Markets advance on optimistic view of Greek debt

Stocks had their 2nd day of strong gains.  Dow rose 145, advancers over decliners almost 4-1 & NAZ added 41.  The Financial Index broke into the black in the PM, but continues to slosh around 200.

S&P 500 Financials Sector Index

Value	201.85
Change	0.83     (0.4%)

The MLPs rose & the REIT index went into the black, rising 1½ to the 238s (on a recommendation that they are under fair value).  Junk bond funds fell as did Treasuries with the yield on the 10 year Treasury backing up to over 3%.  Treasuries fell on hopes Greece problems will be worked out.  Oil had a rebound day as the $90 floor floor held & gold climbed back above $1500.

Alerian MLP Index

Value	366.78
Change	2.11    (0.6%)

Below is the link for today's Market Update video:

Treasury yields:

U.S. 3-month	0.025%
U.S. 2-year	0.489%
U.S. 10-year	3.044%

CLQ11.NYM

...Crude Oil Aug 11

...92.83

... 2.22

(2.5%)

Photo:   Bloomberg

Christine Lagarde, currently the finance minister of France, was named the new head of the IMF to become the first woman serving as the managing director. “I would like to thank the Fund’s global membership warmly for the broad-based support I have received,” Lagarde said. “I will make it my overriding goal that our institution continues to serve its entire membership with the same focus and the same spirit” as it did during the global economic crisis, she continued.  The IMF board said that it “looks forward to Ms. Lagarde effectively leading” the organization.  Her first major problem will be to getting the finances of Greece squared away.  Then there are more European countries to worry about.

Lagarde Named New Head of IMF


Filings for IPOs around the world are accelerating at the fastest pace since 2007 while the debt crisis in Greece & China’s rising inflation drag down stock markets.  720 companies, including Groupon & Beijing Jingneng Clean Energy, announced plans in Q2 for offerings of $67B, the largest number of deals in a qtr since 2007.  However, there are problems.  More European deals have been pulled this year in 5 years amid concern that Greece will default. All but 5 of the biggest IPOs in Hong Kong have declined since their debut, with Chinese inflation rising to its highest since 2008.  A jump in US-listed internet stocks wasn’t enough to buoy the market, even after LinkedIn (LNKD) more than doubled in its first trading day & Yandex NV surged 55%.  Online social game company Zynga plans to raise $1½-$2B in an IPO, possibly tomorrow.  Zynga is expected to float only a small portion of its shares & the IPO could value the company as high as $15-$20B.  Zynga's IPO would be the latest in a string of social media companies to take advantage of the equity markets. Speculative juices are running high.

IPO Filings Accelerate to Highest Since 2007 Just as Stock Markets Retreat

• Zynga could file for IPO as soon as Wednesday- Reuters

Photo:   Bloomberg

LinkedIn jumped $9.18 after 4 analysts began coverage of the stock.  This follows a rise of  $8.31 to $84.69 yesterday.  Its IPO last month helped open the floodgates to more technology IPOs, making for the biggest year in new internet stocks since the dot-com bubble burst in 2000.  This is the kind of behavior that makes me worry about the health of the stock market. 

LinkedIn Jumps After Banks Predict Stock Gains

LinkedIn Corporation (LNKD)

Stock markets are ignoring Greece, because earnings matter more.  Earnings season will begin in 2 weeks & expectations are high although the slowdown in the economic recovery may put a damper on those expectations.  IPOs are getting a lot of attention despite a largely dismal year.  Prada sold stock last week (in Hong Kong) & its reduced offering got only a lukewarm reception.  Greece needs to approve austerity measures tomorrow, something the population is not behind.  Stay tuned for the vote. 

Dow Industrials (INDU)

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Stocks flat while Treasuries & gold sells off

Stock markets fluctuated very little, the drama was with commodities & Treasuries.  Dow hugged break even all day ending up 13, decliners over advancers 3-2 & NAZ gained 10.  Bank stocks are having a nice run in Dec with the Financial Index up about 10 so far.

S&P 500 FINANCIALS INDEX

Value	207.14
Change	3.68  (1.8%)

The MLP index continued lower, down 2¼ in the 355s & the REIT index fell 3½ to the 217s.  Junk bond funds were 1-2% lower.  Treasuries had wild fluctuations & sold off again (see below). 

Alerian MLP Index   ---   6 months



Dow Jones REIT Index   ---   6 months



10-Year Treasury Yield Index   ---   6 months





Oil dropped while gold was hit with major selling.  Late day buying reduced its losses, but it's down 50 this week after reaching new record highs above 1400.

CLF11.NYM

...Crude Oil Jan 11...

88.38 ......

0.31

(0.4%)

GCZ10.CMX

...Gold Dec 10

.....1,379.30 ...

29.00

(2.1%)

*** Gold Super Cycle ***  

Click Here

The 10-year Treasury yield advanced 8 basis points to 3.24% after touching 3.33%, the highest level in 6 months. At the yield's high, it increased 36 basis points over 2 days, the biggest advance since Sep 2008 (following the bankruptcy of Lehman Brothers). 2-year note yields climbed 10 basis points at their high to 0.64%, the highest level in over 4 months.  At today’s auction of $21B in 10-year notes, they drew a yield of 3.34%, compared with a forecast of 3.307%. The sale was a reopening of the Nov 9 auction, which produced a yield of only 2.636%.  The bid-to-cover ratio was 2.92X, below the average of 3.12X at the last 10 auctions. Indirect bidders, including foreign central banks, bought 44.4%, compared with 56.6% in Nov (the most since the Treasury began releasing the data in 2003). The average for the past 10 sales was 43.4%.  $13B of 30-year debt will be sold tomorrow, completing this week’s $66B of sales. Investors find Treasuries less appealing when interest switches to stocks.


Treasury 10-Year Yield Rises to Six-Month High on Global Recovery Outlook

Treasury yields:

U.S. 3-month		0.14%
U.S. 2-year		0.61%
U.S. 10-year		3.24%

Youku.com (YOKU) & E-Commerce China Dangdang (DANG) doubled after their US IPOs.  Chinese internet companies are hot.  YOKU, China’s largest online video company, almost tripled at its high after raising $203M. DANG, China’s biggest book retailer, almost doubled after its $272M IPO at $16 a share.  The offerings were the first of 5 mainland Chinese IPOs scheduled this week. China is home to more than 400M internet users & may expand 4 times as fast as the US next year, according to the International Monetary Fund.  No wonder money is scrambling to buy these stocks.  Of course, that raises memories of the internet bubble 10 years ago. 

www.bloomberg.com/news/2010-12-08/online-retailer-china

Dangdang   ---   1 day



Youku   ---   1 day





US stocks did little while Chinese stocks soared.  But the rapid rise in interest rates is a cause of worry.  On the one hand it implies investors are seeking risk (encouraging for stocks), willing to sell "safe have" Treasuries & gold.  On the other hand higher interest rates bring a host of problems, starting with higher mortgage rates for a housing industry that is struggling badly.  MLP yields, at low levels of 6.3% for the index, may also be subject to selling to make their yields more attractive.  After a quick spurt to its 2010 high at the beginning of Dec, Dow has been struggling, not sure which way to go.  With DC bogged down in partisan debate over the future of taxes, Dow will continue to drift with a downward bias.


Dow Jones Industrials   ---   6 months

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