Merger Monday lifts markets

Dow soared 213 (closing at its high), advancers ahead of decliners 8-1 & NAZ gained 47.  Bank stocks led the way (in addition to the merger news) with the Financial Index 14 off its lows last week.

S&P 500 Financials Sector Index

Value	177.31
Change	5.56     (3.2%)

The MLP Index had another good gain, bringing it back to the trading range it has been in since May & the REIT index popped 7+ to the 225s.  Junk bond funds were up more than 2% (very big in this world) & Treasuries were weak, money went into stocks.  Oil had a good day, some give credit to the rising stock market.  Gold gained for the first time in 3 sessions as the dollar’s decline revived demand for the metal.

Alerian MLP Index

Value	358.40
Change	6.68     (1.9%)

Click below to get the latest market update:

Treasury Yields:

U.S. 3-month	0.000%
U.S. 2-year	0.191%
U.S. 10-year	2.289%

CLU11.NYM

...Crude Oil Sep 11

...87.62

.... 2.24

(2.6%)

Photo:   Yahoo

According to a Federal Reserve (FED) survey, banks loosened credit standards on most types of loans in Q2, with commercial & industrial lenders citing “aggressive competition” as a reason for the easier terms,  “The July survey indicated that, on net, banks continued to ease lending standards and most terms on all major types of loans other than loans secured by real estate over the past three months,” the FED said. Ben Bernanke & policy-making colleagues pledged last week to hold the main interest rate at a record low near zero at least until mid-2013, saying economic growth is “considerably slower” than anticipated.  But even with record monetary easing, Europe's sovereign debt woes, weak economic growth & a downgrade of the US credit rating have triggered turmoil in financial markets, pushing down bank stocks. The S&P 500 Bank Index (above) has fallen 27% since its 2011 peak on Feb 15.

Fed Says Banks Eased Lending Terms

Photo:   Bloomberg

Bank of America plans to sell its credit card business in Canada to TD Bank, part of its plan to shed assets & rebuild its capital base.  The deal covers an $8.6B portfolio.  BAC also wants to exit its UK & Ireland card businesses but has not decided whether to sell or wind down those operations.  The move effectively ends its intl consumer banking operations as it seeks ways to bulk up its capital cushion.  The bank is fighting lawsuits & credit problems related to its acquisition of Countrywide Financial 3 years ago when the US housing bubble burst.  BAC has lost more than $22B in its consumer mortgage division in the last year, agreed in Jun to pay $8½B to mortgage securities investors & is fighting numerous lawsuits.  BAC rose 57¢ & TD added $1.94 on a strong day for bank stocks.

BofA Sells $8.6 Billion Canada Card Unit to TD Bank as Capital Rules Loom

Bank of America Corporation (BAC)

Toronto Dominion Bank (The) (TD)

The European Central Bank (ECB) revealed that it bought €22B ($32B) last week, more than it has ever done before, to prop up the bond markets of Italy & Spain.  Tomorrow the leaders of Germany & France meet to discuss the debt crisis that has engulfed Europe for over 18 months.  Last week's turmoil in financial markets, which was partly blamed on Europe's sprawling gov debt crisis, threatened to sweep up heavyweights such as Italy & Spain.  Fears that the eurozone's 3rd & 4th largest economies may find it too expensive to service their debts triggered the ECB's intervention.  France was also caught in the crossfire, with investors worrying about the financial health of the country's banks & whether France would be the next country after the US to lose its AAA credit rating.  France & Germany, which account for almost half of the eurozone's economic output, are taking the lead in pushing for reforms aimed at pulling the bloc out of its debt crisis.  Euro sovereign debt issues have not gone away, just quieted down for the time being.

• ECB in record $32 billion bond buying spree- AP

Today represents a sigh of relief that the craziness from last week is over (at least for the time being).  Merger Mon news & oversold conditions brought out buyers.  But the Dow is still far under its trend line & is more than 10% below its 2011 high.  The short term trend is favorable until shocks reappear.  The VIX, volatility index, fell a very big 4.53 to 31.83 but this is still its highest level since the very troubled days in early 2009.  Danger has not gone away.   

