Stocks rallied almost 4.5% on the day after the EU announced a $1T bailout program. Volume was very heavy on the day, breadth was incredibly strong at 17:1 and 95% of all stocks were higher on the day. From a purely technical perspective you couldn’t ask for a better rally. Whether this was pure short covering or the start of something more sustainable will become more evident in the coming days.
From Daily Futures:
Currencies – A New European Plan
The European Union agreed to put up 500 billion euros of funding along with 220 billion euros from the International Monetary Fund in an effort to stop fears of credit defaults and save the euro. The June euro was up .0062 at $1.2802.
Most commodities were somewhat higher as Europe’s action helped to stop panic-buying in the U.S. dollar.
In the U.S., stocks are higher and the June U.S. T-bonds closed down 1.05/32nds at 120.27/32nds after Europe’s emergency funding plan.
Grains and Cotton
Statistics Canada said that the nation’s stocks of wheat totaled 15.68 million tons on March 31st, down 3.5% from a year ago. July wheat fell 17.75 cents to $4.927.
July corn was down a cent and a half at $3.705 with rain falling today over much of the central U.S.
July cotton finished up .33 at 81.04, encouraged by today’s weaker U.S. dollar.
Tyson Foods said that they earned $156 million in the second quarter of 2010, up from a loss of $119 million a year ago, helped by better prices for pork and beef. August cattle closed up .87 at 95.07.
Canada’s Mortgage and Housing Corporation said that housing starts were at an annual rate of 201,700 units in April, up 1.3% from March’s pace, but less than expected. July lumber ended up $2.50 at $279.50.
July orange juice was up 2.05 cents at $1.3805 after Friday’s article from Bloomberg news quoted an executive as saying that too much rain hurt Brazil’s orange crop. He expects Brazil to harvest 286 million boxes of oranges this year, down from 305 million boxes last year and the lowest in seven years (see article).
June gold fell $9.60 to $1,200.80 after the new European agreement eased investors’ fears that Greece would default on its debt. July copper jumped up 8.35 cents to $3.2280.
July crude oil closed up $2.01 at $80.52 with hope that Europe’s new aid package will help take pressure off of the rising dollar.
The June Canadian dollar jumped up 1.69 cents to 97.60 with unconfirmed talk that the Bank of Canada may raise the interest rate next month.
The Bank of England met today and kept the interest rate unchanged at .50%, as expected. In the meantime, political negotiators are trying to form the next government and a search is on for a new Prime Minister. The June pound ended up .0069 at $1.4877.
Industrial production in France was up 1.0% in March, better than expected.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.