Interdum stultus opportuna loquitur...

Wednesday, December 22, 2004

USRant: On Track for the '20s...

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

Note: charts should now open in new windows - that should help those who find the screen resolution too low. I'm still trying to get images to resize for lower-resolution screens, but I've decided to actually test if it works before setting it up.

Note 2: There's been something of a hiatus in Rant-ville over the last week - and I've consistently forgotten to mention why.

My father's brother (i.e., my Uncle) Gary visited us for a few days; Dad and he had not seen each other for over 30 years - not due to acrimony or any fraternal frisson, but simply because they were in different bits of the world. "The Other GT" is a brilliant chap, it turns out - I suppose it stands to reason, considering the amount of DNA he has in common with that other top bloke (me). We dragged the poor blighter hither and yon across decent sized tracts of this great brown land, pointing at things we thought he would find interesting.

Anyhow, the end result was that history will show an inexplicable gap in the OzRant - the gap is inexplicable no more, and future archaeologists will be able to discover this by downloading all the subsequent Rants from my new USB-watch, which is the ginchiest piece of kit in my technology arsenal.

The absence of yesterday's USRant was due to our requirement to return Uncle GT to the airport.

But back to the Rant...

Economic Statistics

The ICSC-UBS weekly retail chain store sales index rose 1.6% for the week, bringing the year-on-year increase in sales to +3.5%. That's an oddity - that nominal sales growth is lower than (or roughly equal to) real growth in GDP.

The ICSC report was contradicted somewhat by the Redbook chain store sales index, which fell 0.7% (cumulatively) in the first three weeks of December. Sales appear - on the face of it - to be below plan and are being boosted by heavy discounting.

The State Street Investor Confidence Index rose 3.5 points to 89. This improvement takes the confidence measaure up from near its 12-month low at 84.6, but is still well short of its 52-week high at 109. Recall that this index is not survey based - it seeks to measure confidence by looking at actual levels of risk in investment portfolios. It uses very timely data - the report last night reflects data collected at the close last Wednesday.

The U.S. Treasury auctioned $10 billion of 4-week bills with a high discount rate of 1.88 percent, down from 1.91 the prior auction. The value of 4-week bills auctioned has fallen from $22 billion to 10 billion over the last month; this reduction in supply explains both the fall in yield and the increase in the bid-to-cover ratio (this week: 3.14; last week 3.13).

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 $7billion, 2-day repurchase with $0.792billion in T-backed collateral .

With such paltry monetary stimulus, da Boyz had no hot-sauce for the tamale. As a result, it wasn't until the dozy mid-session that the market got goosed higher. Check out the chart:

S&P Futures Intraday 5 minute chart

Major US Indices

From the early low (set just after it would normally be expected if the Meddling Reserve had performed a bigger T-backed repo) the market was dragged higher; only one Dow component (Johnson & Johnson - JJ) fell for the session. The better-performing components included Pfizer, whose brouhaha regarding Celebrex is, like so yesterday.

The DJIA couldn't quite hold a triple digit gain, closing with an advance of 97.83 points (0.92%), closing out the day at 10759.43 points; the broader S&P500 advanced 10.78 points (0.9%), at 1205.43. It's still on target for a year-high in the mid 1220's, however if the index futures can get to 1215 tonight that will just about do it for this week: i expect that to happen with only a minimal pullback during the Globex session - to 1205 should be within a point or two of the low.

Over at Times Square, the Nasdaq Composite rose 23.06 points (1.08%), to close at 2150.91, while larger-cap technology issues fared better with the Nasdaq100 adding 17.29 points (1.09%), to end at 1609.26 points.

NYSE Volume was chunky, with 1.48 billion shares changing hands, while Nasdaq Volume was chunky, with 1.97 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Nasdaq Composite2150.9123.061.08%
NYSE Volume1.48bn--
Nasdaq Volume1.97bn--


My 9-stock "bellwethers" group rose by an average of 1.12%, thanks largely to the standout performance of the two mortgage debt pyramid schemes (Fannie Mae and Freddie Mac) We should all be shocked, considering that most of the $7b repo today went to mortgage and asset-backed collateral.

