The Dow and S&P 500 reach new record highs

Dow jumped 72 & closed near the high, advancers over decliners 2-1 & NAZ gained 22.  The MLP index went up 2+ to the 464s, the high end of its 10 month trading range & near the record reached earlier in 2013, & the REIT index slipped 1 to the 265s.  Junk bond funds were flattish. again trading sideways for months, & Treasuries saw selling again.  Oil pulled back & gold was barely able to hang in above 1200.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month	0.07%
U.S. 2-year	0.38%
U.S. 10-year	3.03%

CLG14.NYM

....Crude Oil Feb 14

....98.50

...0.79

(0.8%)

Home prices in 20 US cities rose in Oct from a year ago by the most in more than 7 years,.  The S&P/Case-Shiller index of property prices in 20 cities climbed 13.6% from Oct 2012, the biggest 12-month gain since Feb 2006, after a 13.3% increase in the year ended in Sep.  The projection called for a 13.5% advance.  A dwindling inventory of foreclosed properties has helped restrict the supply of homes for sale, pushing up prices even as higher mortgage rates cool demand.  The real-estate market will probably get its next boost from gains in employment that are lifting consumer confidence in the economic expansion.  Home prices adjusted for seasonal variations rose 1% in Oct from the prior month, the same as in Sep.  Property values rose in all 20 metropolitan areas, with the smallest gain coming in at 0.3% in Denver.  However this is lagging data & advances in home equity may be harder to come by as Federal Reserve begins to trim stimulus, causing mortgage rates to climb.

Home Prices in 20 U.S. Cities Rise Most in Seven Years, Case-Shiller Says


Treasuries fell, pushing 10 year yields to the highest level in more than 2 years, as gains in consumer confidence & home sales bolstered bets the Federal Reserve (FED) will end bond purchases next year.  30 year bond yields also reached the highest since 2011.  Treasuries are having the first annual loss since 2009 amid signs the recovery will prove resilient as the FED tapers asset-buying.  10 year yields have jumped 1.2 percentage points this year to 3% & will rise to 3.4% by the end of 2014, according to recent survey.  The 10 year yield climbed 6 basis points to 3.03%,the highest since Jul 2011.  Yields on 30 year Treasury bond jumped 7 basis points to 3.97%, the highest level since Aug 2011.  US gov securities maturing in 10 years or more have slumped 12% this year, the most among all of the 144 gov bond indexes globally.

U.S. 10-Year Yield Climbs to 2-Year High as Data Stoke Fed Bets


The strength in the popular averages during 2013 masks an underlying weakness in the stock market.  Most regular stocks did well while yield stocks, especially in H2, were flat to lower in anticipation of higher interest rates.  Dow rose a startling 27%, one of its best year in history, primarily because of cheap money.  That period is winding down & it will be difficult to approach that kind of return in 2014.  In the meantime, enjoy the new year!!

Dow Jones Industrials

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Higher markets on consumer confidence data

Dow rose 33 to yet another record, advancers over decliners almost 3-2 & NAZ was up 13.  The MLP index, which has been strong in the last 2 weeks, rose 2+ to the 464s & the REIT index was up fractionally in the 262s.  Junk bond funds edged higher & Treasuries were soft, taking the yield on the 10 year Treasury near 3%.  Oil slipped back under 100 & gold is hanging in above 1200 which is becoming an important support level. 

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.06%
U.S. 2-year	0.38%
U.S. 10-year	2.99%

CLG14.NYM

...Crude Oil Feb 14

...98.56

....0.73

(0.7%)

GCF14.CMX

...Gold Jan 14

......1,210.10

...7.00

(0.6%)

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Consumer confidence in the US climbed more than projected in Dec as Americans’ views of current economic conditions jumped to the highest level since Apr 2008.  The Conference Board index rose to 78.1 from a revised 72 a month earlier that was stronger than initially estimated. The projection called for a gain to 76.  Americans are growing upbeat about the economy as household finances improve on the heels of more hiring, rising property values & stock-market gains.  Increased optimism along with greater wealth will help underpin consumer spending that makes up almost 70% of the economy.  The Conference Board’s barometer of present conditions increased to 76.2 from 73.5 & consumers’ assessments of current labor-market conditions also improved.  The share of respondents who said positions were hard to get dropped to the lowest level since Sep 2008 (when Lehman collapsed).  A gauge of consumer expectations for the next 6 months jumped to 79.4, the highest since Sep, from 71.1 a month earlier.  The proportion of Americans who said jobs would become more plentiful in the next 6 months rose to a 4 month high of 17.1% from 13.1% in Nov.  The share of respondents who said they expected better business conditions in the next 6 months rose to 17.2% from 16.7%.

