Stocks got a boost today from another good report on initial unemployment claims, which were 351,000 for a second week in a row, lowest in just about four years. In addition, U.S. homes prices ticked up a bit more than expected in December, the Kansas City Fed’s manufacturing activity index also beat the Street, and in Europe, German’s Ifo business climate and expectations indexes for February exceeded both January levels and market projections. The euro rose more than one cent to $1.337, highest level since December.

Down early, U.S. Treasury bond prices were little changed by the close. Yields were essentially flat to lower across most of the nominal Treasury curve, while the short end of the TIPS (real) curve saw lower yields. Commodities futures prices were mixed, with precious metals going higher, along with energy prices. Crude oil rose more than $2 a barrel to the highest level in nine months, and unleaded gasoline futures rose another three cents a gallon.

Reports/dates/facts/links worth paying attention to over the next week:

1. February 24: U.K. Q4 GDP, German Q4 GDP.
   
2. February 24: U.S. New Home Sales (Jan.) and UofM Consumer Sentiment (Feb.).
   

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

Second thoughts about the Greek deal sent some investors to the safety of the bond market. The 30-year German bund gained nearly two points, lowering the yield to 2.49%. Likewise, the U.S. Treasury’s 30-year bond gained over a point, reducing its yield to 3.14%, while the yield on the 10-year note fell to an even 2.00%. In currency trading, the euro was essentially unchanged against the dollar, at about $1.325. Meanwhile, the dollar continued to rise against the yen, closing at over ¥80 for the first time since July 11. The dollar has gained more than 5% against the Japanese currency this month.

The January existing home sales report from the National Association of Realtors was somewhat positive but for the wrong reasons. Purchases climbed 4% to a 4.57 million annual rate, the third increase in the past four months, to the highest level since May 2010. But the figure was slightly below the market consensus estimate of 4.69 million, and the increase was somewhat padded because the previous month’s figure was revised downward to 4.38 million from an originally reported 4.61 million units. The increase in sales was helped by lower housing prices, which fell to a median $154,700, down 2% from a year earlier. Distressed sales, including foreclosures and short sales, accounted for 35% of total sales in January, up from 32% in December. Investors accounted for 23% of home sales in January, the NAR said, and all-cash purchases – most of which are by investors – accounted for 31% of all transactions. Still, the improved sales reduced the total housing inventory to 2.31 million existing homes, down 21% from a year earlier and representing a 6.1-month supply at the current pace. That’s down from a peak of 4 million in  July 2007.

On the political front, the Obama administration proposed lowering the top income-tax rate for corporations to 28% from 35%. The plan, according to the White House, would raise overall tax revenue by eliminating most deductions or “loopholes.’ For example, it would raise taxes on oil and gas companies and require U.S. companies operating overseas to pay a minimum tax on their foreign earnings for the first time. As with the President’s fiscal year 2013 budget unveiled earlier this month and plans to increase the tax rate on corporate dividends, today’s corporate tax proposals probably are more properly viewed as campaign planks and as only part of the election-year debate to come on all manner of taxes.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

Outside the U.S., stock prices were mostly lower on Tuesday, following healthy gains on Monday, while U.S. markets were closed for the Presidents’ Day holiday. Europe’s commitment to a second Greek bailout, which had been tentatively priced into stocks over the past several days at least, had little impact when it became fact; indeed, the major European bourses sold off from 0.1% (Italy) to 0.6% (Germany and Spain) today. Even under the most optimistic assumptions, Greece’s debt burden will remain above 120% of GDP through 2020 (versus 164% in 2011), levels that leave grave concerns about Greece’s ability to avoid default. In today’s sovereign debt markets, the spread between Greek and German bond yields narrowed at the ten-year maturity, but two-year debt spreads widened to a record 213%. The euro was down early, but closed Tuesday in New York little changed at $1.3233.

U.S. Treasury bond yields hit their highest levels of the year – 3.21% on the 30-year T-bond and 2.06% for the 10-year T-note. The 10-year breakeven inflation rate, which is the difference between the 10-year nominal Treasury (2.06%) and the 10-year TIPS (-0.24%), hit its highest level since August (2.30%). Gold, silver, copper and crude oil futures prices all rose more than 2% Tuesday. This goes a long way toward explaining today’s stock market action, where the energy (+0.8%) and materials (+0.6%) sectors were among the day’s biggest gainers in the S&P 500. Year-to-date stock trends have also tended to favor pro-cyclical market sectors, along with financials and technology stocks.

