MARKET WRAP – ANOTHER MONDAY MELT-UP

It looks like the market is back to its old tricks. After two vicious down days last week the bulls are back in full force and the trends that have characterized the last few months do not appear to have ended – the morning dip is always bought, Mondays are huge rallies and a “correction” no longer amounts to anything more than a few percentage points.  Last week’s two high volume sell-offs have both been followed by heavy buying.  The S&P 500 rallied 1.3% as another Monday Melt-up unfolded on Wall Street.  Volume was moderate and breadth was strong at 3:1.

Today’s action leaves investors asking themselves if the new paradigm is here to stay.  Does this market just not sell-off from here?   Will we continue the powerful trends of the last few months in which stocks simply refuse to go lower?  The theme of the day was the divergence of U.S. stocks from all international names.  While China and Europe continue to experience problems U.S. investors are increasingly confident that they are shielded from anything occurring outside of U.S. border.

From Daily Futures:

Currencies – A Bigger Bailout for Greece
The European Union and International Monetary Fund put together a bailout of 110 billion euros for Greece. For its part, Greece agreed to more spending cuts and tax increases, but convincing lawmakers back home to accept the deal may be difficult (see article). The June euro fell .0094 to $1.3214.

An index of manufacturing for the Euro area from Markit Economics increased from 56.6 to 57.6 in April, the highest in almost four years.

An index of manufacturing in Australia increased from 50.5 to 59.8 in April, the highest in nearly eight years. The Reserve Bank meets tomorrow and many are expecting a rate increase from 4.25% to 4.50%. The June Australian dollar ended up .19 at 92.24.

Markets are closed today in China, Japan, and the U.K.

U.S. Economy
The U.S. Commerce Department said that personal incomes were up .3% in March while consumer spending was up .6%. Also, consumer spending in February was revised from up .3% to up .5%. The June 2011 eurodollars fell .08 to 98.51.

The Institute of Supply Management’s index of U.S. manufacturing increased from 59.6 to 60.4 in April, the highest in over five years.

The U.S. Census Bureau said that construction spending was at an annual rate of $847.3 billion in March, up .2% on the month, but down 12.3% from a year ago.

The stock market is trading higher today after Warren Buffet told his followers over the weekend that the economy is showing signs of improvement.

Grains and Cotton
The USDA said that last week’s export inspections of:
Corn totaled 28.2 million bushels, down 11% from a year ago.
Soybeans totaled 7.2 million bushels, down 67% from a year ago.
Wheat totaled 17.6 million bushels, up 67% from a year ago.

Overall, the weather forecast for the Midwest looks highly favorable for planting this week. July corn closed down 3.75 cents at $3.715.

July soybeans fell 12.5 cents to $9.865 with concerns that the crude oil leak in the Gulf of Mexico may adversely impact grain traffic. So far, there are no shipping restrictions.

Livestock
June cattle closed up 1.30 at 95.52, continuing to benefit from better demand for fewer cattle.

Lumber
Statistics Canada said that lumber production by sawmills totaled 4.011 million cubic meters in February, down 1.8% on the month, but up 14.7% from a year ago. July lumber fell $5.20 to $300.40.

Coffee
Brazil’s coffee crop is reported in good shape, but July coffee closed up 3.25 cents at $1.3855.

Metals
China announced that it will raise the reserve requirement for its five large government-owned banks by .50% to 17% on May 10th. July copper dropped 6 cents to $3.2935.

June gold ended up $2.60 at $1,183.30, supported by Europe’s ongoing debt problems and concerns about possible defaults.