Consumer Confidence Index in U.S. Increased to 78.1 in December

Photo:   Bloomberg

Xi Jinping, delivering his first New Year’s address as China's pres, said the country must press ahead with reforms in 2014 to improve livelihoods & make the country “rich and strong.”  “I firmly believe that new glories will be awaiting the Chinese people,” Xi said in a speech.  China enters 2014 facing slowing economic growth, rising environmental concerns & higher tensions with Japan over a territorial dispute that has damaged a $366B trade relationship.  “In 2014 we will make new strides along the path of reform,” Xi said.  A key task will be overseeing the broadest economic reforms since the 1990s which were spelled out at the Communist Party Central Committee’s Third Plenum in Nov.  Shifts include loosening the one-child policy, increasing property rights for farmers & encouraging private investment in more industries.  China’s equities have fallen this year amid concern slowing economic growth will curb corp profits.  China estimates that growth slowed to 7.6% this year & analysts see growth slowing to a 24-year low of 7.5% in 2014 & 7.2% in 2015.  People’s Bank of China (PBOC) in a separate New Year’s Eve statement said the nation will maintain a “prudent” monetary policy & promote financial reforms in 2014.  Policy makers will ensure financial stability, it said.

Xi Says in New Year’s Address China Will Make Progress on Reform

Stocks are having another good day, probably propelled by fund managers buying to make their holdings look even better.  As I've said many times, all stocks are not participating as shown by limited market breadth.  Consumer confidence is riding higher than it has been for some time but new taxes & fees, largely related to Obamacare, kick in tomorrow.

Dow Jones Industrials

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Markets little changed on light volume

Dow added 25 with a tiny rally at the end, declines just ahead of advancers & NAZ slid back 2.  The MLP index rose 3+ to the 461s (near the high since Aug) & the REIT index was up a fraction to the 266s.  Junk bond funds were mixed to lower & Treasuries finally rallied, taking the yield on the 10 year Treasury below 3%.  Oil backed off from 100 while gold is hovering neat 1200 as it concludes its worst year in more than 3 decades.

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Treasury yields:

U.S. 3-month	0.06%
U.S. 2-year	0.38%
U.S. 10-year	2.97%

CLG14.NYM

...Crude Oil Feb 14

....99.32

...1.00  (1.0%)

Wells Fargo will pay $541M to Fannie Mae to settle claims over defective home loans, completing the gov-controlled mortgage company's efforts to have banks buy back troubled loans made before the financial crisis.  Fannie Mae has reached settlements worth roughly $6.5B over loan buybacks with 8 banks, including WFC, the nation's largest mortgage lender & 4th-largest bank.  The settlements include a $3.6B accord in Jan with Bank of America (BAC) & a $968M accord with Citigroup (C).  WFC will pay Fannie Mae $541M in cash after adjusting for credits from prior repurchases.  Before adjustments, the settlement totaled $591M, & the accord resolves substantially all repurchase claims over loans sold to Fannie Mae that were made before 2009.  WFC agreed in Sep to pay $780M to the smaller Freddie Mac to resolve similar repurchase claims & said it had set aside sufficient funds for the Fannie Mae settlement.  Banks can be forced to buy back home loans if representations & warranties concerning the underwriting & whether borrowers could afford to make payments prove false.  Fannie Mae & Freddie Mac own or guarantee 2/3 of US home loans.  The gov seized them in Sep 2008 & put them into a conservatorship.  As of last month, taxpayers had nearly broken even on the bailout.  There was no change in the stock today.

Wells Fargo to Pay Fannie Mae $591 Million to Resolve Claims

Wells Fargo (WFC)

The Chinese joint venture of General Motors will recall 1.46M cars to replace defective fuel-pump brackets in China's biggest call back since a new law broadening manufacturer liability came into force.  GM’s passenger-car venture is recalling 1.22M Buick Excelle & 243K Chevrolet Sail cars, China’s General Administration of Quality Supervision said.  A Buick dealership owned by Beijing Capital Group estimates replacement costs at about 900 yuan ($150) to 1000 yuan for each Excelle.  China is stepping up protection for consumers as automakers from GM to Volkswagen seek to expand sales in the world’s largest auto market.  The new law, which came into force this year, allows the gov to order investigations & impose fines should manufacturers & importers fail to recall faulty vehicles in a timely manner.  A separate rule mandating minimum standards for warranties took effect in Oct.  3.76M vehicles have been recalled in China, on track for an annual record.  The defective bracket may crack after prolonged use, leading to fuel leaks in extreme cases.  The stock lost a quarter.

GM Recalls 1.46 Million Cars in China in Biggest Case Since New Law

General Motors (GM)

Very little was going on today & tomorrow will be even quieter.  Trading will largely come from last minute adjustments to make portfolio balance sheets look prettier at year-end.  Gold had a terrible time this year as those traders sold to buy stocks.  Treasuries also had a tough year, their first loss since 2009.  But Dow is up 25% to a new record

Dow Jones Industrials

See all of the features of MarketClub...Click Here

I’m a huge fan of INO & from what I have seen so far, their service Marketclub!  This isn’t a stripped down version, everything in MarketClub is available to you. I don’t want to give everything away, but you’ll have unlimited access to my favorite 3 tools: Trade Triangles, Smart Scan & Alerts!
The best part is that the MarketClub customer support team will be providing UNLIMITED support!
You can call or email for an instant response to any question, comment or concern.

Here’s that link:

https://club.ino.com/join/specialtrial/index_free.html?a_aid=CD3289&a_bid=359ef9a3

I’d recommend you jump on this now.