Just when you thought he might have skipped town for good, Santa makes a grand
entrance. Tuesdays rollicking 337-point surge in the Dow provided welcome
relief, restoring some of Wall Streets missing holiday cheer. But can the
newfound enthusiasm last? To answer that one, we have to look a little more
closely at the news that supposedly ignited the buying. Overseas, the Spanish
government conducted a successful auction of three-month bills at 1.74% down
steeply from 5.1% in November. Thats encouraging. It suggests investors are
impressed, so far at least, with Spains new prime minister Mariano Rajoy, a
conservative consensus-builder. Europes road back will be long and difficult,
but its possible at least one major country is about to take the first small
step away from the precipice. On the other hand, the domestic story that got the
bulls fired up yesterday was almost certainly not as big a deal as advertised.
The Commerce Department said builders broke ground on 685,000 new homes last
month up 9.3% from October. This sounds like a great number, until you realize
apartments accounted for the great majority of the increase in housing starts.
Single-family starts rose a much more modest 2.3% and building permits for
single-family homes (a forward-looking indicator for starts) edged up only 1.6%.
Thus, the housing market as most of us know it still is mired in a deep
depression. I expect the homebuilder stocks to give back all of yesterdays spike
and more in the weeks ahead. Speculators, hold your shorts in Lennar (NYSE:
LEN ) and Pulte Group (NYSE: PHM ). As far as the broader equity market is
concerned, theres probably just enough seasonal good feeling in the air to keep
the headline indexes trending upward through Christmas perhaps all the way to
New Years. I would caution you, though, the mood could easily change in January.
Company News After the bell Tuesday, tech bellwether Oracle (NASDAQ: ORCL )
reported slower growth in sales (2%) and profits (5.8%) for the November quarter
than the analyst consensus was projecting. Chalk up one more data point
suggesting that yes, maam, even Americas software industry the envy of the
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