Markets shoot up on Bernanke comments

Dow soared 175, advancers over decliners a relatively mild 3-1 & NAZ rose 32.  The Financial Index jumped 4 to the 237s. The MLP index surged 4+ to the 429s & the REIT index was up 2+ to 280.  Junk bond funds were mixed & Treasuries sold off in a rising stock market.  Oil rallied in the PM & gold dropped, heading for the longest run of monthly declines in 16 years, as confidence that the US economy is recovering curbed demand for the metal as an investment hedge.

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Treasury yields:

U.S. 3-month	0.104%
U.S. 2-year	0.244%
U.S. 10-year	1.904%

CLJ13.NYM

...Crude Oil Apr 13

....92.75

... 0.12  (0.1%)

Photo:   Bloomberg

ECB President Graghi signaled the bank has no intention of tightening monetary policy anytime soon with inflation projected to undershoot its 2% target next year.  While its balance sheet may shrink naturally as confidence returns to financial markets & banks repay emergency loans, policy makers are “far” from considering an exit from monetary stimulus, Draghi said.  “We foresee for next year an inflation rate which is significantly lower than 2 percent.”  The ECB has cut its benchmark interest rate to a record low of 0.75%, extended over €1T ($1.3T) in cheap loans to banks & pledged to buy the bonds of debt- strapped nations if they agree to economic reforms.  The ECB in Dec forecast the euro economy will contract 0.3% this year & inflation will slow to 1.4% in 2014.  While conditions on financial markets are improving, Draghi said the euro-area economy is still “weak” & the ECB’s accommodative policy will help to drive a “gradual recovery” in the course of 2013.

Draghi Signals ECB in No Rush to Tighten Monetary Policy Soon




Photo:   Bloomberg

Apple CEO Tim Cook said he’s in “very, very active” talks about what to do with the company’s growing cash pile, did little to assuage investors seeking more clarity on his plans.  AAPL shares slipped as Cook ended the company’s annual meeting without giving any additional insight on what he’ll do with $137B in cash & investments.  He's under growing pressure to use higher divs, stock buybacks or a new class of preferred shares to compensate investors after the shares tumbled by more than 1/3 from a Sep peak.  The calls grew louder amid signs of slowing sales & profit growth & increasingly acute competition from Samsung & Google (GOOG).  The stock lost 4+ to the 444s with major selling in the last hour (after the annual meeting ended).

Apple’s ‘Very Active’ Cash Talks Won’t Assuage Investors

Apple (AAPL)






Photo:   Yahoo

Facing criticism from Reps, Big Ben stood behind the Federal Reserve's (FED) low-interest-rate policies & sought to reassure members of congress that the FED has a handle on the risks.  In his 2nd day of testimony, Bernanke said that the bond purchases are needed to boost a still-weak economy & have helped create jobs for average Americans.  The bond purchases are intended to lower long-term interest rates which encourages more borrowing and spending that generates growth. But some Reps warned that by continually pumping more money into the financial system, the bond purchases could eventually ignite inflation.  Bernanke said the FED is weighing the costs & benefits of its bond purchases & noted that the FED has a dual mandate: to both maximize employment & maintain low inflation.  He argued that the low-interest-rate policies are giving crucial support to an economy still burdened by high unemployment & also acknowledged the risks of keeping rates low indefinitely.  But he expressed confidence that such risks pose little threat now & gave no signal that the FED might shift away from those policies.

Bernanke Says Higher Rates May Signal Stronger Economy

Markets had another great day as Dow has gained about 300 in just 2 days.  Today's rally is the biggest in almost year.  Buyers are saying "What could possibly go wrong?"  The answer is, plenty.  While Europe is recovering, it's still in a recession.  Then there's the US which has to deal with federal budget cuts (that the the bulls are not taking seriously), raising the debt ceiling AGAIN & passing legislation for funding the gov in a deeply divided DC.  Even though unemployment has come down from recent highs, it remains at stubbornly high levels.  In addition, the effects of the tax increases & higher priced gas are unknown.  But with the Dow at a 5 year high, Why Worry?  Maybe you should ask an AAPL, with the largest market cap in the world, shareholder.