Reports/dates/facts/links worth paying attention to over the next week:

1. February 22: Final February PMI readings for France, Germany and the Euro-Zone.
   
2. February 22: NAR is expected to report a 1% rise in Existing Home Sales for January.
   
3. February 23: German IFO Business Climate and Expectations surveys for February.
   
4. February 23: U.S. Initial and Continuing Unemployment Claims – latest week.
   
5. February 24: U.K. Q4 GDP, U.S. New Home Sales (Jan.) and UofM Consumer Sentiment (Feb.).
   

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

That optimism carried over to the U.S. markets, which also got a little lift from some relatively positive economic reports. The consumer price index increased 0.2% in January, below the consensus Street estimate of a 0.3% increase following no change in December.  Year-on-year, the overall CPI was 2.9%, down from 3.0% in December. The core rate rose to 2.3% from 2.2% on a year-ago basis. The index of leading economic indicators for January rose 0.4%, slightly below the 0.5% consensus forecast, but the previous two months’ figures were revised upward. Meanwhile, both the House and Senate passed an extension of the payroll tax-cut through the end of the year. The Social Security tax had been set to rise to 6.2% from 4.2% on March 1.

U.S. stock market indexes ended the day narrowly mixed. The Dow Jones rose 0.4% to close at 12,950. The index is now closing in on 13,000, a level it last reached in April 2008. The S&P 500 gained 0.2%, while the NASDAQ composite index lost 0.3%. In currency trading the euro gained slightly against the dollar, closing at about $1.315. Meanwhile, the dollar continued to rally against the yen, rising another 0.7% to ¥79.52. The dollar is now within striking distance of ¥80, a level it has not seen since last August. The yen has been in freefall against the dollar for most of the past three weeks.

Treasury bond prices were largely unchanged in the U.S Friday and weaker in Germany. The yield on the 10-year Treasury note closed at an even 2.00% while the 30-year bond was at 3.14%. The German 10-year bund fell in price to yield 1.92% and the 30-year bund was at 2.52%. Oil prices continued to climb, with Nynex crude futures gaining another 1.2% on Friday. U.S. markets are closed Monday in observance of Presidents’ Day.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

U.S. stock futures had been indicating a lower open prior to this morning’s key economic reports and before assurances from Greece that it would unearth more spending cuts and that bailout #2 would arrive in time to avert a March 20 debt default. The Wall Street Journal reported later in the session that the European Central Bank might swap its holdings of Greek debt for newly denominated bonds “once negotiations are complete,” reducing the burden on Greece in the process. Yield spreads on European sovereign debt relative to German bund yields narrowed as the day passed. European stock market averages were flat to down modestly for the day, but they rallied back from earlier, steeper lows. The euro was also lower early Thursday, but finished trading in New York at $1.3142, a 0.6% rise.

Most of Thursday’s economic reports came in on the high side of expectations, furthering the sense that the fourth quarter’s economic momentum continues in this year’s first quarter, if not quite up to Q4 levels. The progress in labor markets continued with initial claims for unemployment hitting 348k in the latest week, the lowest level in almost four years. Housing starts were better than expected last month (+1.5% against -3% on the Street), and building permits were in line with estimates. Finally, the Philadelphia Fed’s business outlook survey index rose from 7 in January to 10 in February, a touch ahead of expectations.

Treasury bond prices fell as stock prices rose today, with the 10-year T-note dropping half a point, its yield climbing five basis points to 1.98%. While down against the euro, the U.S. dollar hit its highest level against the yen since July. Commodities prices were higher on the day, presumably on signs of stronger economic activity, but most of the rise was the energy sector. Natural gas futures rose 6%, unleaded gasoline rose 1% and crude oil ticked up 0.5%.

