Insights

Market Runs up on Greece Bailout Speculation

European Central Bank President Jean-Claude Trichet left a summit in Sydney a day early, sparking speculation that a deal was afoot to help Greece get back on their feet and in control of their debt problem.  With the euro dropping last week on worries that Greece, Portugal and Spain were in trouble financially, world stock exchanges sold off as money flew to the relative safety of the dollar and U.S. Treasuries.  At 11:30 a.m. est, rumors circulated that a deal involving Germany was imminent and the S&P 500 took off as the dollar got hammered.  Within 50 minutes the S&P 500 jumped over 17 points as the PowerShares DB US Dollar ETF (NYSE: UUP) dropped almost a full percentage point in the same time period.  Twenty minutes after the market run-up, a sharp drop of 8 S&P points occurred as all those involved denied there was any deal in place, but the fact that the wheels were seen to be in motion kept the market strong all day.

The Dow Jones Industrial Average closed up 150.25 points (+1.51%, 10,058.64) and regained the 5-digit, 10,000 level with 27 of 30 components finishing higher.  The S&P 500 climbed 13.78 points (+1.30%, 1,070.52) and the high tech Nasdaq 100 gained 18.96 points (+1.09%, 1,753.84) but was the weakest of the three indexes as low tech airlines +8.49%, metals +3.23% and materials +3.01% led the market higher.

The airlines were very strong as United Airlines reported unit revenues in January that blew away Wall Street estimates.  UAL Corp. (NSDQ: UAUA), the holding company for United Airlines, saw its stock rise by 17.52% (+$2.29, $15.36) and logged their strongest single day in the market since August of 2009.  UAUA bottomed at $3.07 on July 10th of last year and has since performed fantastically rising 400% in just over 6 months.  AMR Corporation (NYSE: AMR), the parent of American Airlines and American Eagle, closed up 13.79% (+$1.01, $8.33) and they are up 247% from their low trade of $2.40 last March.  Airlines, once commonly referred to as flying holes in the sky for money, can be a nice investment but just like with everything in life, it is all about timing.

Commodities stocks and commodities were especially strong today as not only do they gain on a rising market, but they get supercharged by the fact that they are denominated in dollars.  The dollar fell relative to the euro, but it would be more appropriate to say the euro gained against the dollar, as last week’s relative jump in the dollar had more to do with euro weakness on worries the Greek economy was sliding south.

The Market Vectors Junior Gold Miners (NSDQ: GDXJ) jumped 5.35% (+$1.19, $23.41) as the major miner index (NYSE: GDX) climbed 4.38% (+$1.79, $42.57).  Hard commodity ETF’s easily outperformed even a strong day in the broader market as the falling dollar provided extra fuel for a bigger move.

SLX – Market Vectors Steel +4.35%

KOL – Market Vectors Coal +3.33%

JJC – iPath Dow Jones – UBS Copper +3.21%

USO – United States Oil Fund +3.07%

DBA – PowerShares DB Agriculture Fund +0.19%

New York spot gold was last seen trading at $1,075.50, up $14.10 an ounce (+1.33%, 4:09 p.m.).  Gold is performing very logically according to the charts as it now has tested the support level at $1,060 and seems headed higher.  The SPDR Gold Shares ETF (NYSE: GLD) is experiencing the same bounce (+$1.37, +1.31%, $105.41) and now has its 50 day exponential moving average over head at $108.10 as resistance.  The rules of technical analysis say two closes above this level is a breakout, so if you did not buy the bottom on support another buy signal showing even more strength may be coming soon.

Nymex crude added $2.03 a barrel and was trading $73.95 (+2.84%) at 4:07 p.m.  If oil makes another run at $80 it will continue the sideways trend channel ($67 to $80) it has been bouncing up and down inside in since last July.  The USO has fluctuated between $35 and $41 a few times now and looks headed back up again.

Tomorrow we get the MBA Purchase Applications report at 7 a.m., International Trade numbers (-$35.7B) at 8:30 a.m. and the Treasury Budget (-$46B) at 2 p.m.  Bernanke’s appearance in front of the House Financial Services Committee has been postponed due to severe weather.  Left to guess I would say severe global warming with all the hot air in D.C., but they are due to get another major snowstorm.  Philly Fed President Charles Plosser gives a speech to the World Affairs Council of Philadelphia at 12:45 p.m. and I guess people in Philly drive better in the snow because it is not canceled.  Strangely, Fed Governor Daniel Tarullo’s testimony in front of the Senate Banking Committee in D.C. at 9:30 a.m. is not canceled, proving that either senators are better drivers than congressmen or they are full of more hot air.

Selected earnings estimates for Wednesday, February 10:

A quick look show it is ‘insurance day’ as quite a few insurance and reinsurance companies report tomorrow: RE, MMC, PRE, PL, PRU, ALL and TRH.

MT 0.27 before market open, BHP, BSX 0.13 after the close, CCE 0.21 bmo, CSC 1.23 bmo, CLB 1.20 atc, DF 0.37 bmo, ELN -0.08 bmo, RE 3.38 atc, ICE 1.14 bmo, LVLT -0.10 bmo, LPX -0.19 bmo, MMC 0.37 bmo, MICC, PRE 2.81 atc, PL 1.02, PRU 1.11 atc, SIAL 0.72, SON 0.50 bmo, S -0.19 bmo, ALL 1.01 atc, NYT 0.38 bmo, TRH 1.83 atc, VALE 0.32 atc, WYN 0.37 bmo.