Interdum stultus opportuna loquitur...

Monday, December 06, 2004

US Markets: A War on Drug(maker)s...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

Economic Statistics

There was no economic data out, however the US Treasury announced the volumes for three auctions -

  • a 4-week bill offering of $19 billion to be held December 7th;
  • a 5-year note offering of $15 billion to be held December 8th; and
  • a 10-year bond offering of $9 billion to be held December 9th.

There were also 2 Treasury auctions completed last night -

  • $19 bill of 3-month bills, struck at a yield of 2.21% (last week 2.195%) and a bid-to-cover ratio of 2.23x (last week: 2x); and
  • $17 bill of 6-month bills, cleared at a yield of 2.38% (last week: 2.395%) and a bid-to-cover ratio of 2.19x (last week: 1.97x).

Forthcoming US Economic Data

Tomorrow'sUS Economic Data Calendar

Federal Reserve Open Market Operations

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

  • a $6.25 billion, overnight repurchase with $3.071 billion in T-backed collateral.

Not enough hot-sauce to give da Boyz some market-moving money - as a result there was no "10 a.m. moonshot... but there was a big move- an attempt to get some short-covering happening. Due to lack of liquidity (i.e., no big repo) da Boyz had to wait until lunchtime (nice thin markets, easy to move) to get their groove on... check out the chart - and note how the rampjob didn't "stick". Lower prices ahead for a few days.

ES 5-min intraday

e-mini S&P Futures 5 minute intraday chart

Major US Indices

The DJIA dipped 45.15 points (0.43%), closing out the day at 10547.06 points; the broader S&P500 shed 0.92 points (0.08%), closing at 1190.25.

Pfizer (PFE -2.44%) down, Merck (MRK-1.95%) down, Procter & Gamble (PG -1.94%) down - there's most of the drop in the Dow explained.

The Dow's Drugmakers (alhough P&G also makes household products) were down primarily due to reflected disdain as a result of weakness in Wyeth, which has been the target of unAmerican, anti-freedom and downright evil comments by... the British.

The comments by a British health agency raise a broad set of issues with the anti-depressants which are now part of 23% of school-kid's lunchboxes. "'s not just for breakfast anymore".

That said, P&G had another curveball to handle - the FDA's rejection of its "female sexual dysfunction" drug Intrinsa. P&G obviously aren't giving enough in campaign contributions to the right people: if Searle could get Aspartame approved (eventually, thanks to Donald Rumsfeld) as a sweetener, you should be able to get Ratsak approved as a cough syrup, if your Beltway connections are good enough.

Of particular interest - to the aforementioned anti-American, freedom-hating British - is Wyeth's Effexor, which tends to give youth (who are sullen at the best of times) ideas about topping themselves. Given the same track record exists for Zoloft (Pfizer's anti-depressant-for-everyone, which has contributed to teenagers here in Australia hanging themselves), it wasn't hard to connect-the-dots.

Personally, I have very strong ideas about trying to "medicalise"depression (and female sexual dysfunction, for that matter). I'm also violently against the use of psychotropic drugs to try and fix it.

I have that silly, old-school idea that kiddies will be happy if you give them things to do (Network Quake is not "something to do"...). Homework, school sports days, swimming club, backyard cricket, and lots of vegetables.

Put that little schema into operation and you might end up with literate, healthy 18 year olds. Little wonder that governments prefer the medicalisation route (mostly because Big Pharma loves it - and they are such big campaign contributors, and politicians will do anything for their campaign contributors) - but why do (some) parents prefer medicalisation?

That said, I am not anti-drugs; prohibition of drugs is doomed to failure, just as prohibition of alcohol was doomed. The prohibition of alcohol made a bunch of folks rich.

The "War on Drugs" is making some members of a criminal underclass rich (they're effectively collection risk premium), and it's also padding the pockets of companies like du Pont and Big Pharma - whose products are second-rate replacements for (and usually chemical corollaries of) naturally occurring drugs.

For example, Marijuana (which I have never used) is not illegal because of the THC it contains: it's illegal because du Pont wanted to displace hemp byproducts in the textiles and ropes market with Nylon, over which it had a patent.

Even the name was tarted up to scare folks - it used to be simply called "Indian Hemp" - but "Marijuana" sounded more"foreign" and played to the fact that Middle America at the time was dead scared of "wetbacks" (Mexican immigrants).

