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Economic Statistics
A moderately busy day in data-land - although the big-ticket numbers this week are tomorrow's PPI and Consumer Sentiment data.
The Import and Export Prices report measures the change in the prices of traded goods & services; the ratio of the two is an input into the terms of trade.
Within the report -
- Import Prices rose 0.2%, slightly faster than the consensus estimates of 0.1%, however Import Prices (excluding Petroleum) rose 0.7 which was much faster than expected; overall, import prices have risen 9.5% since this time last year, thanks to energy prices rising 28% in a four months period recently as Crude Oil had its recent price spike and blowoff;
- Export Prices rose 0.3% (there is no consensus estimate for this figure) and have risen 4.3% year-on-year; excluding agriculture exports (the prices of which fell 0.1%), export prices rose 0.4% and 5.4% year on year. This is explained in part by the weaker US dollar, which enables higher USD prices (for export contracts struck in foreign dollar terms) without affecting foreign-currency denominated demand.
Thursday is always New Jobless Claims Day. I doubt that this will ever rival World Endangered Species Day, but it's important to get a read on the poor schlubs who line up to collect unemployment benefits. This report was considerably worse than estimates, and although the very short-term trend (the 4-week average) is still subdued, the continuing claims numbers tell a tale of renewed slack in the employment market.
- Jobless Claims at 357k; consensus estimates called for 335k (range 325k-340k);
- Continuing claims at 2.796m; consensus estimates called for ;
Last but not least, there was the Wholesale Trade report. Again, there is no consensus estimates for this report, which attempts to give a read on the state of play in the intermediate-goods sector (i.e., producers of stuff, selling stuff to producers of other stuff - for use as inputs, or as final sales).
The overall picture was one of a fairly sluggish trend, albeit an upward trend. Thankfully, these numbers don't suffer from the political-sanitation machine too much: there's no hedonic adjustment (but there is seasonal adjustment, which is just as poisonous when it's being done by political appointees).
- Wholesale Inventories rose 1.1%, and was concentrated in durable goods;
- Wholesale Sales rose 1.8%; and
- the Inventory-Sales ratio was basically unchanged at 1.15x.
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 $7.75b, overnight repurchase with $5.412bn in T-backed collateral ; and
- an $8b, 14-day repurchase with $6.914b in T-backed collateral.
Plenty of fragrant grease for da Boyz, and it was employed to good effect. Take a look at the 5-minute chart of the S&P futures... the low wasn't at precisely 10:a.m. NY time... it was delayed by half an hour, mostly because of the iffy Wholesale Trade report, but also because the market had got a head of steam up over the ATLR and XLNX warnings. Then NSM stepped up and warned on the upside, so that jourmnalists had a one-liner for "why the market turned", when the correct answer was liquidity infusion from Easy Al the Banker's Pal.
ES04z - 5 minute intraday chart... Moonshot!
US Treasury Auctions Announced
| Auction Date | Issue | Offering Amount |
| 13-Dec | 3-month bills | $19b |
| 13-Dec | 6-month bills | $17b |
US Treasury Auctions Held Today
| Issue | Offering Amount ($b) | Yield Awarded (%) |
| 10-year Notes | 9 (14) | 4.15 (4.28) |
(Note - Numbers in parentheses are previous auction results for this issue type)
All things considered, this was a pretty successful auction - given the fact that it was a re-opening of the November note. The concern was the very high proportion of accepted competitive bid from dealers (at over 89%) which basically means that central banks and retail investors have pretty much ignored the auction. That said, re-openings are almost always accompanied by high dealer-proportions in accepted bid. It seems that central banks and retail prefer new Treasuries.
Major US Indices
With the data anything but positive, you would have expected a decline... but as I said yesterday, the pullback from last week's high has finished and now it's time for the ramp into the year end.
