Monday Morning Musings

The stock market is pushing higher again in early trading, adding to last week's breakout into new high territory.  The Santa Claus rally is usually the period after Christmas into the first few days of the New Year, but it looks like it came early this year.  Par for the course for 2013.

There isn't too much in the way of news, but AAPL is trading 3% higher after finally inking a multi-year deal with China Mobile to sell iPhones on their network in China.

In economic news, the Univ. of Mich consumer sentiment index remained unchanged at 82.5.

The 10-year yield is a bit higher to 2.91%.  Back in October when yields drifted back down to 2.50% we said that we thought yields would trend back towards 3.0% into year-end.  That was a good call.

Asian markets closed higher overnight.  Japan was closed for a holiday.  The PBOC injected more liquidity in China as the cash crunch continues.  The 2-week SHIBOR rate rocketed 124 bps to climb to 8.25%.  That's an astounding spike.  The Chinese govt doesn't want the media harping on the cash crunch.

Europe's markets also finished higher today.  Fitch affirmed France's sovereign rating at AA+.  And Germany's Economics Ministry put out a long-term forecast that projects Germany's GDP growth to be in the range of 1.5% through 2018.

The volatility index is falling another 4.5% to 13.15.

Trading comment: The strength of this rally continues to be surprising.  It feels like a mad last-minute dash by underinvested portfolio managers to increase their equity exposure and add to winners into year-end.  But we would not be surprised to see some weakness in the last week of trading as profits for the year get locked in and exposures get trimmed in preparation for 2014.  The market remains overdue for a correction, which could come in January after the usual new fund flows for the year.  But right now we aren't making any big changes.