European stocks climbed

European stocks climbed to the highest level since October 2008 and Asian shares advanced after China raised its economic growth forecast and Japan’s industrial production increased. U.S. index futures also gained.

Infineon Technologies AG, which gets more than 40 percent of annual sales from the Asia-Pacific region, added 1.1 percent. ArcelorMittal led basic-resources companies higher as metals prices rose. Seadrill Ltd., the drilling company founded by billionaire John Fredriksen, and Aker Solutions ASA gained at least 1 percent as crude oil traded above $78 a barrel.

Europe’s Dow Jones Stoxx 600 Index added 0.4 percent to 252.89 as of 12:46 p.m. in Paris. The gauge is heading for its biggest annual increase in a decade, having climbed 27 percent this year, on mounting evidence that the global economy is recovering from its worst recession since World War II. Markets in Europe were closed on Dec. 25 for the Christmas holiday. The U.K. is also closed today.

China on Dec. 25 raised its 2008 growth estimate to 9.6 percent from 9 percent and said this year’s quarterly figures will also increase, narrowing the gap with Japan, the world’s second-biggest economy.

Emerging markets’ economies “will support global growth,” said Arnaud Scarpaci, a fund manager at Agilis Gestion in Paris, which oversees about $150 million. “That’s good for stocks. We expect another year of gains in 2010.”

Rally Since March

Japan’s Cabinet Office said on Dec. 25 that the economy will expand for the first time in three years and today said industrial production improved for a ninth month in November.

A 60 percent rally in the Stoxx 600 since March has been spurred by record-low interest rates in the U.S. and Europe and as governments committed about $12 trillion worldwide to revive credit markets and stimulate economic growth.

U.S. stocks rose last week, pushing the Standard & Poor’s 500 Index to a 15-month high. Futures on the benchmark for U.S. equities increased 0.1 percent today, and the MSCI Asia Pacific Index advanced 0.7 percent.

Infineon, Europe’s second-biggest semiconductor maker, climbed 1.1 percent to 3.83 euros.

ArcelorMittal, the world’s biggest steelmaker, rose 1.5 percent to 31.77 euros. Boliden AB, Europe’s second-largest zinc producer, gained 1.3 percent to 91.05 kronor.

Basic-resources shares were the best performers among 19 industry groups in the Stoxx 600. Copper in Shanghai climbed to the highest price in more than 15 months on optimism demand is improving in the world’s largest user after domestic stockpiles dropped. Zinc jumped to the highest since April 2008.

Crude Oil

Seadrill rose 1.1 percent to 149.1 kroner. Aker Solutions, Norway’s biggest maker of oil platforms and equipment, advanced 1 percent to 76.15 kroner. Tenaris SA, the world’s largest maker of seamless pipes used to extract oil and gas, added 1.8 percent to 15.04 euros. Crude oil climbed for a fourth day as forecasts of colder-than-normal weather in the U.S. increased demand for heating fuels.

PSA Peugeot Citroen, Europe’s second-biggest carmaker, added 0.9 percent to 23.67 euros. French new car sales increased by about 40 percent between Dec. 1 and Dec. 23, helped by scrapping incentives, French daily Les Echos reported, without citing anyone. By Christmas, December car sales in France reached 180,000, meaning that 2009 as a whole will show an increase of about 9 percent, according to the newspaper.

Seat Pagine Gialle SpA lost 2.2 percent to 16 cents after Italy’s largest telephone directories publisher said on Dec. 23 that it may cut financial targets for 2010 and 2011.

U.S. Economy

The U.S. economy next year will turn in its best performance since 2004 as spending perks up and companies increase investment and hiring, says Dean Maki, the most- accurate forecaster in a Bloomberg News survey.

The world’s largest economy will expand 3.5 percent in 2010, according to Maki, the chief U.S. economist at Barclays Capital Inc. in New York. The rebound in stocks and rising incomes will prompt Americans to do what they do best –consume, said Maki, a former economist at the Federal Reserve.