The bad jobless claims numbers spooked the market, and equities weren't overjoyed with the Wholesale Trade report at 10 a.m. Prior to the market, two semiconductor stocks (Altera and Xilinx) had warned on revenue and earnings, as well. The ducks appeared to be lined up for a decline. ALTR was taken to the woodshed good and proper, dropping 7.7% for the session; XLNX got away with six of the best, getting only a 3.29% haircut by the close of play. At their respective lows, ALTR was -12.5% and XLNX was -9.2%. Yowza!
The weight of data (and warnings) was what prevented the normal "Fed jamjob" from the repo market from getting any traction until almost half an hour later after its appointed time, but eventually the weight of money (thanks, Easy Al) won the day.
The DJIA posted a rise of 58.59 points (0.56%), closing out the day at 10552.82 points; the broader S&P500 rose 6.43 points (0.54%), to end the session at 1189.24.
Over at Times Square, the Nasdaq Composite advanced 2.9 points (0.14%), to close at 2129.01, while larger-cap technology issues fared better with the Nasdaq100 adding 7.88 points (0.49%), to end at 1609.79 points.
NYSE Volume was chunky, with 1.62 billion shares changing hands, while Nasdaq Volume was super-chunky (over 2 bill) yet again, with 2.28 billion shares thrashing their way through cyberspace.
| Index | Close | Gain(Loss) | % |
| DJIA | 10552.82 | 58.59 | 0.56% |
| S&P500 | 1189.24 | 6.43 | 0.54% |
| Nasdaq Composite | 2129.01 | 2.9 | 0.14% |
| Nasdaq100 | 1609.79 | 7.88 | 0.49% |
| NYSE Volume | 1.62bn | - | - |
| Nasdaq Volume | 2.28bn | - | - |
Bellwethers
My 9-stock "bellwethers" group rose by an average of 0.14%
- Citigroup (C) +$0.15 (0.32%) to $46.44;
- Fannie Mae (FNM) -$0.07 (0.1%) to $69.82;
- Intl Bus Machine (IBM) +$0.86 (0.89%) to $97.51;
- General Electric Co (GE) +$0.31 (0.87%) to $36.02;
- Freddie Mac (FRE) +$0.34 (0.5%) to $68.67;
- Ebay Inc (EBAY) +$1.61 (1.4%) to $116.22;
- Wal-Mart Stores (WMT) +$0.26 (0.5%) to $52.77;
- Intel Corp (INTC) -$0.25 (1.09%) to $22.76;
- Cisco Systems (CSCO) -$0.40 (2.02%) to $19.40;
Market Breadth & Internals
On the NYSE advancing Issues exceeded decliners by 1778 to 1524 for a single-day A/D reading of 254; and Nasdaq losers exceeded gainers by 1726 to 1383. That's a very balanced breadth setup, in light of the 145-point moonshot that the Dow had during the day (from its low).
NYSE advancing volume exceeded volume in decliners by 945.51 to 656.43 million shares; Nasdaq advancing volume was greater than volume in decliners by 605.97 to 604.69 million shares.
90 NYSE-listed stocks rose to new 52-week highs, and 7 posted fresh 52-week lows, while on the Nasdaq there were 62 stocks that hit new 52-week highs, and 19 which fell to fresh 52-week lows
| NYSE | Nasdaq | |
| Advancers | 1778 | 1383 |
| Decliners | 1524 | 1726 |
| Advancing Volume (m) | 945.51 | 605.97 |
| Declining Volume (m) | 656.43 | 604.69 |
| New Highs | 90 | 62 |
| New Lows | 7 | 19 |
Market Sentiment
The sentiment setup shows a market that is still in the grip of a wave of mindless optimism - which means we are in a topping formation. There are also a couple of interesting divergences which have shown up on the Dow Transports chart (where price made new highs but momentum has faded sharply), and of course the Industrials have not "confirmed" the Transports' move to new yearly highs.
All of this, plus the inordinate tilts in the NYSE and Nasdaq bullish percent indicators (shown below) set us up for a very exploitable new year... but between now and then I still expect that the market will meet the target of 1220 posted here just after the S&P500 futures closed above 1140.
