U.S. stocks were able to buck another ugly close in Europe -- those equities erased early gains again after a late-session selloff – as industrials, energy and financials led the broad market higher.  Tech, telecoms and consumer discretionary shares were the day’s laggards.

The Treasury market failed to corroborate a move to risk-on though as traders showed their penchant for safety remains in play.  The yield on the 10-year closed flat at 1.95%; the five-year backed up a bit (price up/yield down) to 0.84% and the two-year rallied to 0.24%.

The euro recovered a touch on news Merkel and Sarkozy will meet yet again to hash out budget restrictions.  But, as already stated, European bourses weren’t feeling the vibe as they sold off for a fourth-straight session.  And on that topic of budget constraints that MerKozy are set to discuss, good luck with it as every euro-zone member has violated the current deficit cap – numbers that are likely to get uglier again as the zone enters recession.

On the bond yields, French sovereigns improved a touch, Italian widened (7.16% on their 10-year, or 532 basis points wider than German bunds – approaching the record of 553 bps hit in November), while Spanish yields posted a meaningful improvement (that 10-year yield fell 13 basis points to 5.56% -- 90 bps narrower than the record hit in November).  It’s pretty obvious where the ECB concentrated their early-week buying.  And on to Eastern Europe’s most-troubled member, Hungary did complete its first successful auction after two failed tries over the past week, selling six-week bills at 7.77%.  Congrats!

This morning U.S. futures are up nicely, following overseas bourses that are on the rebound (though euro-zone sovereign bonds aren’t coming along for the ride).  Stock indices in Asia and Europe have gained about 2% on speculation that China will engage in more monetary easing to spark growth.   We’ll see if these indices, particularly within Europe, can shake the late-session weakness that’s becoming a trend and hold onto these gains.

Market Activity for January 9, 2012

Sector Activity for January 9, 2012

Consumer Credit

The Federal Reserve released their monthly report on consumer credit (doesn’t include mortgage debt) for November and it was a blow out – the fifth-largest monthly increase in consumer borrowing since the data set began in 1943.

Total consumer credit jumped $20.4 billion, or 9.9% at an annual rate, to $2.5 trillion in November.  The number was mostly propelled by non-revolving credit (largely auto and student loans).

That non-revolving segment rose $14.8 billion to $1.68 trillion.  Auto loans make up the bulk of these loans, but student debt is gaining fast – rising from just 8% of the segment at the beginning of 2009 to 24% as of this latest reading.   Taxpayers better hope this crowd finds work fast, otherwise these funds will turn from a subsidy to an outright gift.

Revolving credit (credit card debt) increased $5.6 billion, or 8.5% at an annual rate, to $798 billion in November.  That’s up three months in a row after sliding nearly every month over the previous three years.

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Have a great day

Brent Vondera, Senior Analyst

Phone: 636-449-4900