Market Recap: Euro Bond Auctions Buoy Markets Despite Negative Data

Markets closed up on Wall Street today: Dow +0.17%, S&P +0.23%, Nasdaq +0.51%, Oil -1.77%, Gold +0.69%.

On the commodities front, Oil (NYSE:USO) fell to $99.08 a barrel. Precious metals were up, with Gold (NYSE:GLD) climbing to $1,650.90 an ounce while Silver (NYSE:SLV) rose 1.02% to settle at $30.20.

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Today’s markets were up because:

1) Bonds. Spain and Italy both had successful debt auctions today that saw borrowing costs fall sharply in the first test of euro-zone bond markets in 2012. The Spanish Treasury raised 10 billion euros, double its target, as it auctioned three kinds of bonds, while Italy paid less than half what it did a month ago to sell one-year bills. Spain and Italy both saw the spread between yields on their benchmark 10-year notes and Germany’s benchmark bunds narrow as banks took advantage of cheap three-year loans from the European Central Bank to invest in sovereign debt. Ultimately, the success of today’s European bond auctions, and the expectation of continued success, was enough to outweigh a host of negative economic data today, allowing markets to close slightly up. The euro climbed to $1.2822.

2) Data. Jobless claims rose more than expected last week, the first week of the New Year, signaling that improvement seen in the job market in November and December may have largely been the result of higher temporary holiday hiring than in previous years. As the holiday shopping season winds down, unemployment could tick upward as retailers let go of temporary hires. In another bad sign for employment and the economy as a whole, retail sales rose just 0.1 percent in December as lower gas prices and heavy holiday discounts weighed down the value of goods sold. Purchases excluding automobiles fell 0.2 percent in their first decline since May 2010.

3) Oil. The U.S. won Japanese support today for sanctions on Iranian oil that not only threaten the flow of world oil supplies, but also the possibility of war. Iran has refused to terminate a nuclear program it says is entirely peaceful, but Western superpowers suspect the country to be developing nuclear weapons. In response to what it deems to be unjust sanctions, Iran has threatened to block access to the Strait of Hormuz, through which roughly one-fifth of the world’s oil supply is transported. In what could be another upset to global supply, Nigeria’s main oil union, which has been on strike over the last four days, has threatened to shut down output completely, beginning Sunday, if the government does not reinstate a petrol subsidy that ended January 1, doubling oil prices for Nigerians 150 naira ($0.93) per liter. Nigeria is Africa’s largest oil producer, and exports largely to the U.S., Europe, and Asia.

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