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While you were sleeping: U.S. sitting pretty

While you were sleeping: U.S. sitting pretty

(BusinessDesk) December 23 - Stocks on Wall Street extended their recent advance on fresh data showing decent growth in the third quarter for the world’s biggest economy.

The U.S. economy expanded at a 2.6% annual rate in the third quarter, compared with a 2.5% estimate issued last month, according to a Commerce Department report.

Today’s data also showed a measure of inflation rose at the slowest pace in more than five decades.

A separate report showed the U.S. housing market recovery was still struggling to gain traction. Sales of previously owned homes climbed 5.6% - less than forecast - to a 4.68 million annual rate, according to figures from the National Association of Realtors.

“The economy is on the right track, but people need to understand that it’s happening at a moderate pace,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, told Bloomberg News.

A Reuters poll showed on Wednesday investors are entering 2011 in a relatively bullish mood, raising equity holdings to a 10-month high, increasing exposure to high-yield credit and cutting back on government debt.

U.S. Treasuries declined. Benchmark 10-year yields gained rose four basis points to 3.35% at 11:31 a.m. in New York, according to BGCantor Market Data.

The difference between 10- and two-year yields was at 2.72 percentage points, about double the five-year average, according to Bloomberg. A wider spread signals that investors are shunning longer-dated securities, which are more sensitive to the inflation outlook.

Today the Federal Reserve bought US$2.07 billion of Treasuries due from February 2021 to February 2027 as part of its quantitative easing program.

The Treasury is scheduled tomorrow to announce the sizes of two-, five- and seven-year auctions for next week.

In Europe, Greek bonds dropped after Fitch Ratings said it might cut the country’s debt rating to junk. The euro hit another record low against the Swiss franc.

The euro fell below 1.25 Swiss francs, down about 16% so far this year,

The euro slid 0.1% against the greenback to US$1.3088, reversing gains sparked by a report in the Jornal de Negocios business daily that China was ready to buy between 4 billion euros and 5 billion euros of Portuguese sovereign debt.

China's central bank declined to comment on the report while Portuguese government officials were not immediately available for comment, according to Reuters.

Oil rose to hit a two-year high, boosted by a drop in U.S. oil inventories and cold weather on both sides of the Atlantic.

Economists said they were optimistic U.S. economic growth was accelerating in the final months of the year.

"With two days to go until Christmas Eve risk markets have ignited the afterburner, reinforcing one more time the all-pervasive mantra throughout 2010, "What crisis?" JP Morgan analysts said in a note.

(BusinessDesk)

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