Brown-Forman Corp.’s Paul Varga and Johnson & Johnson’s William Weldon are among chief executive officers left behind in the 2009 stock-market rebound even after they created the most value for their companies. Brown-Forman, the maker of Jack Daniel’s whiskey and Southern Comfort liqueur; J&J, the world’s largest health products company; and 30 other S&P 500 companies rallied less than 10 percent this year as their managers posted better-than-average sales and efficiently invested capital, data compiled by Bloomberg show.

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Stock market will tread water in 2010

Trading On Stock Market at 2010

If your faith in the stock market remained unshakable in 2009, toast your own good sense. It was a great comeback year, with the leading indexes up 20 percent to 45 percent. Most stocks are up about 50 percent from the year’s lows in March.

But don’t expect anything like a repeat in 2010.

A bull statue near the New York Stock Exchange may not symbolize how the market will fare in 2010.

Look for stocks to show little upside oomph over the next 12 months. A decline is possible, but a tight trading range is more likely. When stocks don’t show any direction, it’s usually because of confusion, something we’ll see plenty of in 2010. Investors will be preoccupied with measuring the conviction of any recovery, but the signals won’t be clear.

We will, indeed, see an improving economy in 2010. Production will ramp up. Hiring will grow. But it won’t look like the kind of recovery people are accustomed to.

For one thing, bank lending will remain tight. All of the incentives for banks are still on the side of retracting from risk and strengthening their balance sheets. Also, many are saddled with bad commercial real estate loans that will become bigger problems over the next couple of years. Commercial property values — now at a seven-year low — will drop more and could hit a total decline of about 50 percent from the decade’s highs, according to Foresight Analytics.

The other disappointment for people will be housing prices. Many equate an increase in home values with true prosperity, and government support for home-buying shows the industry’s populist importance. But tax credits have to end as the government turns its attention to deficits, and mortgage rates can’t fall any further.

The housing market is a ball of bad debts that will take years to unravel. It depended since the 1990s on people cashing in equity to trade up. But now there is no equity, and the pressure will be felt on higher-end homes. The Cook County assessor’s office is reporting that foreclosures in well-to-do neighborhoods are rising faster than in lower-income neighborhoods, where subprime mortgages were the culprits. Research from Barclays Capital and others say that over the next three years, the market will face a surge of adjustable-rate loans scheduled to reset at higher rates, increasing many people’s payments 50 percent or more.

STEP ON IT: Robert W. Baird & Co. analyst David Leiker suggests keeping an eye on Navistar International (NAV), which last traded at $40.62. Leiker wrote that if the stock slips, and especially if it gets back to recent values of around $35, it will pose a compelling opportunity. Leiker says several trends work in Navistar’s favor, starting with a cyclical recovery in commercial vehicle sales.

He also sees the company reporting higher profit margins on cost-cutting and on its decision to take engine manufacturing in-house.

Note that one of NAV’s businesses is manufacturing chassis for motor homes. And motor-home production is starting to pick up, though for the life of me I can’t understand why.

UNDER IT ALL: Which brands are causing a buzz these days? For people under 25, Under Armour (UA) has to be on that list. The maker of moisture-wicking sports apparel has identified itself with the youth market and appears ready for worldwide growth, reports Sharon Zackfia, analyst at William Blair & Co.

Zackfia wrote that Under Armour has the potential to quadruple its U.S. market share, currently at around 2 percent. The company relies less on international sales than Nike (NKE), but even there the sales growth will be in the billions of dollars if it merely maintains its current rate of increases, she said.

PERFECT PERFIDY? The New York Times reports that the Securities and Exchange Commission and the security industry’s in-house cop, the Financial Industry Regulatory Authority, are looking at whether Goldman Sachs Group (GS) and other big banks deliberately steered customers into bad investments on collateralized mortgages. While the banks were selling these securities, they also were taking positions that helped them profit from a decline in housing values. This may have been going on in 2007, when the housing markets first showed cracks.

