U.S. Rally Lifts Indexes to 30-month Highs; AIG Repays $21 Billion to Fed

Bikram Pandey
14 Jan, 2011
New York City

U.S. stocks closed higher for the seventh week in a row and two popular benchmarks the Dow and the S&P are near 30-month high. Financials rallied on the back of earnings from JPMorgan and AIG repaid $21 billion to the Fed. Gold declined after China lifted bank reserve requirements.

[R]4:00 PM New York – U.S. stocks closed higher for the seventh week in a row and two popular benchmarks the Dow and the S&P are near 30-month high. Financials rallied on the back of earnings from JPMorgan and AIG repaid $21 billion to the Fed. Gold declined after China lifted bank reserve requirements. Emerging markets struggled as inflation perks up.[/R]

U.S. stocks rose as banks reports higher than expected profit and Intel expressed confidence about the outlook. JPMorgan reported 47% increase in quarterly earnings and set aside smaller reserves for bad loans. Financials rallied on the back of news from JPMorgan and AIG.

AIG paid back $21 billion to Federal Reserve borrowed under its emergency credit line and also swapped the preferred share stake of the U.S. Treasury to common stock.

U.S. Treasury will own 1.66 billion share or 92% of the insurer and with the final payment of $21 billion, AIG completed its obligation to the Fed.

U.S. retail sales and consumer prices rose in December but less than expected. Intel expressed confidence about the outlook and JPMorgan earnings soared. The SEC probed transactions between U.S. financial service firms and sovereign-wealth funds.

JPMorgan Chase & Co. ((JPM)) increased 1.9% or 86 cents to $45.31 after the financial services firm reported fourth quarter total net revenue grew 13% to $26.1 billion from $23.16 billion in the prior-year quarter. Net income in the quarter soared 47% to $4.83 billion or $1.12 per share, compared to net income of $3.28 billion or 74 cents per share last year.

Intel Corporation ((INTC)), the semiconductor chip maker said fourth quarter revenue rose 8% to $11.46 billion from $10.57 billion in the same quarter last year. Net income in the quarter surged 48% to $3.39 billion or 59 cents per diluted share, compared to net income of $2.28 billion or 40 cents per share for the year-ago quarter.

The European indexes slid after euro-zone inflation crossed the ECB threshold in December. Many European nations including German reported a rise in inflation and Hungarian industrial output soared in November.

The UK indexes dropped as inflation increase and a private estimate suggested economic growth of 1.6% in 2010. Output price inflation increased and home prices declined in December. BAE Systems agreed to acquire Norkom for €217 million. Smith & Nephew denied merger speculations.

Japanese stocks fell after rallying for five days and closed 2.64% higher for the week. Machine tools orders in December rose for the thirteenth month in a row. Prime Minister Naoto Kan reshuffles his cabinet. The total market cap China bourses exceeds those of Japan by 60% in 2010.

Shanghai stocks drop to their lowest level in ten days led by commodities and banks. Shougang Group shuts its steel plant in Beijing to cut air pollution levels. CNPC says its net profit for 2010 surged by 30%. China overtakes U.S with the largest installed wind power capacity.

Stocks in Mumbai fell 1.8% on Friday and 4.34% for the week. A sustained elevated inflation may force central bank to lift rates. Steel Authority of India net dropped 34% in third quarter. The Food Security Bill is termed as unworkable by the expert committee.

Stocks in Sydney rose to end at their highest in more than eight months. Residents of Tasmania and Victoria are evacuated while donations to flood relief fund pours in. Port of Gladstone expects coal exports to begin on Saturday.

Commodities, Currencies and Yields

Dollar declined against euro to $1.336 and rose against the Japanese yen to 82.98. One UK pound fetched $1.59.

Crude oil decreased $0.61 to $91.25 a barrel for a front month contract, natural gas edged lower 0.13 cents to $4.38 per mBtu and gasoline decreased 1.87 cents to 244.44 cents.

Gold decreased $28.70 in New York trading to close at $1,358.30 per ounce, silver decreased $0.88 to $28.37 per ounce and copper for the front month delivery increased 5.20 cents to $4.42 per pound.

Yield on 10-year U.S. bond increased to 3.32% and on 30-year U.S. bond yield rose to 4.52%.