Daily Insight: NFIB, Trade, Buyers Show Up But Greece Pays, Intel Inside

U.S. stocks shook off early-session weakness to gain ground for a fourth-straight session on Tuesday. The broad S&P 500 has jumped 15% over the past two months, bouncing off of the late-January pullback of 8%; the market has its eyes set on the pre-Lehman collapse level of 1250 – about 4% above yesterday’s closing price.

This 57-week rally from the 13-year low hit on March 9, 2009 currently stands at 77%, as measured by the S&P 500.

Consumer discretionary, technology and industrial shares led the gainers. Consumer stocks got a lift from the latest trade balance report that showed strong import activity in February; without fear of sounding repetitive, I’m highly skeptical of the idea that consumer activity will improve in a consistent manner – appears to be a minority view, but I’m fine with that.

The four industry groups that closed lower yesterday were energy, utility, basic material and telecoms.

On the EU sovereign-debt financing front, Greece sold $2.12 billion in 6-12 month Treasury bills on Tuesday and demand was super-strong with bid-to-covers at 7.67 for the six-month paper and 6.54 for 12 month – a figure approaching 3.00 is strong. But Greece had to pay up as yields came in at 4.55% and 4.85%, respectively. Dang, U.S. savers would love deposit rates even half these levels – sit tight, we’ll get them in time.

So the EU states that they’ll come to the rescue of Greece if they have trouble funding government debt, which means risk of default over the next 12 months is about zilch. I wonder what Greece would have had to pay without that backstop, 7-8% on 12-month paper? What will they have to pay when this debt needs to be rolled a year from now? Which begs the question: where will EU budget-deficit funding costs rise to when Italy and Spain run into trouble? Germany and France won’t be able to bail them out too, without driving their own borrowing costs higher. This story has only just begun.
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Brent Vondera, Senior Analyst
www.acrinv.com