Dow Jones Industrials

Markets rise on new orders data

Dow rose 89, advancers over decliners 3-1 & NAZ was up 28.  The Financial Index climbed 1 to 235.  The MLP index was up 2 to the 427s & the REIT index went up 2 to the 279s.  Junk bond funds were mixed & Treasuries inched higher.  Oil slipped back & gold fell to the 1600 support level.

Treasury yields:

U.S. 3-month	0.104%
U.S. 2-year	0.240%
U.S. 10-year	1.865%

CLJ13.NYM

...Crude Oil Apr 13

...92.51

... 0.12

(0.1%)

GCG13.CMX

...Gold Feb 13

...1,609.00 Feb 26

... 6.20

(0.4%)

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Photo:  Bloomberg

Italy’s 10-year gov bonds rose, pushing yields down from a 3-month high, after demand increased at the nation’s first bond auction since its inconclusive election results.  The bonds pared their first monthly decline since Jul as the Treasury sold €6.5B ($8.5B) of 5 10-year securities.  Spanish bonds also gained as a report showed economic confidence in the euro area increased more than analysts forecast in Feb.  The rate jumped as much as 44 basis points yesterday, the biggest increase since Dec, 2011, & has climbed 53 basis points this month.  Italy sold €4B of new 10-year bonds at an average yield of 4.83%, up from 4.17% at the Jan 30 auction.  The sale came as EU leaders put pressure on Italy’s political parties to form a unity gov committed to budget rigor.  EU Economic & Monetary Commissioner Olli Rehn said it is “important to get a functioning government in Italy.”  Nobody knows what's going on here!

Italy’s 10-Year Government Bonds Advance After Auction




Photo:   Bloomberg

Orders for US durable goods excluding transportation equipment climbed in Jan by the most in a year, indicating business investment is holding up.  Bookings for equipment meant to last at least 3 years minus demand for things such as aircraft climbed 1.9%, exceeding the forecast & the most since Dec 2011.  But Commerce Dept data showed that total orders dropped more than projected, reflecting the biggest slump in defense bookings in a decade.  Healing overseas markets, sustained demand for automobiles & leaner inventories are combining to stabilize manufacturing.  Last month’s gain may reflect relief that the US skirted most of the tax increases & spending cuts associated with the fiscal cliff, even as further progress on a budget compromise hit a brick wall.

Orders for U.S. Non-Transportation Goods Jump Most in a Year


The number of Americans who signed contracts to buy homes rose in Jan from Dec to the highest level in more than 2½ years, suggesting sales of previously occupied homes will continue rising in the coming months.  The National Association of Realtors said that its index for pending home sales rose 4.5% last month to 105.9.  That's the highest since Apr 2010, when a homebuyer's tax credit was about to expire.  There is generally a 1-2 month lag between a signed contract & a completed sale.  Pending home sales rose in all regions, but just barely ticked up in the West, where a limited supply of available homes is holding back sales.  And new-home sales jumped 16% last month from Dec to the highest level since Jul 2008, the Commerce Dept said yesterday.  Home prices, meanwhile, rose by the most in more than 6 years in the 12 months ending in Dec.  Steady price increases are also contributing to the housing recovery.  They encourage more people to buy before prices rise further.  Higher prices also build homeowners' wealth, which can spur more spending & economic growth.  Builders, meanwhile, started work on the most new homes in 4½ years in Dec.  Last year was the best year for residential construction since 2008, just after the recession started.  Housing is in a recovery mode.

U.S. Pending Home Sales Rise to Highest Since 2010 AP


Economic data was favorable, bringing out buyers.  Confused elections results from Italy are a cloud that could be hanging over the markets for some time.  The federal budget cuts & debt mess are much bigger problems, but they "can't get no respect."  The pres is the one who came up with the sequester idea idea in 2011 to solve the then problem of raising the debt ceiling.  Now the idea is once again to kick the can down the road.  Solve today's problems today, tomorrow will take care of itself.  Even with today's rise, Dow continues to hug 14K, which it has been doing for a month.   Sorry, no graphs today.