The allegation sounds damnable, but it’s really just an extension of what Wall Street does. They trade and hedge regardless of customer interests. These are nonpartisan profit-mongers. They can even say taking the opposite side of the trade was prudent business.

The old saying in Washington is that if you want a friend, buy a dog. If you want a friend on Wall Street or LaSalle Street, feed a pigeon.

DATA MINING: A company that operates from Lake View, Ycharts, has a free online service for stock analysis. A founder, Shawn Carpenter, said investors have little choice if they want free or low-cost data services that measure a stock’s long-term financial performance and enable comparisons with other companies. Ycharts takes financial reports and puts them into easy-to-read graphics. The service relies on advertising for revenue. It’s just starting, and it links to other sites for some data analysis. But Ycharts is looking for feedback. It’s worth checking out if you can’t afford a Bloomberg terminal.

CLOSING QUOTE: “Apple [AAPL] may be on the verge of kneecapping the cable industry.” — a headline at seekingalpha.com on a piece about Apple negotiating with TV networks to offer subscription access over the Web.

If you’ve ever waited all day for the cable guy or been stuck in cable’s on-hold limbo, you’re probably rooting for Apple to the core.

Resource: http://www.suntimes.com

Stock Picks: PHM Up, C Down
Pulte Homes Up

Pulte Homes (PHM: 9.94*, +0.52, +5.52%) shares rose more than 2% early Tuesday as investors showed enthusiasm for new home sales data to come later this week.

Early Tuesday, the National Association of Realtors said existing home sales popped 7.4% to 6.54 million in November, vs. expectations for an increase of just 2.6%.

Investors took this as a sign that new home sales, due out from the Department of Commerce on Wednesday, might offer an upward surprise as well. Expectations are for 439,000 new home sales in November, up from 430,000 in October.

“As the housing cycle unfolds over the next 3-6 months and home builders show more progress towards getting back to profitability, we expect investors will focus more on normalized earnings and that focus will cause PHM to outperform its peers,” wrote Citi analyst Josh Levin in a note upgrading Pulte to a Buy rating in late November.

Fellow home stocks KB Home (KBH: 13.91*, +1.00, +7.74%), D.R. Horton (DHI: 11.02*, +0.28, +2.60%), Toll Brothers (TOL: 19.27*, +0.89, +4.84%) and Lennar (LEN: 13.36*, +0.50, +3.88%) were also on the rise.

But while investors are definitely reacting to the existing home sales data today, unemployment is expected to stay at high levels, and that likely means a long and low recovery process, says Charles Rotblut, vice president of the American Association of Individual Investors.

The bottom line: “I think it’s still wait and see, because we did have the existing home sales data that were better than expected and it looked like inventories dropped,” says Rotblut. “On the other hand, we found out yesterday that the percentage of prime mortgages going into default also rose.”
Citigroup Down

Shares of Citigroup (C: 3.38*, -0.04, -1.16%) were falling after The Wall Street Journal reported that the FBI is investigating a hacker attack, allowed by a computer security breach, that resulted in the theft of tens of millions of dollars.

The Journal cited unnamed government officials for the report, who said the hackers appear to be related to a Russian cyber gang.

The attack targeted the company’s Citibank subsidiary, although it couldn’t be learned whether the thieves gained access to Citibank’s system directly or through third parties, according to the report. Citigroup denied that such an investigation is underway, according to the Journal.

Beneath all the drama, this is likely more of a personal finance and identity theft issue than Citigroup itself, says Rotblut, of the American Association of Individual Investors.

The bottom line: “The concern is if these guys are able to hack into Citibank, are they able to hack into other banks? It’s definitely disconcerting,” says Rotblut. But, “I think with Citigroup there are problems far worse than hackers — presuming this is an isolated incident.” Thus, this may just be headlines in a slow week, he says.

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