Equity Put-Call Ratio... not too extreme now
NYSE BPI - too bullish
Nasdaq BPI - WAY too bullish
Bond Market Analysis
Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 5.5 basis points to 4.836%. The December 30-year T-bond futures (ZB04Z) we've watched since my short call at 114 & 1/32 way back, fell 16/32 to put the position back in the black. Those of you who're interested in how this position would have been aggressively managed should have a look at my favourite charts - a 5-period smoothed 14-day %R and a standard RoC... you will see that once the call is made (by me) those indicators are a terrific guide to when to take profits and try to reset the trade on better terms.
There is also a monster head & shoulders in the 30-year bond; the market has broken the neckline, but recent awful economic data has saved it thus far. The target (shown below on the chart) it will seek is about 106 - well on the way to my target for the new year, of 102 and then 100.
US 30-year Bond Futures
| Index | Close | Gain(Loss) | % |
| UST 2Y (yld) | 2.916 | -0.01 | -0.27% |
| UST 5Y (yld) | 3.545 | -0.035 | -0.98% |
| UST 10Y (yld) | 4.172 | -0.05 | -1.18% |
| UST 30Y (yld) | 4.836 | -0.054 | -1.1% |
The Banks Index rose 0.39 points (0.39%), ending the day at 101.5; within the index,
- MBNA Corp (KRB) +$0.48 (1.85%) to $26.45;
- Golden West Financial (GDW) +$1.64 (1.38%) to $120.87;
- National City (NCC) +$0.44 (1.22%) to $36.62;
- Fifth Third Bancorp (FITB) +$0.54 (1.18%) to $46.32;
- Suntrust Bank (STI) +$0.64 (0.89%) to $72.16;
The Broker-dealer Index gained 0.55 points (0.37%), to end the session at 148.46; the ticket clippers lined up as follows -
- Bear Stearns (BSC) +$3.40 (3.3%) to $106.55;
- Charles Schwab (SCH) +$0.21 (1.95%) to $10.98;
- Merrill Lynch (MER) +$0.81 (1.41%) to $58.37;
- Raymond James (RJF) +$0.26 (0.87%) to $30.19;
The Philadelphia SOX (Semiconductor) index shed 6.45 points (1.49%), to 425.46
- National Semiconductor (NSM) +$0.79 (4.94%) to $16.79;
- Maxim Integrated (MXIM) +$0.35 (0.84%) to $42.24;
- Marvell Tech (MRVL) -$0.12 (0.35%) to $33.87;
- Micron Tech (MU) -$0.05 (0.45%) to $11.15;
- Applied Materials (AMAT) -$0.12 (0.69%) to $17.15;
Gold & Silver Markets
Gold weakened by another $2.90 (0.66%) to $437.10 per ounce. The Gold Bugs Index lost 0.25 points (0.12%), to 214.85 points. Within the index, the major movers were as follows:
- Freeport-McMoran (FCX) +$0.75 (2.08%) to $36.74;
- Kinross Gold (KGC) +$0.12 (1.66%) to $7.35;
- Glamis Gold (GLG) +$0.26 (1.4%) to $18.81;
- Golden Star (GSS) +$0.05 (1.39%) to $3.65;
- Eldorado Gold (EGO) +$0.02 (0.67%) to $3.00;
Silver was absolutely tennelled by another $0.37 (5.16%) to close at $6.81 per ounce. The Gold and Silver Index (XAU) gained 0.44 points (0.45%), to 99.24 points.