Dow Industrials (INDU)

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Dow rises to new 2010 highs

Markets are feeling good following more dealmaking & encouraging data on retail sales.  Dow is up 46, advancers 2-1 ahead of decliners & NAZ gained 13.  Volume remains low in this holiday season.  Bank stocks are leading the way up taking the Financial Index to within 1 of its yearly high made 2 weeks ago.  After being market laggards for much of the year, bank stocks have resumed their traditional role as market leader in Dec.


S&P 500 FINANCIALS INDEX

Value	211.77
Change	2.27  (1.1%)

The MLP Index is up 1 to 352, but has pulled back from its record high last month & is learning to be a market follower (not leader).  The REIT index is up 1 to the 218s, where it was at its highs in Apr.  Junk bond funds are mixed & little changed.  There is a small amount of buying for Treasuries.  The yield on the 10 year Treasury fell 1½ basis points to 3.33%

Treasury yields:

U.S. 3-month		0.12%
U.S. 2-year		0.60%
U.S. 10-year		3.33%

Alerian MLP Index   ---   2 weeks



Dow Jones REIT Index   ---   2 weeks



10-Year Treasury Yield Index   ---   2 weeks




Oil imports to China may slow into next year, but cold temps in the northern hemisphere are bringing out oil buyers.  Oil has been having a nice run in the last 3 months (the graph below just shows the trend).  It's pushing $90 & has its eyes on $100.  Unfortunately higher oil prices bring increased inflation worries. Gold slipped a tad today, but also has had an excellent run allowing it to set new records above $1400.  A link below is provided to learn more about gold.

CLG11.NYM

...Crude Oil Feb 11

...89.55

... 0.18 (0.2%)

GCZ10.CMX

...Gold Dec 10

.....1,383.20

.... 2.30

(0.2%)

Gold Super Cycle Link! Click Here

OIL  (ETF)   ---   3 months



GLD  (ETF)   ---   3 months

Photo:   Bloomberg

Holiday retail sales are looking good.  Same-store sales at a selection of US retailers posted the biggest holiday jump last week, rising 4.2%.  Almost 74% of shoppers completed gift buying last, faster sales growth than the previous 3 weeks. That compared with 56.6% a week earlier, according to a chain-store sales index released today by the International Council of Shopping Centers (ICSC) & Goldman Sachs.  62% of adults expected to spend the same or more on holiday gifts this year than last, according to a National Retail Federation survey.The ICSC is forecasting that holiday sales will rise 3.5-4%, the biggest increase in 4 years.  However, longer term this would be rated as an average kind of increase.  In addition, online retail business is strong.

U.S. Retail Sales Growth Accelerated to 4.2% Last Week





Photo:  Yahoo


TD Bank (TD), looking to accelerate their growth in the US, agreed to buy Chrysler Financial from private equity firm Cerberus Capital Management for $6.3B.  This deal is the latest example of a healthy Canadian bank using its muscle to buy US institutions battered by the financial crisis.  TD wants to expand its loan business, & said the deal will give it access to technology that can process more than 2M credit applications per year. The auto lending market hasn't taken as much of a hit as other kinds of consumer loans over the last several years & the value of used cars is picking up as the economy improves.  TD expanded its US presence with the purchase of Commerce Bancorp in what has been its largest acquisition after buying smaller, troubled banks in the Carolinas & Florida. Earlier this year, TD agreed to buy the risky assets of 3 insolvent Florida banks worth $3.8B. TD didn't have a presence in US 6 years ago, but now has about 1,300 branches compared to about 1,100 in Canada.  TD Bank expects to rebrand Chrysler Financial under the TD name by next spring 2011 after the deal closes. The acquisition is expected to add $100M in adjusted earnings in 2012, the first full year of operations.  The stock with a 3+% yield is up $1.66 today but has been trading sideways for more than a year.

TD Bank to Buy Chrysler Financial in $6.3 Billion Deal

TD Bank   ---   2 years




Markets are in a holiday mood.  China is getting involved with European debt problems & may become the sugar daddy to help with the bailouts.  Europe needs a lot of help because there will be more bailouts next year.  The rest of the week should quiet with a bias to the upside.  Dow has been below 10½K for more than a week. but buyers may take it higher so that it can close the year at its yearly highs, values not seen since prior to the Lehman collapse in Sep 2008.  Below is a link to my article, just published, at SeekingAlpha on MLPs next year.


After 2 Stellar Years, MLPs Need Rest in 2011


Dow Jones Industrials   ---   2 weeks

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