Reports/dates/facts/links worth paying attention to over the next week:

1. February 17: U.S. Consumer Price Index (January); Street has 0.3% headline rate and 0.2% core.
   
2. February 17: U.S. Index of Leading Economic Indicators (Conference Board) is expected to rise 0.5% for January.
   
3. February 22: NAR is expected to report a 1% rise in Existing Home Sales last month.
   

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

The Dow Jones Industrial Average was the biggest loser on the day, falling nearly 100 points and closing down 0.8%. The S&P 500 and the NASDAQ composite index closed with more modest losses, down 0.5% and 0.6%, respectively. European stocks, which closed before the announcement of the finance ministers’ meeting postponement, ended mostly higher. The Stoxx Europe 600 gained 0.6% and both the main French and German indexes were up 0.4%. But the euro took a hit Wednesday, falling 0.5% to below $1.31. Asian stocks were broadly and sharply higher. Oil prices rose following a report that Iran stopped petroleum shipments to Europe, a report later denied by Iran’s government. Nymex crude futures rose $1.20 to near $102 a barrel.

Economic reports on manufacturing were mixed today. The Federal Reserve reported that industrial production in January was unchanged, well below the Street’s consensus estimate calling for a 0.7% increase. On the plus side, however, December’s 0.4% increase was revised to a full 1.0% rise. January’s flat result seems to have been as much about unseasonably warm weather, which caused utility output to decline 2.5% last month (and 7.5% over the past 12 months). Manufacturing output rose another 0.7% following a revised 1.5% gain in December, and was a healthy 4.5% higher than 12 months earlier. The Federal Reserve’s report on industrial production  followed the release of the Empire State Manufacturing Survey index for February, which jumped to 19.5 from 13.5 previously, well above Street forecasts. Thanks to better-than-forecast results for France and Germany, Euro-Zone GDP declined 0.3% in the fourth quarter, as compared to estimates around 0.4%.

The Federal Reserve released the minutes of its January 24-25 policy meeting, which showed a lack of consensus on when and if a third round of quantitative easing was called for.  While some Fed officials thought such bond purchases should happen “before long,” meaning in 2012, due to high unemployment and low inflation, “a number of participants” wanted to wait and see “if the economic outlook deteriorated” or if inflation seemed likely to remain below 2% (which on a 12-month basis is not the case currently). Treasury bond prices were largely unchanged on the day. The 10-year yield was at 1.93% and the 30-year bond at 3.09%.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

Today’s late-day recovery in stock prices appeared to be the result of reports out of Athens that Antonis Samaras, leader of the Greek opposition party (and conceivably the next prime minister as soon as April), has reversed his opposition to the austerity package approved by parliament over the weekend. This speculation took some of the sting out of the postponement of a meeting that had been scheduled for Wednesday in Brussels of Euro-zone financial ministers to approve a second round of Greek bailouts; the meeting was rescheduled as a teleconference, which suggested that further Greek concessions would be required. European stock prices generally finished down slightly Tuesday, and bond yield spreads were generally wider (as German yields fell while other sovereigns ticked a bit higher). The euro fell about 0.5% Tuesday against the dollar.

Tuesday’s economic news was mixed, with a better-than-expected improvement in economic sentiment in Germany and the Euro-zone and U.S. retail sales coming up a bit short of expectations in January. The Zew February survey readings for Germany and the Euro-area improved sharply, easily outstripping recent results and market expectations. On the other hand, the U.S. Census Bureau reported that retail sales increased 0.4% last month, about half the increase the Street had been expecting. The shortfall came in auto sales, which fell 1.1% – despite the fact that the seasonally adjusted rate of unit sales hit the highest level since 2009′s cash-for-clunkers program. The dollar sales volume of automobiles may have been hurt by price cutting and other incentives. Outside of this auto sales anomaly, retail sales were basically in line with Street projections; retail sales ex autos and gas station sales increased 0.6% in January, one tick better than the 0.5% consensus but December’s result was revised from unchanged to a 0.2% decline. The momentum of consumer spending in the final month of the fourth quarter and the first month of 2012′s first quarter leaves something to be desired (although restraint by consumers and increased savings can hardly be considered a surprise or for that matter a bad thing).

Treasury bonds rallied moderately in Tuesday trade, with the 10year T-note rising about one-third of a point, its yield falling to 1.94%. The Bank of Japan announced an easing of monetary policy, expanding its asset-buying program by 10 trillion yen and reiterating its zero interest rate policy. The dollar rallied against the yen, gaining more than 1% to the highest level – 78.44 yen – since the panicked buying of early August. Commodities prices were relatively flat today, with energy and livestock futures higher and most everything else trading lower.