- Freeport-McMoran (FCX) +$0.75 (2.08%) to $36.74;
- Barrick Gold (ABX) +$0.42 (1.82%) to $23.51;
- Kinross Gold (KGC) +$0.12 (1.66%) to $7.35;
- Placer Dome Inc (PDG) +$0.25 (1.33%) to $19.08;
| Index | Close | Gain(Loss) | % |
| Gold | 437.1 | -2.9 | -0.66% |
| Silver | 6.805 | -0.37 | -5.16% |
| PHLX Gold and Silver Index | 99.24 | -1.01 | -1.01% |
| AMEX Gold BUGS Index | 214.85 | -3.77 | -1.72% |
Oil Market
Oil was firmer, rising by $0.44 per barrel, closing at $42.64 per barrel. The Oil and Gas Index (XOI) gained 2.82 points (0.4%), to 710.95
- Occidental Petroleum (OXY) +$0.62 (1.13%) to $55.37;
- Kerr Mcgee (KMG) +$0.60 (1.04%) to $58.37;
- Repsol (REP) +$0.20 (0.83%) to $24.43;
- Noble Corp (NE) +$1.63 (3.61%) to $46.77;
- Cooper Cameron (CAM) +$1.47 (2.97%) to $51.03;
- Halliburton Co (HAL) +$1.03 (2.69%) to $39.38;
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 277.1 | 0.55 | 0.2% |
| Crude Oil Light Sweet | 42.64 | 0.44 | 1.04% |
| AMEX Oil Index | 710.95 | 5.61 | 0.8% |
| Oil Service Index | 119.7 | 2.42 | 2.06% |
Currency Markets
The bounce in the USD continued, but looks pretty unimpressive. The contrarian in me says that an unimpressive start to a counter-trend bounce just means that dumb money is still shorting USD, thinking "this is a counter-trend bounce" and not waiting for the bounce to exhaust before throwing against it.
While dumb money is still shorting, the USDX will keep climbing - triggering their stops until they eventually want the pain to stop, and then throw long. Look at any data on the CoT for any market and see how dumb the herd is. Retail (small-specs) was buying Live Cattle futures at above $90, at above $95... even above $99 (and it only got there for one day). Likewise, they were sellers of Euro futures at the swing low at $1.19 months ago.
That's just how it works... money goes from people who think that you don't have to think very hard, to people who think quite hard, and often.
That said, don't get me wrong... this is not the start of a new love affair with the US dollar; it is simply a market which has run far enough in one direction, that it warrants some consolidation, plus a chance to kill off another couple of hundred thousand ForEx nuffnuffs who are leveraged 100:1 (I've seen some folks offering 500:1)... and who are about to find out just how hard it is to hold on to your account when you're playing with that sort of leverage.
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 82.18 | 0.28 | 0.34% |
| Euro | 1.3305 | -0.0031 | -0.23% |
| Yen | 104.64 | 0.66 | 0.63% |
| Sterling | 1.9239 | -0.0116 | -0.6% |
| Australian Dollar | 0.7541 | -0.0033 | -0.44% |
| Swiss Franc | 1.1506 | 0.002 | 0.17% |
| Canadian Dollar | 0.8174 | -0.0054 | -0.66% |
European Markets
France's benchmark CAC-40 Index shed 27.58 points (0.73%), to end the session at 3747.46; the German DAX-30 Index slid 50.94 points (1.21%), ending the day at 4150.41; and in the UK, the FTSE-100 Index declined 15.5 points (0.33%), closing at 4688.4
| Index | Close | Gain(Loss) | % |
| CAC-40 | 3747.46 | -27.58 | -0.73% |
| DAX-30 | 4150.41 | -50.94 | -1.21% |
| FTSE-100 | 4688.4 | -15.5 | -0.33% |
Tonight's Pivots (US Futures Market)
| Dow | S&P500 | Nasdaq | Bonds | |
| R2 | 10658 | 1202.07 | 1639.67 | 114 19/32 |
| R1 | 10602 | 1195.33 | 1623.33 | 114 2/32 |
| Pivot | 10508 | 1184.47 | 1600.67 | 113 23/32 |
| S1 | 10452 | 1177.73 | 1584.33 | 113 6/32 |
| S2 | 10358 | 1166.87 | 1561.67 | 112 27/32 |
