Daily Insight: The Great Unwind, Durable Goods and New Home Sales

U.S. stocks were able to shake off the increasingly early signs of government debt-related contagion in Europe as a great durable goods orders report and a bounce in new home sales – albeit from at least a 47-year low – helped the market focus on things more positive. The gains among the benchmark indices made for the fourth winning session this week and the 11th of the past 13.

Energy shares were the clear leader, up 2.29% on Friday, as the price of crude has quickly returned to $85/barrel. Eight of the 10 major industry groups closed higher. Telecoms and consumer staples were the only groups down on the session.

For the week, the S&P 500 added 2.10%; the Dow rose 1.68%; and the NASDAQ Composite gained 1.97%. The S&P 400 (mid cap) rallied 3.56% and the Russell 2000 (small cap) jumped 3.82%. The S&P 500 has now rallied 80% from the nefarious March 9, 2009 low of 666.

Greek government-bonds continue to get hit as Germany plays a game of chicken – a game Greece is going to win, but only in the short term. Germans don’t like bailing Greece out of their troubles because they’ll be on the hook for most of the cost; to begin with, Germans seemed fairly reluctant to go with this Euro System anyway, unwilling to give up their Deutsche Mark all the way up to the Euro’s initial adoption in 1999. Greek 10-year bond spreads have hit 626 basis points (that’s 6.26 percentage points above German bunds), which means a yield of 9.03%.
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Brent Vondera, Senior Analyst
www.acrinv.com