U.S. stocks struggled again yesterday, following European bourses lower (those indices closed ugly again as the selling accelerated to the close), as it’s still all about Europe.   Yet, even with the eurozone’s troubles, and they are deep troubles, stocks are holding in nicely, down just 3.9% during this latest round of weakness – lower by only 11% relative to the three-year high hit in April.

Health care, financials and consumer staples were the session’s relative winners.  Energy, tech and consumer discretionary were the hardest hit.

There was news Bernanke is “very concerned” about Europe, as well he should be – there was also word that Germany is preparing to bail out Commerzbank, which may have prompted the statement.  When that headline flashed I figured it would trigger a rally at the end of the day, boosting expectations of more QE, but no dice.

The precious metals complex continues to sink the CRB (the index covering a basket of 19 commodity prices) as gold has slid 10% over the past five sessions (down 16% from the peak) and silver continues to get smoked (down 33% from its peak hit in August).   Crude was even in the act too, sliding 5.3% yesterday – although since it’s coming from $100/bbl, it’s still bucking the overall commodity trend for now.

The Treasury market continues to rally yet again – no surprise there with stocks down.  Remember when the 10-year sold off, bringing that yield back up to 2.40% at the end of October?  Well, it was another false alarm that problems were getting solved and the risk-off trade was dead.  Now that 10-year yield has rallied (prices up/yields down) back to 1.88% -- still above the modern-era low of 1.70% touched in September, but we may just be on our way back there.

It was an awesome 10-year auction on Tuesday that sparked a rally, yesterday’s 30-year auction was just as runtactular (runnin’ from Europe) as the bid-to-cover came in at 3.05 (best gauge of demand in 12 years, but back then the rate was 6.5%) and all for a yield of 2.92% (a record low for a 30-year auction).  But it’s not about the yield, it’s about the expectation that the price will continue to rally.

Market Activity for December 14, 2011

Sector Activity for December 14, 2011

Mortgage Apps

The Mortgage Bankers Association reported that their applications index rose 4.1% last week but it was all due to refinancing activity as purchases erased the previous week’s gain for that segment.

The average contract rate on the 30-year fixed mortgage hit a new low of 4.12% last week, inciting a 9.3% jump in apps to refinance.  However, purchase apps fell 8.2%.

And on an interesting note, I noticed yesterday morning that the National Association of Realtors (NAR) announced that they’ll revise existing-home sales lower for the past four years due to double counting.  Those who pay some attention to the CoreLogic sales data have seen an increasing discrepancy for some time.  The NAR’s sales data historically runs higher than CoreLogic’s, but the difference has widened over the past several years.  That revision is expected to come next week when the November sales data is due for release.

Import Prices

The Labor Department reported that import priced rose 0.7% in November (light of the 1.0% increase expected), halting a three-month string of declines.  On a year-over-year basis, import prices are up 9.9% (10.2% was expected), which is down from the 10.9% as of October.

The monthly increase was essentially all due to a 3.6% increase in petroleum import prices (rebounding from a three-month period of decline) as the import price index fell 0.2% when excluding petro.

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Have a great day!

Brent Vondera, Senior Analyst

Phone: 636-449-4900