Interdum stultus opportuna loquitur...

Thursday, December 16, 2004

USRant: JJ Saves the Dow, Goldman Sinks the Creeps

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Economic Statistics

The Current Account (Q3/2004)came in at -$164b, which was better than what was expected by the consensus guessers (they expected -$171b). This is not really a market-sensitive number, since everybody now knows that the biggest moocher in the history of the world will never again run a current account surplus...

Housing Starts fell 13% for the month, and are now almost 14% below last year's level. The number of new houses on which work commenced fell to 1.771m, which fell short of the consensus guess (1.98m).

Within the housing report, Housing permit applications rose slightly to 1.988m (up slightly from the previous month's 1.984m).

New Jobless Claims fell by more than the market expected, to 317,000 (the market expected 340,000).

All things considered, the economic data was not bad - but the market had some bad news hanging over it, in the form of earnings news from Goldman Sachs.


Forthcoming US Economic Data Tomorrow's US Economic Data Calendar

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations last night:

  • a $4billion, overnight repurchase with none of it in T-backed collateral ; and
  • a $7billion, 14-day repurchase with $2.626billion in T-backed collateral.

If you were a non-astute observer, you might have seen the headline repo numbers and thought "Whooo-eee... the Fed's opened the spigot real wide... the buy-at-10 approach is a slam dunk". But despite pumping in a total of $11 billion, only 2.6bill went to the Treasury-backed segment, which meant that after allowing for normal banking liquidity requirements, da Boyz had almost nothing left to play with. They have to have $5 bill of more in T-backed before they can really get a jamjob happening.

Bond Auction Announcements

DateInstrumentAmount ($b)
Dec-203-month bills19
Dec-206-month bills17

Major US Indices

On the one hand, the earnings report from Goldman Sachs was a downer... on the other, someone somewhere changed their minds about the wisdom of Dow component Johnson&Johnson's (JJ, +4.19%) attempt to acquire Guidant (GDT -0.49%). So while Goldman was busy dragging the parasitic bottom feeding ticket-clippers (and their attendant court-jester analysts) down into the muck where they belong, JJ was "dyn-o-mite" (boom boom), helping other Pharmaceuticals (and Dow components) like Merck (MRK +4.3%) and Pfizer (PFE +2.33%). There was also a little fluff piece on the newswires about how less than 2/3 of the FDA's scientists think that the FDA does a good job in monitoring stuff.

What they probably meant was that the FDA is corrupt and that fewer drugs should be approved - what some folks thought it meant was that the FDA should be forced (through the usual political coercion) to back off, particularly on thins like MRK's Vioxx.

Anyhow, the general tenor of the market was pretty negative; it was "downwards slippery" for the whole session, although once it dropped to touch 1200 (in the S&P futures - the cash market fell below 1200 at one point) it managed to recruit some bounce.

By the close, the DJIA had held on to a gain of 14.19 points (0.13%), closing out the day at 10705.64 points; the broader S&P500 lost 2.51 points (0.21%), at 1203.21. So the JJ story - although not a "single stock" story as such, due to its influence on other Dow pharmaceutical stocks - was the only thing that made the headline number for the Dowager look sexy.

Over at Times Square, the Nasdaq Composite shed 16.4 points (0.76%), to close at 2146.15, while larger-cap technology issues fared worse with the Nasdaq100 losing 16.01 points (0.99%), to end at 1607.62 points.

NYSE Volume was chunky, with 1.79 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill), with 2.37 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Nasdaq Composite2146.15-16.4-0.76%
NYSE Volume1.79bn--
Nasdaq Volume2.37bn--


My 9-stock "bellwethers" group fell by an average of 0.54%; when you look at Fannie Mae's share price, it's no surprise to find that the bulk of the overnight Fed repurchase grease was pumped into the asset-backed and mortgage-backed markets.

  • General Elec Co (GE) -$0.28 (0.75%) to $37.11;
  • Intel Corp (INTC) -$0.27 (1.17%) to $22.87;
  • Intl Bus Machine (IBM) +$0.12 (0.12%) to $97.45;
  • Cisco Systems (CSCO) -$0.00 (0%) to $19.40;
  • Wal-Mart Stores (WMT) -$0.28 (0.53%) to $52.75;
  • Freddie Mac (FRE) +$0.99 (1.42%) to $70.75;
  • Citigroup (C) -$0.26 (0.55%) to $47.05;
  • Ebay Inc (EBAY) -$1.69 (1.44%) to $115.70;
  • Fannie Mae (FNM) -$1.39 (1.97%) to $69.30;

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2165 to 1160, for a single-day A/D reading of -1005; as with yesterday, a very large tilt in the advance-decline line with little or no change in the headline indices. Yesterday's A/D reading was a very large positive, today's a large negative. It's evidence of a market that is just about at the end of its rope, but which is being supported to the best of the abilities of da Boyz. Nasdaq losers exceeded gainers by 1930 to 1189.

On the NYSE declining volume was greater than volume in advancing issues by 979.37 to 793.55 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 859.8 to 432.54 million shares.

180 NYSE-listed stocks rose to new 52-week highs, and 4 posted fresh 52-week lows, while on the Nasdaq there were 119 stocks that hit new 52-week highs, and 8 which fell to fresh 52-week lows

Advancing Volume (m)793.55432.54
Declining Volume (m)979.37859.8
New Highs180119
New Lows48

Market Sentiment

Fluffy... toppy... mindless... crack-induced Call it what you will, the market keeps defying the sentiment numbers; in other words, it's hard (ish) to make money "fading" sentiment extremes at the moment. All that means, is that when it turns, the market is going to really really sting those still holding long positions.

1220 still looks "do-able" by the end of the year, but the market is definitely overcooked and a pullback to under 1200 is both warranted and would serve a useful purpose... the odds are that such a pullback will happen tonight.


