Interdum stultus opportuna loquitur...

Tuesday, December 07, 2004

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Economic Statistics

On the whole, it would be hard not to be disappointed with the data released in the US today; by and large it told a continuing story of a "recovery" that is anaemic at best, and completely illusory at worst. I am in the same camp as Steven Roach (of Morgan Stanley) and Bill Gross (of PIMCO) on the current economic picture; it's worse than it looks, and it's being deliberately made to look better by the use of hedonics.

Last nights numbers in review:

  • ICSC-UBS Store Sales fell -1.7%, taking the growth rate to +3.3% year on year (remember this is nominal growth - subtract 2.5-3% for inflation, and real growth falls to near-zero);
  • The Redbook - another measure of chain store sales - showed growth of a very anaemic +1.8% year/year - all of a sudden we are talking about negative real growth in a measure that accounts for about 10% of total consumption expenditure;
  • Non-farm productivity - using the fundamentally flawed "output per worker" measure - rose 1.8%, which fell short of the consensus guess (2%). This measure, so often heralded by Greenspan as the key reason for his continued belief in the chimerical, liquidity-and-deficit-primed recovery, now looks "trend-sick";
  • Unit Labour Costs rose 1.8%, which exceeded the consensus estimate (1.6%). Thus, while productivity growth (badly measured, and overstated) is slowing, wage claims - although not keeping pace with inflation - are rising. That spells pressure on profit margins;
  • Consumer Credit was the only bright spot - if you believe that digging downwards is the right thing to do when you're in a hole. Credit grew by $7.7b, which exceeded the consensus guess ($6b).
  • All things considered, it was a set of datapoints that gave equities a lot to think about.

There was also a 4-week bill auction, which cleared at a yield of 2.05% (last week: 2.035%), with a healthy bid-to-cover ratio of 2.75x (last week: 2.26x).

Forthcoming US Economic Data Tomorrow's US Economic Data Calendar

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation last night:

  • a $4 billion, overnight repurchase with $4 billion in T-backed collateral .

In conjunction with the weak economic data, the lack of repurchase grease for the market cogs meant that there was absolutely no hope for any intraday bounce.

Major US Indices

With the technical divergence (pointed out in this space over the weekend) threatening to correct an overbought technical condition, with insufficient repurchase grease in the cogs, with economic data looking sad, the last thing that market needed was an unpopular merger bid.

But that's what has happened; the market has - oddly - taken a broadly negative view of the news that Johnson&Johnson (JJ, -2.3% at $60.41) wants to take over Guidant (GDT, +5.24% to $72.35). Clearly, from JJ's reaction, the consensus is that they're paying too much.

Given the concatenation of circumstances listed above, the Dow never really had a chance. Plus, yesterday I said there would be lower prices this week, so the market didn't dare countermand that - that would be like ignoring the latest "we did it - don't you know we hate your freedoms" message from Emmanuel Goldstein and the Eurasians (oops... I meant Abu Musab al-Zarqawi and al Qaeda).

It wasn't entirely one-way traffic, but it sure weren't pretty (as they say in Texas). The one attempt to move higher - generated mostly by "gap closing" assumptions - was laboriously slow and when it gave way,m it gave way in a big way. Check out the Dow intraday chart:

The DJIA shed 106.48 points (1.01%), closing out the day at 10440.58 points; the broader S&P500 shed 13.18 points (1.11%), to end the session at 1177.07.

Over at Times Square, the Nasdaq Composite shed 36.6 points (1.7%), to close at 2114.65, while larger-cap technology issues fared worse with the Nasdaq100 losing 30.26 points (1.87%), to end at 1589.33 points.

NYSE Volume was heavy, with 1.53 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill), with 2.67 billion shares being shifted around cyberspace as electronic traders discover that the little app that they bought in a chat room doesn't give them "infinite lives" in the stock market in the same way as it does in Quake.

Nasdaq Composite2114.65-36.6-1.7%
NYSE Volume 1.53 bn --
Nasdaq Volume 2.67 bn --


My 9-stock "bellwethers" group fell by an average of 1.11%

  • Freddie Mac (FRE) -$0.78 (1.13%) to $68.39;
  • IBM Corp (IBM) -$1.57 (1.61%) to $96.10;
  • Citigroup (C) -$0.17 (0.37%) to $46.00;
  • Fannie Mae (FNM) -$0.55 (0.78%) to $70.39;
  • Cisco Systems (CSCO) -$0.16 (0.81%) to $19.66;
  • Wal-Mart Stores (WMT) -$0.02 (0.04%) to $52.50;
  • General Electric Co (GE) -$0.36 (1.01%) to $35.31;
  • Ebay Inc (EBAY) -$2.43 (2.09%) to $113.91; and
  • Intel Corp (INTC) -$0.53 (2.21%) to $23.48.

Market Breadth & Internals

On the NYSE declining Issues beat out advancers by 2525 to 785, for a single-day A/D reading of -1740; and Nasdaq losers exceeded gainers by 2359 to 795. That's some of the most downside-tilted A/D stats that I can recall - at least since August.

On the NYSE declining volume was greater than volume in advancing issues by 1258.51 to 258.12 million shares; that's a 5:1 downside volume tilt (or as near as makes no odds). On the Nasdaq declining volume exceeded volume in advancing issues by 951.86 to 546.2 million shares.

111 NYSE-listed stocks rose to new 52-week highs, and 5 posted fresh 52-week lows, while on the Nasdaq there were 86 stocks that hit new 52-week highs, and 14 which fell to fresh 52-week lows

Advancing Volume (m)258.12546.2
Declining Volume (m)1258.51951.86
New Highs11186
New Lows514

Market Sentiment

I've taken this bit out; trying to go back to the whole-of-market option volume has stuffed something up. Still not updating... will fix today for sure.

