Upbeat corporate news lifts Dow to 12-month high

Upbeat news from the corporate sector helped Wall Street extend its rally Friday, capping a solid week of gains fueled by growing hopes for a profit recovery.

The Dow Jones Industrial Average climbed 78.07 points (0.80 percent) to 9,864.94, propelling the blue-chip index to a fresh 2009 high and its best since October 6, 2008.

The Nasdaq composite advanced 15.35 points (0.72 percent) to 2,139.28. The broad-market Standard & Poor's 500 index added 6.01 points (0.56 percent) to end at 1,071.49, a fraction shy of its 12-month high hit last month.

The market shook off early weakness, and kept moderate gains throughout the day, with sentiment helped by an improved profit outlook from oil giant Chevron and news of more corporate dealmaking.

The Dow surged nearly four percent for the week and the broad S&P index nearly 4.5 percent.

Andrea Kramer at Schaeffer's Investment Research said the market was helped by "residual earnings-related optimism" following Alcoa's surprise profit report earlier this week, raising expectations for an improving corporate profit picture.

Fred Dickson at DA Davidson & Co. said investors sitting with cash on the sidelines have been using the modest dips to buy more stocks.

"We continue to see small pullbacks followed by rallies on expanding volume, signaling equity buyers are still waiting on the sidelines to get on board the train," he said.

"Some of the recent rally can be attributed to global investors seeking to unload dollars for stocks and commodities."

The market was digesting comments from Bernanke late Thursday that rates may be lifted from the level of near zero when the US economic outlook has "improved sufficiently."

Although some analysts fear talk of a rate hike might spook the market, Robert Kavcic at BMO Capital Markets said it also meant the economy is on the mend.

"It's actually normal behavior for stocks to cheer rate hikes coming out of a recession," he said.

"For equity investors, the benefit of strengthening economic and earnings growth outweighs the cost of higher interest rates this early in the cycle."

There was little reaction to a report showing the US trade deficit narrowed for the first time in four months.

Although a lower trade gap would ordinarily be seen as positive news, analysts said it showed higher exports driven by a weak dollar and lower imports amid lackluster domestic demand.

"This month's trade report is bad news for anyone expecting to see signs of recovery in trade," said Christopher Cornell at Moody's Economy.com.

"Trade volume has flattened, both in nominal and real terms."

Among stocks in focus, Chevron rose 1.83 percent to $72.76 after it revealed interim results indicating third-quarter profits would increase on better results from exploration and production.

Kimberly Clark added 0.34 percent to $59.26 after the maker of Kleenex and other personal care products said it would buy medical equipment maker I-Flow for 276 million dollars. I-Flow rose 6.97 percent to $12.58.

Analyst upgrades helped the tech sector as IBM jumped 2.98 percent to $125.93 and Google increased 0.4 percent to 516.25.

Citigroup fell 0.43 percent to $4.63 after announcing the sale for $250 million of its oil trading unit Phibro to Occidental Petroleum, down 0.69 percent at $79.54.

Bonds fell sharply on the prospect of higher rates. The yield on the 10-year US Treasury bond rose to 3.384 percent from 3.255 percent Thursday and that on the 30-year bond climbed to 4.227 percent from 4.094 percent. Bond yields and prices move in opposite directions.

Agence France-Presse

How much will it cost insurance companies?

Now it is time to file claims....from Ondoy and Pepeng damages. How much it will cost our insurance companies?

Insurance companies face at least P11 billion in property claims alone from the devastation brought about by Tropical Storm “Ondoy,” according to the Philippine Insurers and Reinsurers Association (Pira).

The amount, which does not include life insurance claims, was an “ultraconservative” estimate, said Michael F. Rellosa, vice chair of Pira, the country’s non-life insurance industry association.

The estimate is enormous because the areas most affected by the devastating floods were industrial and commercial rather than agricultural or residential, he said.

“Marikina, Pasig and Cainta [host] many factories that have millions of pesos worth of machinery and equipment. The warehouses were full of stock for the Christmas season,” he said.

The commercial establishments sustained heavy losses in lost inventories, he added.

Claims from water-logged vehicles with “acts of God” coverage could reach P1 billion, said Rellosa, who is also president of Fortune General Insurance Corp.

“Three Pira members that offer motor vehicle insurance with [acts of God coverage] said claims from their clients could reach roughly P300 million,” he said.

There you have it.

Are you properly covered?

Can we still take this: another global crisis to watch out for?

2008 until today, the world hasn't fully recovered yet from the subprime crisis - and yet another warning was given out today in Manila:

VISITING INVESTMENT GURU Mark Mobius warned that the rapid growth of money supply and lax regulation on derivatives could lead to another global financial crisis in the future.

Mobius, executive chair of Templeton Asset Management Ltd. and considered to be one of the world’s most influential asset managers, said liquidity growth that could induce inflation and unbridled growth of derivatives were the two “big elephants” in the global investment area.

“As you know, elephants can be very gentle and they can also be very wild and destructive,” the Singapore-based Mobius said in a briefing before addressing delegates to the 9th Annual Pacific Region Investment Conference in Manila.

on the other hand, concerns are growing over another mortgage giant in the US, from New York Times:

First it was Fannie Mae and Freddie Mac. Now concern is growing that another government mortgage giant might teeter, just as the nation’s housing market is stabilizing. A year after Fannie and Freddie were effectively nationalized, problems at the Federal Housing Administration are raising worries among industry executives and Washington policy makers.

Some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances. Mr. Stevens said that the F.H.A., which insures mortgages with low down payments, holds more than $30 billion of cash in reserve to cushion against potential losses, and the average credit score of borrowers is about 9 percent higher now than two years ago.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” the former Fannie Mae executive, Edward Pinto, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, predicted losses on its mortgage insurance would more than wipe out the agency’s reserves.