Daily Insight: Import Prices, Housing Starts, FOMC Statement

U.S. stocks gained good ground on Tuesday after S&P affirmed their credit rating on Greek government debt of BBB+ (they had threatened to lower that rating) and the EU signaled they’d sidestep “no-bailout” rules and provide emergency loans to that government. The market rally accelerated in the afternoon after the Fed confirmed the rate on fed funds will remain floored for an extended period (yeehaw!) and provided the impetus for traders to push past that 1150 market on the S&P 500 – had been stuck there for three sessions. The broad market sits at a new 17-month high.

Basic material, financials and industrial shares led the advance. All 10 of the major S&P 500 sectors gained ground on the day, but consumer staples and health-care (the traditional area of safety) along with telecoms were the laggards.

And speaking of commodity-related basic material shares, the price of oil is back above $82/barrel this morning – call it a Bernanke bounce. I’m watching for the price to breach $85, which hasn’t occurred since economic mayhem began in late 2008. At some point the market is going to view higher energy prices as another noose around the consumer’s neck. In quick order we could have both oil and stocks at fresh 17-month highs, both are unlikely to move higher in tandem for very long.

Sovereign debt default concerns eased again yesterday, here’s the ebb and flow we’ve been talking about, as European finance ministers laid out unspecific groundwork for a financial lifeline to Greece. If Greece runs into trouble rolling their debt, EU officials will provide emergency loans as members pool funds. The meeting didn’t provide an actual euro amount of these potential emergency loans.
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Brent Vondera, Senior Analyst