Bond Market Analysis

Bonds were mixed, with the shorter maturities falling slightly and the belly and the long end rising. The yield on the benchmark 30-year Treasury bond shed 1.9 basis points to 4.891%.

UST 2Y (yld)2.9280.020.69%
UST 5Y (yld)3.578-0.002-0.06%
UST 10Y (yld)4.22-0.01-0.33%
UST 30Y (yld)4.891-0.014-0.29%

The Banks Index dipped 1.15 points (1.13%), closing at 100.74; within the index,

  • Mellon Financial Corp (MEL) +$0.19 (0.63%) to $30.39;
  • Bank Of New York (BK) -$0.04 (0.12%) to $33.00;
  • State Street Corp (STT) -$0.06 (0.13%) to $44.62;
  • Citigroup (C) -$0.17 (0.37%) to $46.00;
  • Suntrust Banks (STI) -$0.30 (0.42%) to $71.27;

The Broker-dealer Index lost 0.86 points (0.58%), closing at 147.33; the ticket clippers lined up as follows -

  • Legg Mason (LM) +$0.56 (0.81%) to $69.85;
  • E*Trade Financial Corp (ET) +$0.06 (0.41%) to $14.72;
  • A G Edwards Inc (AGE) +$0.02 (0.05%) to $39.82;
  • Charles Schwab (SCH) -$0.00 (0%) to $10.82;

The Philadelphia SOX (Semiconductor) index lost 9.37 points (2.1%), to 437.51

  • Texas Instrument (TXN) -$0.28 (1.11%) to $25.01;
  • Maxim Integrated (MXIM) -$0.47 (1.12%) to $41.31;
  • Freescale Semiconductor B (FSLb) -$0.21 (1.17%) to $17.70;
  • Taiwan Semiconductor (TSM) -$0.10 (1.19%) to $8.27;
  • Infineon Tech (IFX) -$0.14 (1.24%) to $11.17;

Gold & Silver Markets

Gold weakened by $0.7 (0.15%) to $451.7 per ounce. The Gold Bugs Index lost 6 points (2.67%), to 218.62 points. Within the index, the major movers were as follows:

The Gold Bugs Index lost 6 points (2.67%), ending the day at 218.62 points. Within the index, the major movers were as follows:
  • Coeur D'Alene (CDE) +$0.04 (0.99%) to $4.07;
  • Glamis Gold (GLG) -$0.16 (0.84%) to $18.79;
  • Goldcorp Inc (GG) -$0.18 (1.26%) to $14.08;
  • Newmont Mining (NEM) -$0.64 (1.39%) to $45.31;
  • Randgold Resources (GOLD) -$0.17 (1.41%) to $11.88;

Silver fell by $0.05 (0.64%) to close at $7.8 per ounce. The Gold and Silver Index (XAU) lost 2.15 points (2.1%), at 100.25 points.

  • Durban Roodepoert Deep Ads (DROOY) +$0.09 (5.7%) to $1.67;
  • Barrick Gold (ABX) -$0.18 (0.76%) to $23.58;
  • Goldcorp Inc (GG) -$0.18 (1.26%) to $14.08;
  • Newmont Mining (NEM) -$0.64 (1.39%) to $45.31;
PHLX Gold and Silver Index100.25-2.15-2.1%
AMEX Gold BUGS Index218.62-6-2.67%

Oil Market

Oil lost ground yet again, shedding $1.66 per barrel, closing at $41.43 per barrel. The Oil and Gas Index (XOI) shed 12.91 points (1.8%), to 705.34

  • TotalFinaElf (TOT) -$0.92 (0.85%) to $107.37;
  • Royal Dutch Shell (RD) -$0.58 (1.01%) to $56.57;
  • BP (BP) -$0.64 (1.07%) to $59.26;
The Oil service stocks (OSX) Index shed 2.63 points (2.19%), to 117.2 points:
  • Halliburton Co (HAL) -$0.67 (1.71%) to $38.45;
  • Schlumberger Ltd (SLB) -$1.11 (1.75%) to $62.25;
  • Nabors Inds Ltd (NBR) -$0.94 (1.89%) to $48.71;
Reuters CRB280.25-4.25-1.49%
Crude Oil Light Sweet41.43-1.66-3.85%
AMEX Oil Index705.34-12.91-1.8%
Oil Service Index117.28-2.63-2.19%

Currency Markets

The entire ForEx market is still toey about when (or if) the BoJ will step in and stick a floor under the Yen/USD exchange rate; that's the sole reason why nobody is p[prepared to sell Dollars against Yen under 102. 100 looms large, and if the BoJ intervenes Yen might get a short-term pop to 105-106, but if not I expect 100 to break before the New Year.

Without a break in the Dollar-Yen cross, there is no scope for much further downside in the US dollar index. It's had an 80-handle at one stage, and is wandering around at the 80-8-81.5 range like a little lost sheep.

US Dollar Index81.25-0.07-0.09%
Australian Dollar0.77440.00150.19%
Swiss Franc1.1401-0.0007-0.06%
Canadian Dollar0.8277-0.0055-0.66%

European Markets

France's benchmark CAC-40 Index added 20.06 points (0.53%), closing at 3787.45; the German DAX-30 Index posted a rise of 18.71 points (0.45%), ending the day at 4212.62 points; and in the UK, the FTSE-100 Index rose 5.9 points (0.12%), closing at 4728.7 points.


Tonight's Pivots (US Futures Market)

R2106211198.11642.17113 2/32
R1105361187.81617.33112 27/32
Pivot104911182.51604.17112 18/32
S1104061172.21579.33112 11/32
S2103611166.91566.17112 2/32