Wednesday, January 12, 2011

Stocks Head Higher on Portugal Good News

Stocks got a big boost today without assistance from the Fed, though it is reasonable to assume that the more then $15 billion in POMOs over the previous two days should have given the big banks enough ammo to fire away at will at equities.

Some of the excitement seemed to be baked into Portugal's raising a billion or so Euros in a treasury auction with participation by China and Japan. The duo with money from the Orient seems intent on buying up whatever they can of the failing states of Europe. More power to them though these investments seem less than shrewd.

What the market didn't (or maybe they did) take into account was the excessive rise in import prices, up 1.1% in December after a similar rise in October and a 1.5% increase in November. With imports flashing inflation were traders more giddy with anticipation over rising prices for all assets, including equities, or do they believe that this is yet another "manageable" situation that has nothing at all to do with QE2? It's hard not to see the effects of the Fed's non-stop printing of greenbacks anywhere else on the planet. They are exporting inflation worldwide, with food prices up everywhere, especially in developing countries, which can least afford it.

Elsewhere, Wells-Fargo upgraded the entire banking sector, which is something akin to declaring yourself the winner of a golf tournament which you organized, scored, competed in and handicapped. It just reeks of self-dealing, but, other market participants seem inclined to go along, as the indices popped to new highs.

In the housing market, home price declines are accelerating and have reached a level more severe than during the Great Depression. Various reasons include high foreclosure rates, underwater mortgages, high unemployment and a glut of homes on the market.

Dow 11,755.44, +83.56 (0.72%)
NASDAQ 2,737.33, +20.50 (0.75%)
S&P 500 1,285.96, +11.48 (0.90%)
NYSE Composite 8,122.98, +104.30 (1.30%)

Naturally, advancing issued far outpaced decliners, 4617-1925. On the NASDAQ, there were 288 new highs and 8 new lows. On the NYSE, 310 and 42, respectively. Volume was low again, though after a year and a half of this thin market, is now being reported as "normal," being part of the "new normal" group-think.

NASDAQ Volume 1,887,035,375
NYSE Volume 4,782,270,000

Crude oil moderated a bit, but still managed to gain 75 cents, to $91.86. Gold had a gain of $1.50, to $1,385.80, and silver added five cents, to $29.54.

The Street seems to be well ahead of itself on the upper end of a four-month plus rally which has taken the Dow up 1740 points since the end of August. The S&P and NASDAQ have performed in similar fashion, the NASDAQ being the best of all the indices in percentage terms.

With 4th quarter earnings about to roll out in earnest next week, one wonders how much more lift there can be with markets already at elevated levels. We'll find out soon enough whether January's rise is sustainable or merely pushing on a string.

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