Markets soar on European debt deal

Dow exploded, gaining 339, closing slightly below its highs & topping 12K, advancers over decliners 7-1 (below earlier levels) & NAZ jumped 87.  Banks soared, there's no other way to describe it.  The Financial Index shot up 11 to the 189s, but is still down 16% YTD.

The MLP index rose only a fraction in the 372s & the REIT index flew up over 10 to the 234s.  12 month charts for both are shown below to give a better idea of the enormous rally in Oct.  Junk bonds were up a more moderate 1% & Treasuries sank with that money going into the stock market.  The VIX, volatillity index, tumbled 4+ to the 25s on easing fears.  Oil is climbing on positive economic news for the US & Europe.  Gold only had a modest gain.

ALERIAN MLP Index (^AMZ)

DJ REIT INDEXDJR (^DJR)

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Treasury Yields:

U.S. 3-month	0.005%
U.S. 2-year	0.309%
U.S. 10-year	2.376%

CLZ11.NYM

...Crude Oil Dec 11

...93.75

... 3.55

(3.9%)

Time Warner Cable reported a small decline in Q3 earnings, shy of expectations as it continued to lose subscribers to its video service.  The country's 2nd biggest cable company continued to see a defection of video customers even as its high-speed Internet subscriber base grew.  CEO Glenn Britt said TWC showed "steady financial progress" in Q3, helped by residential broadband & business services & added that the company saw stronger subscriber results in Aug & Sep.  EPS was $1.08 compared to $1 last year (while net income fell 1%).  Revenue grew 4% to $4.9B.  Expectations were for EPS of $1.13 on revenue of $4.95B.  Residential services revenue climbed 2% to $4.3B & business services revenue jumped 35% to $387M.  Growth in the number of high-speed data subscribers helped boost results.  But advertising revenue fell 3% to $216M.  The market didn't like the news, sending the stock down 5.46 (8%).

Time Warner Cable Slumps as Profit Falls Short

Time Warner Cable Inc (TWC)

Photo:   Yahoo

European leaders bought time to work out more lasting solutions to the debt crisis. Today's 3-pronged deal appears to have met or beaten expectations for some kind of decisive action.  It retools the eurozone's underpowered bailout fund, calls on banks to take 50% losses on Greek bonds & orders them to raise €106B in new capital by Jun.  But European leaders will have to work out the complex financial details quickly & skillfully.  It's unclear whether the bailout fund changes will be enough to prop up Italian & Spanish banks, or whether the bond writedown will be enough to pull Greece from the brink.  The debt crisis is still far from over.  The hope is that the 3 measures crafted will give European countries some breathing space within which to focus on getting their economies growing again to reduce debt & boost confidence in the region's financial markets.  That's called, "High hopes."  The most difficult part of the plan was persuading banks to take 50% losses on their Greek bonds.  The deal will cut Greek debt to 120% of economic output by 2020, from 180% otherwise.  Yet debt of more than 100% of GDP is still breathtakingly high.  Eurozone finance ministers are to work out the terms of the scheme in Nov, but there are already doubts about how leveraging the bailout fund's limited resources will work.  This deal which the markets love today, is still just a work in progress.

Eurozone wins respite, but it could be brief AP


With this rally, you would think Santa Claus brought gifts for everybody.  Not so.  Disappointing earnings caused stocks to sell off.  Dull economic keeps coming.  Pending home sales dropped 4%, but that got lost today.  Dow is up almost 1.3K this month, one its best months in history & there is explanation.  The European debt mess has not gone away.  The super committee will come up with its recommendations to reduce federal spending.  Early word is that is not going well.  Both sides are playing hardball!  Let's see what tomorrow brings to the markets. 

Dow Industrials (INDU)

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Quadruple witching brings higher stocks and record gold prices

Dow added 31 (extending its weekly gain), advancers ahead of decliners 2-1 & NAZ was up 11. Quadruple witching days are very unpredictable. Bank stocks gained, pushing the Financial Index towards 200.


S&P 500 FINANCIALS INDEX

Value	199.69
Change	0.91 (0.5%)

MLPS are taking a rest this week after a nice run recently. The index fell a fraction to the 304s, still up 19 YTD. The Dow Jones REIT Index was up ½ to the 207s. Junk bond funds were flattish. The VIX, volatility index, dropped 1½ to the 23s. It's been having a significant retreat while gold is hitting record highs! Treasuries sold off, the yield on the 10-year Treasury bond rose 4 basis points to 3,23% (but remaining in low territory).


Alerian MLP Index --- 2 weeks




Dow Jones REIT Index --- 2 weeks




VIX --- 2 weeks





Oil was essentially flat but gold took off, setting another record going over 1260. Gold is heading for its 10th consecutive annual increase, best performance in 90 years. Gold buying comes from beliefs that debt cutting measures in Europe will slow growth in Europe & the US.

CLN10.NYM

...Crude Oil Jul 10

...76.87

... 0.08 .......(0.1%)

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The European Union will publish the results of tests that check the stability of banks using stress tests. The results were not initially meant to be made public, but after some countries said they would do so to quell rumors of banking problems, the EU agreed to act in unison. The move was seen as a vote of confidence in the financial sector. Asked how the govs would react if the tests revealed shortcomings, Angela Merkel, German Chancellor, said the EU has “taken precautions,” including a €750B ($928B) financial backstop. When the US carried out similar stress tests over a year ago, it pledged to provide capital to banks that couldn’t raise it. The EU still hasn’t disclosed details of its tests, including whether they include a sovereign debt restructuring, raising concerns they may not be stringent enough.

EU Stress Tests Face Investor Questions on Stringency

Photo: Bloomberg


CVS Caremark (CVS) & Walgreen (WAG), WAG is a Dividend Aristocrat, settled a contract dispute that could have prompted thousands of WAG customers to search for a new place to fill prescription drugs. The companies had been negotiating for months & earlier this month said they would end their partnership. That partnership allows people whose prescription drug benefits are handled by Caremark to be reimbursed for prescriptions filled at Walgreen's pharmacies. WAG has more than 7,500 outlets & wanted to be paid more for filling prescriptions. Each stock gained 1+ on the news.

CVS Caremark, Walgreen Agree on Drug Plans


CVS Caremark --- 2 years




Walgreen --- 2 years





The € reached $1.24 but fell back to $1.23½. Strength in the € could be bringing out stock buyers, but that's hard to figure today. Stress tests for European banks are designed to make investors feel better but also add to uncertainty. Congress is enjoying an opportunity to beat up on helpless BP (BP) execs even though this theater is not getting anything done. With 4 kinds of options expiring today, anything is possible. But lately, these option expiration days have not provided a lot of excitement.


Dow Jones Industrials --- 2 weeks

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