When the War on Drugs is finally lost, those people who're making all that money will eventually become respectable - just like the Kennedy family, who made all their money running bootleg liquor from Canada.

I'm digressing again...

An attack on the US Consulate in Saudi Arabia gave the oil market something to be concerned about - which was also something of a negative for stocks.

Over at Times Square, the Nasdaq Composite gained 3.29 points (0.15%), to close at 2151.25, while larger-cap technology issues fared better with the Nasdaq100 adding 5.19 points (0.32%), to end at 1619.59 points.

NYSE Volume was chunky, with 1.35 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill), with 2.14 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Nasdaq Composite2151.253.290.15%
NYSE Volume1.35bn--
Nasdaq Volume2.14bn--


My 9-stock "bellwethers" group rose by an average of 0.12%

  • General Electric (GE) -$0.16 (0.45%) to $35.67;
  • Wal-Mart Stores (WMT) -$0.41 (0.77%) to $52.52;
  • Citigroup (C) +$0.52 (1.14%) to $46.17;
  • Intl Bus Machine (IBM) +$0.59 (0.61%) to $97.67;
  • Intel Corp (INTC) +$0.10 (0.42%) to $24.01;
  • Cisco Systems (CSCO) +$0.39 (2.01%) to $19.82;
  • Ebay Inc (EBAY) -$0.07 (0.06%) to $116.34;
  • Freddie Mac (FRE) -$0.57 (0.82%) to $69.17;
  • Fannie Mae (FNM) -$0.74 (1.03%) to $70.94.

Notice that things were pretty mixed, but the 'old eceonomy' stuff was pretty lacklustre. Fannie and Freddie - barometers of the still-overheated US housing and mortgage sector - are looking weak of late.

Market Breadth & Internals

On the NYSE declining Issues beat out advancers by 1910 to 1430, for a single-day A/D reading of -480; and Nasdaq losers exceeded gainers by 1736 to 1389

On the NYSE declining volume was greater than volume in advancing issues by 742.49 to 560.53 million shares; Nasdaq advancing volume was greater than volume in decliners by 828.13 to 382.74 million shares.

171 NYSE-listed stocks rose to new 52-week highs, and 6 posted fresh 52-week lows, while on the Nasdaq there were 114 stocks that hit new 52-week highs, and 10 which fell to fresh 52-week lows

Advancing Volume (m)560.53828.13
Declining Volume (m)742.49382.74
New Highs171114
New Lows610

Market Sentiment

Problem - table refuses to update option volumes. Suffice it to say that nothing much has changed - everything is frothy and points lower. The divergence I pointed out over the weekend (between the S&P index andit RoC indicator) hasn't fully bitten, but I now expect it to do so in a tradeable way.

CBOE Equity Call Volume (000)873.7100%
CBOE Equity Put Volume (000)607.200%
CBOE Volatility Index13.190.231.77%
CBOE Nasdaq Volatility Index19.531.276.96%
Equity Put-Call Ratio0.6900%
10-day PCR0.5700%
SPX-VIX Ratio90.24-1.67-1.82%

Bond Market

Bonds rose right across the term structure, with the yield on the benchmark 30-year Treasury bond shedding 3.6 basis points to 4.905%.

UST 2Y (yld)2.908-0.02-0.55%
UST 5Y (yld)3.58-0.028-0.78%
UST 10Y (yld)4.234-0.04-0.82%
UST 30Y (yld)4.905-0.036-0.73%

The Banks Index rose 0.04 points (0.04%), at 101.89; within the index,

  • Citigroup (C) +$0.52 (1.14%) to $46.17;
  • Wachovia Corp (WB) +$0.43 (0.82%) to $52.82;
  • National City (NCC) +$0.20 (0.54%) to $37.37;
  • Mellon Financial (MEL) +$0.14 (0.47%) to $30.20;
  • Bank Of America (BAC) +$0.18 (0.39%) to $46.50;

The Broker-dealer Index rose 0.04 points (0.03%), at148.19; the ticket clippers lined up as follows -

  • E*Trade (ET) +$0.19 (1.31%) to $14.66;
  • Lehman Bros (LEH) +$0.69 (0.81%) to $85.69;
  • Goldman Sachs (GS) +$0.70 (0.66%) to $107.17;
  • Morgan Stanley (MWD) +$0.20 (0.38%) to $53.27;

