S. Growth, Hiring Mostly Steady AP


Federal Reserve Bank of Atlanta President Dennis Lockhart

Photo:    Bloomberg

Federal Reserve Bank of Atlanta President Lockhart said extending Operation Twist, the program to lengthen maturities of debt on the FED balance sheet, is an “option on the table.”  “There is capacity to do more,” Lockhart said.  “It is certainly an option. I’m not going to speculate on what the FOMC will do,” he said.  The FOMC meets Jun 19-20 to consider whether more stimulus is needed after the economy added the fewest jobs in a year in May.  ECB President Draghi said officials are ready to add more stimulus to the euro region’s economy if necessary, while damping expectations that another round of 2-year funding for banks is imminent.  “We monitor all developments closely and we stand ready to act” as the economy faces “increased downside risks,” Draghi said today after the ECB left its benchmark rate at 1%.  “A few” governing council members asked for a rate cut today, he said. 

Lockhart Says Extending Operation Twist Is ‘On the Table


Kinder Morgan, Inc said 3 of its investors, including Goldman Sachs (GS), are selling part of their stakes in the natural gas pipeline operator as part of a secondary offering of 63M shares of stock.  In addition, the Carlyle Group & Riverstone Holdings are selling.  KMI is not selling any shares in the offering.  The offering comes after last month's closing of the $20B acquisition of El Paso, making KMI the biggest US natural gas pipeline operator thru Kinder Morgan Pipeline (KMP) & Kinder Morgan Management (KMR).  KMI stock fell 1.12 on the news of the offering.

Kinder Morgan announces 63M stock offering AP

Kinder Morgan, Inc. (KMI)


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The markets must have been reading my posts, I had been calling for promises by the financial biggies which would bring buyers back to vastly oversold markets.  That's exactly what happened.  Even Facebook (FB), which has been in its own bear market, rose more than $1.  Chances are good that Asian markets will extend this rally.  But problems remain.  The Greek election is 11 days away & Spain badly needs a financial bailout.  China has to deal with its slowing growth.  And on & on.  With today's rally, Dow is barely in the black in the first few days of Jun.  The question becomes, "Does this rally have legs?"

Dow Industrials

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1 comment:

Anonymous said...

nice posting.. thanks for sharing..