  • Wal Mart Stores (WMT) +$0.40 (0.77%) to $52.60;
  • IBM (IBM) +$0.47 (0.49%) to $97.02;
  • Freddie Mac (FRE) +$1.31 (1.86%) to $71.80;
  • Cisco Sys Inc (CSCO) +$0.31 (1.63%) to $19.36;
  • Fannie Mae (FNM) +$1.00 (1.44%) to $70.42;
  • Intel (INTC) +$0.79 (3.48%) to $23.49;
  • Citigroup (C) +$0.50 (1.07%) to $47.19;
  • General Electric (GE) +$0.06 (0.16%) to $37.17; and
  • EBay (EBAY) the sole loser, down $0.95 (0.83%) to $113.70.

Market Breadth & Internals

On the NYSE advancing Issues exceeded decliners by 2438 to 916 for a single-day A/D reading of 1522 (mindless optimism... will they never learn); Nasdaq gainers trumped losers by 2026 to 1100.

NYSE advancing volume exceeded volume in decliners by 1165.8 to 303.32 million shares, or a touch under 4:1; Nasdaq advancing volume was greater than volume in decliners by 825.74 to 293.65 million shares.

206 NYSE-listed stocks rose to new 52-week highs, and 2 posted fresh 52-week lows, while on the Nasdaq there were 118 stocks that hit new 52-week highs, and 11 which fell to fresh 52-week lows

Advancing Volume (m)1165.8825.74
Declining Volume (m)303.32293.65
New Highs206118
New Lows211

Market Sentiment

No, seriously... take a look at the put-call ratio. Zero point three freaking nine. Almost 4 million call option contracts bought. That's just insane, and it sets the market up for an almost guaranteed unhappy start to 2005 (which, you will recall, everyone is saying will be a great year because years ending in 5 have always been good... we know what happens when the entire herd believes a thing... the abbatoir door is swinging open: these sheep are not being set up to be fleeced, they're being set up to be slaughtered (I will collate some interesting data on insider sales later today... they are at levels not seen since August of 2000).

Equity Call Volume (000)3870.71309.58.69%
Equity Put Volume (000)1511.75-703.17-31.75%
CBOE Volatility Index11.55-0.72-5.87%
CBOE Nasdaq Volatility Index16.94-1.66-8.92%
Equity Put-Call Ratio0.39-0.23-37.2%
10-day PCR0.5700%
SPX-VIX Ratio104.376.316.43%

Bond Market Analysis

See the spread from 13-week bills to 2yr notes? See the spread from 2yr notes to 10-yr notes?

Well, those spreads are never that small - for any length of time - unless the US is heading into recession. Other indicators tell the same story; unless the yield curve steepens dramatically, the bond market is telling "those with ears to hear" that the economy looks shot. Feddle Reverse knuckleheads reckon the yield curve has to actually invert before a recession is a "lock". The underlying reason for the "usual" yield curve inversion excessive monetary tightening - too much too late, in normal bureaucratic fashion.

However in the present situation, monetary policy is manifestly at "crisis" levels (Fed Funds is still below the inflation rate, meaning interbank loans are happening at negative real interest rates), so expecting a monetary-tightening-led recession is stupid (and typically bureaucratic). No no, dear Penny... this recession will be a contraction due to private sector credit being defaulted.

Anyhow...The yield curve flattened some more last night, with 2yr yields rising 4 basis points after the good auction outcome. Meanwhile the long end yield fell, the benchmark 30-year Treasury bond shedding 2.4 basis points to 4.8%.

UST 13wk (yld)2.1730.010.65%
UST 2Y (yld)3.020.0421.41%
UST 5Y (yld)3.5620-0.08%
UST 10Y (yld)4.17-0.015-0.36%
UST 30Y (yld)4.8-0.023-0.48%

The Banks Index posted a rise of 1.28 points (1.25%), at 103.62; within the index, led by

  • US Bancorp (USB) +$1.01 (3.38%) to $30.88;
  • Comerica Inc (CMA) +$1.76 (2.96%) to $61.28;
  • PNC Financial Services Group (PNC) +$1.19 (2.15%) to $56.52;
  • Suntrust Banks (STI) +$1.39 (1.92%) to $73.79;
  • Northern Trust (NTRS) +$0.91 (1.89%) to $49.04;

