December 10, 2010

Market Wrap: for the week ending 10-Dec-2010

Weekly Snapshot
• S&P 500 at its highest level since the week Lehman Brothers collapsed (Reuters)
• US consumer sentiment rose more than expected in early December (Reuters)
• US trade deficit shrank 13.2% from September to October 2010, to -$38.7 billion (ESA)
• China raises bank reserve requirements by 50 basis points - 6th time this year (FT)
• US Treasuries hit by biggest sell-off in two years as capital costs soar (FT)
• The yield on 10-year T-notes jumped from 2.95% to 3.17% on Tuesday (Economist)
• Bank of England kept the base rate at its record low of 0.5% (Reuters)
• Crude oil prices rose above $90, highest level in over 2 years.
• Copper prices surged to an all-time high above $9,000 per ton on Tuesday (FT)
• The U.S. government exits Citigroup stake and earns $12 billion profit (Reuters)
• Moody's cut Hungary's sovereign rating by two notches, just above "junk" grade (Reuters)

Market Barometers    
st-2010-1210   fx-2010-1210

Chart Of The Week
The S&P 500 closed at a new high for the year and reached a level last seen since Lehman Brothers collapsed in 2008.  Are stocks overvalued now or are prices still relatively fair? Please consider this chart courtesy of Doug Short showing the historic data points of cyclical PE ratios.  On the basis of comparing the PE multiples with inflation, the markets are somewhat close to the center. We’re currently 4 1/2 points above the long-term average of 16.4 but still nowhere near the insane valuations of the Tech bubble.

PE10-inflation-correlation-colors
Source:  www.dshort.com

Treasury Notes 
In the spirit of the US administration’s efforts to provide more transparency, you can now get it directly from the horse’s mouth. Please consider Tim Geithner’s new blog Treasury Notes.

Our Money Is Committing Suicide
Putting some humor on a rather serious subject, please consider Jon Stewart’s take on Ben Bernanke’s Quantitative Easing efforts. File this one under “things that make you go hmm”…

Good luck and good trading!

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