The Stock Market Builds on Yesterday’s Rally

The stock market is building on its impressive jump from yesterday. The S&P 500 rose 2.3% yesterday, and so far, we’re up another 1% today. After the stock market rose 110% in a little over three years, one of the greatest rallies in history, a two-month fall of 7% was taken somehow by bears as vindication for their views.

One of the major concerns in Europe is in Spain. The bond market had effectively shut them out of raising more money. Fortunately, they had a successful bond auction this week. That’s probably one of the reasons why AFLAC ($AFL) has responded so well. Shares of AFL rose from a low of $38.18 on Monday to as high as $41.55 today.

Sysco ($SYY) went to the bond market and borrowed money for three years with a coupon of 0.55%. The other part of their borrowing was at ten years, and that carried a coupon of 2.6%. Bear in mind that Sysco’s stock currently yields 3.8%.

Reuters writes:

This quest for high-quality bonds has gained pace in the last couple of weeks as supply has receded amid rising eurozone contagion worries.

Although Sysco’s business is not the most glamorous, delivering food is viewed by investors as an essential business that generates guaranteed cash flow in good and bad economic times.

Sysco is regarded as a quality, powerful franchise with a diverse selection of food products that gives it significant pricing power.

Sysco’s deal is expected to encourage other issuers who have been sitting on the sidelines waiting for overall market nervousness to subside.

The other positive news today is that China cut its interest rates for the first time since 2008. Also, unemployment claims fell to 377,000.

Posted by on June 7th, 2012 at 9:56 am


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