Markets rise on better than expected reports

Dow went up 115. advancers ahead of decliners 2-1 & NAZ added 13.  The Financial Index gained 1 to the 233s.  The MLP index was up 1+ to the 425s & the REIT index gained 2+ to the 277s.  Junk bond funds were higher & Treasuries also found buyers.  Oil pulled back but gold rose sharply, going well over 1600, on concerns over the budget mess in DC.

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Treasury yields:

U.S. 3-month	0.114%
U.S. 2-year	0.244%
U.S. 10-year	1.877%

CLJ13.NYM

....Crude Oil Apr 13

...92.59

... 0.52

(0.6%)

Photo:   Bloomberg

Purchases of new homes surged in Jan by the most in 2 decades & consumer confidence jumped this month, signs of a rebound in US economic growth at the start of 2013.  Home sales shot up 15.6% to a 437K annual pace, exceeding the highest forecast & following a 378K rate in the prior month.  The figures bolster Big Ben’s view that Q4 slump in growth will prove temporary as the central bank’s efforts to keep interest rates low help households repair finances.  Demand for new houses picked up in all 4 regions of the US as buyers took advantage of mortgage rates near record lows.

Confidence Jump With Housing Gains Point to U.S. Growth: Economy




Photo:   Yahoo

Consumer confidence in the US picked up much more strongly than expected in Feb as Americans shrugged off earlier worries over fiscal policy & tax increases.  The Conference Board index of consumer attitudes accelerated to 69.6, from a downwardly revised 58.4 in Jan, handily topping expectations for 61 & was the highest level since Nov.  Jan was originally reported as 58.6, the lowest level in more than a year.  Consumers last month had been concerned over the impact of the deal on the fiscal cliff at the beginning of the year.  While the full brunt of tax increases & spending cuts that were scheduled to go into effect was averted, the payroll tax deduction holiday came to an end & weighed on consumer attitudes.  "The shock effect caused by the fiscal cliff uncertainty and payroll tax cuts appears to have abated," Lynn Franco, director of The Conference Board Consumer Research Center, said.  The expectations index climbed to 73.8, from 59.9, while the present situation index gained to 63.3, from 56.2.  Consumers felt better about price increases with expectations for inflation in the coming 12 months falling to 5.5%, from 5.7%.

• Consumer Confidence Rebounds in February Reuters

Photo:   Bloomberg

John Boehner said one of his “highest” priorities is to overhaul the US tax system.  In his remarks, Boehner said congress should curtail tax breaks “as part of tax reform that lowers rates and helps create jobs.”  “It’s time we shift the balance of power from the tax collector to the taxpayer,” Boehner said.  The speaker said he supported efforts to rewrite the tax code & he reiterated his opposition to higher tax revenue.  “The president has a different view: The first thing he wants to do about taxes is have more of them,” Boehner said, adding that congress passed higher taxes for top earners in Jan as part of a deal to avert tax increases for all income levels.  “Higher tax rates are not the answers to our problems. Spending is the problem, and spending cuts are the solution,” Boehner said.

Boehner Calls Tax-Law Rewrite One of ‘Highest’ Priorities

Risk averse thoughts were discarded today & buyers were eager to bid up stock prices.  Actually the rally wasn't very impressive, the breadth of the market was nothing to write home about.  Economic data sounded good, but the budget mess in DC drones on with no end in sight.  The pres thinks the best strategy is to get away from DC & give campaign speeches elsewhere.  But divided DC remains mired in doubt.  Even after today's advance, Dow is still struggling to climb above 14K.  On Feb 1, Dow rose big time taking it over 14K (barely).  Now it is looking at 14K as a ceiling that it hasn't able to break thru in a convincing fashion.

Dow Jones Industrials