Reports/dates/facts/links worth paying attention to over the next week:

1. February 15: German Q4 GDP, expected to be down 0.3% by the Street, down from Q3′s 0.5% rise.
   
2. February 15: Fed reports on Industrial Production for January.
   
3. February 16: U.S. Producer Price Index for January and latest week’s jobless numbers.
   
4. February 16: U.S. Housing Starts and Building Permits for January.
   
5. February 17: U.S. Consumer Price Index (January).
   

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

For today at least, European stock trading was mostly in a positive direction, with the Stoxx Europe 600 and the German DAX indexes both gaining 0.7% on the day. The FTSE 100 index of London-traded stocks rose 0.9%. The euro traded higher at the open but closed the day in New York trading slightly lower, at a hair below $1.32. European bond prices were generally higher, as bond yields fell in absolute terms and relative to  German bund standards; Portuguese five and ten-year sovereign yields fell to levels last seen in November. After markets closed in New York, Moody’s announced credit rating downgrades on Italy, Portugal and Spain.

Stock gains carried across the Atlantic, where the three main U.S. stock market barometers opened higher and remained there all day. The NASDAQ Composite had the biggest gain, rising nearly a full percentage point. In a widely noted milestone, shares of Apple Computer (AAPL) closed above $500 a share for the first time ever, ending the day up $9.18 to close at a record $502.60. The S&P 500 ended Monday 0.7% higher, while the Dow Jones average rose 0.6%. In bond trading, the 30-year U.S. Treasury rose slightly in price, its yield at 3.12%, while the 10-year was basically unchanged at a 1.98% yield. Oil prices were higher on belief that resolution of the Greek bailout is a positive for the global economy. NYMEX crude futures jumped roughly 2% to over $100 a barrel.

President Obama announced his proposed budget for 2013, which includes higher taxes on the wealthy and investors, specifically wealthy investors. The budget calls for a 30% tax on incomes of more than $1 million – the so-called Buffett rule – which would replace the alternative minimum tax. (This is a somewhat ironical shift since the AMT was originally targeted at certain high income tax payers in 1969, only to hit a broader sweep of middle-income tax payers over the subsequent four decades.) The plan also calls for taxing dividends as ordinary income on high-income taxpayers and raising the top income tax rate to 39.6% from the current 35%.  Dividends would be treated as ordinary income for individuals making more than $200,000 a year and married couples making more than $250,000. The current top dividend tax rate is 15%; the budget proposal calls for raising it to 20%. The budget plan would also raise the top tax rate on capital gains to 20% from 15%. The $3.8 trillion spending plan, which projects a deficit of $1.33 trillion, is based on a forecast of economic growth of 2.7% this year; its growth forecast for 2013 was reduced to 3% from 3.5% previously. One suspects that the Obama budget for fiscal year 2013 may face the same fate as last year’s proposal, which is to say it will not be passed.

A few reports/dates/facts/links worth paying attention to over the next week:

1. February 14: U.S. Retail Sales for January and Fed releases minutes of FOMC meeting.
2. February 15: Fed reports on Industrial Production for January.
3. February 16: U.S. Producer Price Index for January and latest week’s jobless numbers.
4. February 16: U.S. Housing Starts and Building Permits for January.
5. February 17: U.S. Consumer Price Index (January).

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

What little economic news there was on Friday didn’t help stock prices. The Reuters/University of Michigan consumer sentiment index for February fell to 72.5, down a bit from January’s 11-month high reading of 75.0 and below the Street’s consensus estimate of 74.3. The Wall Street Journal reported that President Obama’s budget request to Congress next Monday will entail a deficit of $1.33 trillion in fiscal 2012, steeper than the Congressional Budget Office’s recent projection, and a $901 billion deficit for fiscal 2013, also up from the White House’s earlier projections.

Doubts about a Greek debt deal sent some investors to the safe haven of U.S. and German government bonds, both of which rose in price on Friday. The 30-year U.S. Treasury bond gained over a point, its yield falling to 3.13% from Thursday’s 3.18%. The 30-year German bund soared over 2 ¼ points, driving its yield down to 2.55%. The euro fell 0.7% against the dollar, ending the day below $1.32 (although after hours, the euro appeared to be getting a bid). Outside of Greece, tensions in the Mideast eased a bit. Oil prices were lower, as were most major commodity prices.