The Broker-dealer Index advanced 1.54 points (1.03%), ending the day at 150.8; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.32 (2.73%) to $12.03;
  • Jeffries Group (JEF) +$0.73 (1.91%) to $39.00;
  • Ameritrade (AMTD) +$0.23 (1.65%) to $14.21;
  • Morgan Stanley (MWD) +$0.85 (1.58%) to $54.50;
  • E*Trade (ET) +$0.19 (1.31%) to $14.70;

The Philadelphia SOX (Semiconductor) index added 5 points (1.19%), to end the session at 424.4; the brown chips were led by the usual suspects:

  • Intel (INTC) +$0.79 (3.48%) to $23.49 after some idiot Penguin upgraded it;
  • ST Microelectronic (STM) +$0.45 (2.38%) to $19.35;
  • National Semiconductor (NSM) +$0.30 (1.72%) to $17.70;
  • Linear Technology (LLTC) +$0.63 (1.68%) to $38.11;
  • Micron Technology (MU) +$0.19 (1.67%) to $11.54;

Gold & Silver Markets

Gold fell by $1.60 (0.36%) to close at $442.70 per ounce.

Gold Bugs Index posted a rise of 2.34 points (1.09%), to 216.22

  • Golden Star (GSS) +$0.19 (5.4%) to $3.71;
  • Harmony Gold (HMY) +$0.25 (2.73%) to $9.40;
  • Iamgold (IAG) +$0.16 (2.43%) to $6.75;
  • Freeport McMoran (FCX) +$0.85 (2.28%) to $38.15;
  • Goldcorp (GG) +$0.21 (1.4%) to $15.19;

Silver rose $0.07 (0.95%) to close at $6.94 per ounce. The Gold and Silver Index (XAU) gained 1.23 points (1.25%), at 99.99 points.

  • Harmony Gold (HMY) +$0.25 (2.73%) to $9.40;
  • Freeport McMoran (FCX) +$0.85 (2.28%) to $38.15;
  • Barrick Gold (ABX) +$0.37 (1.57%) to $23.93;
  • Goldcorp (GG) +$0.21 (1.4%) to $15.19;
PHLX Gold and Silver Index99.991.731.76%
AMEX Gold BUGS Index216.222.341.09%

Oil Market

Oil added less than a nickel for the session (but it gyrated around like a dervish). It closed at $45.69 per barrel, up just 4c a barrel. it had traded as high as $46.20, and had a huge spike down to $45.08 at about 6am Australian time. Check out the chart...

Intraday 5 minute chart

The Oil and Gas Index (XOI) added 2.61 points (0.36%), ending the day at 724.45

  • Exxon Mobil (XOM) +$0.63 (1.23%) to $51.69;
  • Repsol YPF. (REP) +$0.27 (1.08%) to $25.35;
  • Kerr Mcgee (KMG) +$0.52 (0.88%) to $59.87;
The Oil service stocks (OSX) Index posted a rise of 2.1 points (1.69%), closing at 126.41

  • Transocean (RIG) +$1.88 (4.57%) to $42.99;
  • Global Santa Fe (GSF) +$1.02 (3.2%) to $32.90;
  • Global Inds Ltd (GLBL) +$0.19 (2.33%) to $8.36;
Reuters CRB285.23.71.31%
Crude Oil Light Sweet0-44.35-100%
AMEX Oil Index724.458.191.14%
Oil Service Index126.412.772.24%

Currency Markets

The US Dollar has thus far failed to mount anything approaching a decent rally. There has also been no obvious intervention by the Bank of Japan in the Yen cross - however dollar bears are still on tenterhooks in expectation of more Yen being thrown on the Yen-suppression bonfire. Central wankers fit the old definition of insanity perfectly - they continue to do the same idiotic things, but expect different outcomes.

US Dollar Index82.070.320.39%
$/€ 1.3363-0.0028-0.21%
¥/$ 104.360.270.26%
$/£ 1.9269-0.0201-1.03%
$/AU$ 0.76450.00180.24%
Swiss Franc1.15360.00430.37%
Canadian Dollar0.8117-0.0028-0.34%

European Markets

France's benchmark CAC-40 Index rose 5.99 points (0.16%), ending the day at 3770.03 points; the German DAX-30 Index posted a rise of 2.84 points (0.07%), ending the day at 4214.39 points; and in the UK, the FTSE-100 Index gained 1.9 points (0.04%), ending the day at 4733 points.