MARKET WRAP – STOCKS REBOUND

Stocks rebounded on the day as the dollar declined and the Treasury extended the TARP plan.  As we’ve been saying, this is just one more sign that we are going to see more of the same in the coming months.  More “better than expected earnings”, more low rates and more government intervention.  These have been powerful trends driving equity prices higher and remain the primary reason why I continue to believe this market cannot be shorted with any confidence.

Stocks finished the day higher by 0.37% on moderate volume.  Breadth was widely mixed.  Small caps were lower on the day by 0.3%, banks closed higher by 0.3%, retailers closed lower by 0.75% and the Nasdaq 100 closed higher by 1%.   Daily Futures has all the action from the markets:

U.S. Economy
The Mortgage Bankers Association said that its index of mortgage applications was up 8.5% last week to 665.6, the highest level in two months.

The U.S. Census Bureau said that wholesale sales were up 1.2% in October while inventories were up .3%. The March 2011 eurodollars ended up .02 at 98.49.

The U.S. Treasury sold $21 billion of 10-year T-notes at a median yield of 3.36% with a bid-to-cover ratio of 2.62. The March U.S. T-bonds closed down 12/32nds at 119.09/32nds.

Grains and Cotton
March corn ended down 1.5 cents at $3.835 ahead of tomorrow morning’s supply and demand estimates from the USDA. Not all corn was harvested this year due to a wet fall in several states.

The USDA said that China bought 110,000 tons of U.S. soybeans. January soybeans dropped 15.5 cents to $10.285.

Livestock
February cattle fell 1.20 to a new contract low of 81.92 with no sign of concern about the first major winter storm of the season. March feeder cattle closed down 1.22 at a new contract low of 91.92.

Cocoa
According to Dow Jones Newswires, 2009-2010 cocoa arrivals in the Ivory Coast as of December 6th were up 47% from a year ago. March cocoa was one of the few commodities that traded higher today, closing up $49 at $3,411.

Coffee
The International Coffee Organization said that they expect world production to total 124 million bags in 2009-2010, far short of the 132 million bags of consumption that they predict. March coffee closed down 2.25 cents at $1.4165.

Energies
The U.S. Department of Energy (DOE) said that crude oil supplies were down 3.8 million barrels last week to 336.1 million barrels and another 500,000 barrels were added to the Strategic Petroleum Reserve. Supplies of gasoline were up 2.2 million barrels in spite of low imports while heating oil supplies were down 700,000 barrels. January crude oil closed down $1.95 at $70.67.

The DOE also said that refinery use increased from 79.7% to 81.1% of capacity last week. Over the past four weeks, gasoline demand was up 1.2% from a year ago while distillate demand was down 8.3% from a year ago.

Bitter cold temperatures are covering the U.S. west of the Mississippi river today after yesterday’s winter storm swept across the Plains and is headed to the Northeast. January natural gas fell 21.6 cents at $4.898.

Metals
February gold dropped $22.50 to $1,120.90, still suffering from the surprise of last Friday’s positive employment report.

Currencies
Japan’s Cabinet Office said that real GDP was up .3% in the third quarter, but down 5.1% from a year ago, much weaker than the government’s estimate last month. The March yen closed up .0078 at 1.1406.

Standard and Poor’s lowered its outlook for Spain’s debt rating from “stable” to “negative.”