Equity Call Volume (m) 3.56 343.5310.68%
Equity Put Volume (m) 2.22 476.7627.43%
CBOE Volatility Index12.27-0.08-0.65%
CBOE Nasdaq Volatility Index18.6-0.17-0.91%
Equity Put-Call Ratio0.620.0815.13%
10-day PCR0.57 -0.02 -3.5%
SPX-VIX Ratio98.060.430.44%

Bond Market Analysis

Bonds fell sharply at the long end, with the 30-year bond falling a point and a half, and the yield on the benchmark 30-year Treasury bond rising 11.1 basis points to 4.824%.

UST 2Y (yld)2.9820.051.84%
UST 5Y (yld)3.5670.0952.74%
UST 10Y (yld)4.1850.112.72%
UST 30Y (yld)4.8240.1112.36%

The Banks Index lost 0.33 points (0.32%), closing at 102.85; within the index,

  • Wachovia Corp (WB) -$1.21 (2.23%) to $53.10;
  • MBNA Corp (KRB) -$0.31 (1.12%) to $27.39;
  • Comerica Inc (CMA) -$0.59 (0.98%) to $59.82;
  • Zions Bancorp (ZION) -$0.58 (0.87%) to $66.26;
  • Regions Financial (RF) -$0.29 (0.82%) to $35.05;

The Broker-dealer Index declined 1.35 points (0.88%), ending the day at 151.29; the ticket clippers were dragged down by Goldman Sachs' earnings report, and so it's no surprise that GS was the worst performed stock of the parasite sector... they lined up as follows -

  • Goldman Sachs (GS) -$3.85 (3.52%) to $105.40;
  • Jefferies Group (JEF) -$1.09 (2.67%) to $39.68;
  • Merrill Lynch (MER) -$1.20 (1.97%) to $59.83;
  • E*Trade (ET) -$0.29 (1.94%) to $14.68;
  • Morgan Stanley (MWD) -$0.68 (1.22%) to $54.85;

The Philadelphia SOX (Semiconductor) index declined 6.95 points (1.6%), to 427.09, led lower by

  • Novellus Systems (NVLS) -$0.84 (2.97%) to $27.48;
  • Maxim Integrated (MXIM) -$1.25 (2.91%) to $41.69;
  • Applied Materials (AMAT) -$0.39 (2.23%) to $17.07;
  • Infineon Tech (IFX) -$0.23 (2.08%) to $10.82;
  • ST Microelectronics (STM) -$0.41 (2.07%) to $19.35;

Gold & Silver Markets

Gold fell by $3.6 (0.82%) to close at $437.20 per ounce.

The Gold Bugs Index lost 5.5 points (2.51%), to end the session at 213.88

  • Glamis Gold (GLG) -$1.42 (7.41%) to $17.75;
  • Coeur D'Alene (CDE) -$0.28 (6.59%) to $3.97;
  • Hecla Mining Co (HL) -$0.34 (5.68%) to $5.65;
  • Iamgold Corp (IAG) -$0.31 (4.36%) to $6.80; and
  • Meridian Gold (MDG) -$0.77 (4.13%) to $17.89.

Silver fell by $0.16 (2.38%) to close at $6.68 per ounce. The Gold and Silver Index (XAU) lost 1.74 points (1.74%), closing at 98.26 points.

  • Meridian Gold (MDG) -$0.77 (4.13%) to $17.89;
  • Kinross Gold (KGC) -$0.22 (3.05%) to $7.00;
  • Placer Dome Inc (PDG) -$0.55 (2.89%) to $18.50;
  • and
  • Anglogold Ashanti (AU) -$0.96 (2.61%) to $35.79.
PHLX Gold and Silver Index98.26-1.74-1.74%
AMEX Gold BUGS Index213.88-5.5-2.51%

Oil Market

Oil lost ground, shedding $0.06 per barrel, closing at $44.29 per barrel. The Oil and Gas Index (XOI) slid 8.9 points (1.23%), at 716.26

  • TotalFinaElf S.A. (TOT) -$2.25 (2.08%) to $106.00;
  • BP (BP) -$1.20 (2.02%) to $58.20;
  • Sunoco Inc (SUN) -$1.60 (1.9%) to $82.79;
The Oil service stocks (OSX) Index slid 0.68 points (0.55%), ending the day at 123.6
  • Halliburton Co (HAL) -$0.70 (1.74%) to $39.48;
  • Baker Hughes Inc (BHI) -$0.58 (1.34%) to $42.76;
  • Global Santa Fe (GSF) -$0.34 (1.08%) to $31.08;
Reuters CRB281.5-1.5-0.53%
Crude Oil Light Sweet44.29-0.06-0.14%
AMEX Oil Index716.26-8.9-1.23%
Oil Service Index123.64-0.68-0.55%

Currency Markets

The sharp drop in bonds gave some succour to the still-embattled US dollar, but it's still not developed any upwards traction that even looks like sticking. Oh well... still not time to short.

US Dollar Index82.650.891.09%
Australian Dollar0.7559-0.0076-1%
Swiss Franc1.15790.01621.42%
Canadian Dollar0.8091-0.0073-0.89%

European Markets

France's benchmark CAC-40 Index posted a rise of 7.68 points (0.2%), ending the day at 3810.67 points; the German DAX-30 Index added 20.02 points (0.48%), to end the session at 4233.71; and in the UK, the FTSE-100 Index posted a rise of 7 points (0.15%), closing at 4735.2


Tonight's Pivots (US Futures Market)

R2107601213.31639.33115 10/32
R1107401208.91627.17114 14/32
Pivot107051203.61613.83113 30/32
S1106851199.21601.67113 2/32
S2106501193.91588.33112 18/32