By Carlos Guillen

Demand for equities continues to slowly ramp higher, and so far during today's trading session the Dow Jones Industrial Average is holding its ground above the 12,500 mark, a level not held since the early part of this past summer. Part of the mild enthusiasm comes as a result of rather encouraging news from the International Monetary Fund (IMF).

Now officially confirmed, the IMF has said that it will seek to raise up to $500 billion in order to have the capability to give out new loans to help mitigate a worsening financial crisis. The new money to be raised includes $200 billion that European countries recently agreed to hand the IMF. At the moment it is estimated that nations in the eurozone will need close to $1 trillion in the coming years to save them from the current debt crisis. While the IMF has been focusing on eurozone nations, others will also need assistance. The potential of this liquidity to hit the streets is clearly capturing the interest of investors at the moment.

On the Greek front, talks between the Greek government and private creditors have resumed, and they are currently discussing the possibility of writing down about 50 percent of the Greek debt burden. A deal is extremely important at the moment if Greece is to receive the next tranche of the bailout funds it needs to meet its next debt repayment deadline in the next two months. At the moment the news is not solid, but there are rumors that suggest a small number of hedge funds are blocking the deal, either to try to force a reduced write-off percentage or to trigger a default, against which they are insured. If Greece were to fail to meet its over 14 billion euro debt repayment in March, it would be forced to default and, in turn, would very much likely be shown the door out of the eurozone.

On other news, The World Bank forecasted that the world economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent. GDP growth for the U.S. was cut to 2.2 percent from 2.9 percent, and the eurozone may contract 0.3 percent, compared with a previous estimate of a 1.8 percent gain.

Despite the growth reduction, equity markets are reacting positively to some encouraging earnings results from the likes of Goldman and Linear Technologies and to the increasing likelihood of increasing liquidity in the eurozone as well as in China as we saw yesterday that Chinese economic leaders were certainly becoming less restricted to provide the necessary liquidity to boost economic growth.

Housing and Industrial Data Foreshadow Construction Rebound
By David Urani

Once again, optimism in the housing sector is picking up and the January NAHB/Wells Fargo Housing Market Index rose up to a reading of 25 versus 21 the previous month and the 21 consensus estimate. The most striking aspect of the report was that it's at its highest level since June 2007, after increasing for a fourth month in a row. It reflects an ongoing perception by homebuilders of more traffic, and improving chances of making sales in the months ahead. Caution is still required, however, given that buyers can't always get mortgages and projected home prices aren't always worth the construction costs.

Perhaps the most critical use of the Housing Market Index is it's predictability for housing starts. Over time it has held a relatively strong relationship, and therefore the recent jump in the index is a good omen. It's more than likely that there has been a meaningful increase in construction activity in the past four months. Not only is that an indicator that home demand is strengthening, but it also foreshadows some potential re-hiring for construction jobs, which crashed to the range of 5.5 million from a peak of 7.7 million in 2006 and have barely budged from the bottom.

Then there was the report on industrial production which was just slightly below estimates at a 0.4% increase month to month. No surprises here really, and typically not a big market mover. That being said, I think there is something to be taken away from the capacity utilization aspect. Similar to construction employment, the percent usage of production facilities fell steeply during the recession. However, at 78.1% utilization, factories are back up to running as hard as they were in mid-2008 right as the economy was beginning to falter. For some of the stronger companies including major automakers, factories are beginning to run at full capacity and that means more construction may be necessary in the industrial sector as well as in housing.

For me, it's starting to look like 2012 could be the year that the construction labor market makes its big comeback.