Several analyst boosts to U.S. stock allocations vis-a-vis European holdings, including those of Lehman and Goldman, helped inspire the 2-2.5% shopping spree on Wall Street, while European bourses gained 3-4% on French banking M&A speculation and surging energy market shares. Another potential ultimatum on Iraq weapons documents this week and oil supply disruptions from Venezuela propelled NYMEX Jan crude above $30/bbl for the first time in two months.
Stocks managed to shrug off the energy sticker shock and appeared to have the upper hand after key indices bounced from their 50-day moving averages and enjoyed a visible "outside day." Impending supply may have intruded as well, with housing agency Fannie Mae prepping a $6 billion two-tranche offering and the two-year note auction lurking next Monday.
The March bond closed down 29/32 at 109-4/32, while the two-year not and 30-year bond spread widened two basis points to +211 basis points.