The Philadelphia SOX (Semiconductor) index posted a rise of 1.6 points (0.36%), ending the day at 446.88

  • Advanced Micro Devices (AMD) +$1.63 (7.02%) to $24.85;
  • National Semiconductor (NSM) +$0.59 (3.64%) to $16.79;
  • Motorola (MOT) +$0.45 (2.52%) to $18.30;
  • LSI Logic (LSI) +$0.12 (2.23%) to $5.51;
  • Micron Tech (MU) +$0.15 (1.3%) to $11.69;

Gold & Silver Markets

Gold weakened by $1.80 (0.4%) to $452.4 per ounce. TheGold Bugs Index lost 2.62 points (1.15%), closing at 224.62 points. Within the index, the major movers were as follows:

  • Hecla Mining Co (HL) +$0.03 (0.5%) to $6.09;
  • Golden Star Rscs (GSS) +$0.01 (0.25%) to $3.98;
  • Kinross Gold (KGC) unchanged at $7.60;
  • Iamgold Corp (IAG) -$0.03 (0.4%) to $7.40;
  • Goldcorp Inc (GG) -$0.08 (0.56%) to $14.26;

Silver fell by $0.16 (1.94%) to close at $7.85 per ounce. The Gold and Silver Index (XAU) lost 1.45 points (1.4%), at 102.4 points.

  • Kinross Gold (KGC) unchanged at $7.60;
  • Goldcorp Inc (GG) -$0.08 (0.56%) to $14.26;
  • Harmony Gold (HMY) -$0.09 (0.87%) to $10.26;
  • Agnico Eagle (AEM) -$0.13 (0.88%) to $14.59;
PHLX Gold and Silver Index102.4-1.45-1.4%
AMEX Gold BUGS Index224.62-2.62-1.15%

Oil Market

Oil was firmer, rising by $0.62 per barrel, closing at $43.08 per barrel; it got as high as $43.60 after the new of attack on the US interests in Saudi Arabia.

The Oil and Gas Index (XOI) added 0.91 points (0.13%), closing at 718.25.

  • BP (BP) +$0.51 (0.86%) to $59.90;
  • Repsol (REP) +$0.11 (0.45%) to $24.46;
  • Sunoco Inc (SUN) +$0.34 (0.43%) to $79.95;

The Oil service stocks (OSX) Index slid 0.34 points(0.28%), ending the day at 119.91, with major movers being -

  • Global Industrial (GLBL) +$0.18 (2.22%) to $8.30;
  • Halliburton (HAL) +$0.38 (0.98%) to $39.12; and
  • Transocean (RIG) +$0.29 (0.75%) to $38.78.
Reuters CRB284.5-0.2-0.07%
Crude Oil Light Sweet43.080.621.46%
AMEX Oil Index718.250.910.13%
Oil Service Index119.91-0.34-0.28%

Currency Markets

The US dollar index is refusing to go down - and why?

First, because every journalist and taxi driver is now talking about the weak US dollar - the best contrarian signal ever devised (except for Alan Greenspan - he is the best contrarian device in human history...assuming he is human and not some diabolical spawn of a hellish cross-breeding of Mr Magoo and a Cane Toad).

Second, everybody who actually puts their dough on the line, is expecting the Bank of Japan to jump into the Yen cross.

Unless the Yen resynchs (which would require the BoJ to definitively state that they won't weaken the yen... not likely), the dollar will find its feet for a nuffie-killing counter-trend bounce.

That said, a spike down to the point where the Euro hits $1.37 is technically likely 9to lure the last of the sheep into the slaughterhouse); this would put the USDX at about 77.6 - but requires the Yen to crack 100.

US Dollar Index81.320.340.42%
Australian Dollar0.772600%
Swiss Franc1.14070.01010.89%
Canadian Dollar0.833-0.0067-0.8%

European Markets

France's benchmark CAC-40 Index slid 16.12 points (0.43%), to end the session at 3767.39; the German DAX-30 Index slid 14.96 points (0.36%), to 4193.91 points; and in the UK, the FTSE-100 Index shed 25.1points (0.53%), to end the session at 4722.8


Tonight's Pivots (US Futures Market)

R2106061197.171638.17112 30/32
R1105761193.231628.33112 23/32
Pivot105531189.271617.17112 16/32
S1105231185.331607.33112 9/32
S2105001181.371596.17112 2/32