Speaking before a National Association of Homebuilders event, Federal Reserve Chairman Ben Bernanke called on lenders to ease underwriting standards to boost the housing and mortgage markets. Allowing that “some tightening was no doubt necessary,” Bernanke said, “the pendulum has probably swung too far in the other direction. Conditions are still too tight for the health of both the financial system, for the construction industry and for our economy.” Noting that the Fed has helped lower mortgage rates to their lowest levels in decades, “yet we are not seeing as much activity as we would like to see,” he said. Bernanke’s bottom line: “The state of housing and mortgage markets may also be holding back the recovery of our financial system and the normalization of credit conditions.”

A few reports/dates/facts/links worth paying attention to over the next week:

1. February 14: U.S. Retail Sales for January and releases minutes of FOMC meeting.
2. February 15: Fed reports on Industrial Production for January.
3. February 16: U.S. Producer Price Index for January and latest week’s jobless numbers.
4. February 16: U.S. Housing Starts and Building Permits for January.
5. February 17: U.S. Consumer Price Index (January).

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.

While details of the plan are still sketchy, Greece does appear to have arrived at an accommodation with the EU/ECB/IMF troika on a way forward, if not a way out of its debt crisis. As this is written, reports from Brussels suggest that finance ministers from the European Union have not yet given their approval to the proposed austerity package. Meanwhile, Greece’s unemployment rate was almost 21% in November, half again as high as it was 12 months earlier (14%), and more austerity figures to make labor conditions worse before they get better. Of course, perhaps it is only a Trojan Horse of a debt deal that the Greeks have dragged over to Brussels, with no chance of political or popular support back in Greece. (The U.S. approach to its own debt crisis is a horse of a different color: accommodative policies now, austerity later.)

In the U.S. today, the Labor Department reported that initial unemployment claims fell to 358,000 in the latest week, down 15,000 from the prior week’s claims. The four-week moving average of claims hit its lowest level (366k) in almost four years. Also buoying global stock markets today was the report that U.K. industrial production rose a surprising 0.5% in December, while on the disappointing side, China’s CPI bumped up to 4.5% in the 12 months to January from 4.1% in December. The ECB and Bank of England left their target lending rates unchanged at Thursday’s policy meetings, although BOE did add another 50 billion pounds to its Quantitative Easing program, a not unexpected development.

While U.S. stock market averages inched ahead to many month highs today, the i-rally continued in Apple shares (HT: WSJ). AAPL shares rose 3% to the brink of 500 Thursday, bringing its two-month rise to roughly 100 points or 25%. In market value terms, AAPL’s recent rise has added more than $100 billion to the stock’s market capitalization. After the market close, LinkedIn reported good profit numbers, and LNKD shares were trading up 8% after hours. Treasury bonds fell for a third day, with the 30-year Treasury bond price falling about two-thirds of a point.

SIDEBAR: Here’s a link to the so-called National Mortgage Settlement website. There you’ll find details about the $25 billion deal struck today between 5 big banks or mortgage lenders, 49 state attorneys general (Oklahoma settled outside today’s agreement), and agencies of the federal government on behalf of thousands of distressed borrowers, states and the U.S. government. The total settlement (of state and federal investigations of shoddy mortgage servicing practices, including the “robo-signing” of foreclosure notices outside the presence of a notary public and other servicing abuses) is to be paid by the five mortgage servicers. It breaks down as follows: $10 billion in principal reductions for homeowners who are under water on their mortgages; $3 billion in refinancing for homeowners who are current on their mortgages and who owe more than their homes are worth; $7 billion in other forms of mortgage relief; and $5 billion in payments to states and the federal government. Should smaller banks and mortgage servicers join the agreement, the total settlement could reach $45 billion to be paid out over the next three years. To the extent that the back-up now afflicting the foreclosure process is alleviated, today’s settlement does represent progress in the housing crisis, we suppose, although somehow this all looks to be one big wealth transfer from one part of the economy to another (with limited ancillary economic benefits) all done in the interest of expediency for the markets, closure for the banks, and some small measure of justice. The happy family pictured on the website linked to above is, we guess, supposed to represent typical beneficiaries of today’s agreement. Nice house.

A few reports/dates/facts/links worth paying attention to over the next week:

1. February 10: U.S. Trade Balance (December).
   
2. February 10: University of Michigan mid-February Survey of Consumer Sentiment.
   
3. February 10: U.S. Treasury Budget Statement for January.
   
4. February 14: U.S. Retail Sales for January.
5. February 15: Fed reports on Industrial Production for January.

Copyright © 2012 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.