Interdum stultus opportuna loquitur...

Wednesday, April 27, 2005

USRant: Markets-A-Go-Go (or a-Yo-Yo)...

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Despite a repo that looked unlikely to set the markets on fire, things went up relatively solidly after looking pretty soft after the open. The softness was easy to understand after a genuinely woeful set of data on Durable Goods - the headline number in the Durable Goods report was a decline of 2.8% (compared to the consensus guess of +0.3% and a consensus range of -2% to +1.5%). the key category (non-defence capital goods, ex aircraft) was a stinker too; shipments dropped 1.1% for the month, and new orders for the category tanked 4.7%... tell me again about this supposed economic recovery that shills like Larry Kudlow are trumpeting? It's going to happen without new capital goods, obviously...

Then again (thinking now about the repo amount) you can bet your bottom dollar that the Fed's OMO desk knew full well that the Crude Oil inventories data was going to be interpreted as positive. With every screen jockey, ticker-junkie and ticket clipper now watching oil markets, the uptick in crude inventories was always going to provide its own zing to equities. That's especially true since most of them couldn't spell "Non-defence Capital Goods ex-Aircraft".

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation.

  • a $6billion, overnight repurchase with $5billion in T-backed collateral .

Major US Indices

The Dow Jones Industrial Average rose 47.67 points (0.47%), closing out the day at 10198.8 points. With the T-backed repo meeting the $5b market-goosing requirement, the expected time-low for the Dow was 10 a.m.: and the actual low for the session was set at 10:20 (but was only 5 points below the 10 a.m. level). At that point, the Dow was trading at 10079.45 - from there the market rose 140 points in less than three hours, setting an intraday high of 10219.56 at about 1:10 p.m. NY time.

Within the blue-chip index, 22 stocks rose, the biggest gainers being Verizon Communications (VZ, +3.59% to $35.22) and International Business Machines (IBM, +2.15% to $77.05), which accounted for 21 Dow points between them. Losers in the Dow numbered 8 and were led by Exxon Mobil (XOM, -1.50% to $58.38) and Hewlett Packard (HPQ, -1.47% to $20.17), with these two stocks contributing -9 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 279.1m shares to 71.4m.

The broader S&P500 rose 4.64 points (0.4%), to 1156.38. Within the index, gainers numbered 300, while 193 S&P500 stocks fell for the day. Volume was tilted 1.3:1 in favour of the winners with 1.08 billion units traded in the winners as compared with 821.06 million traded in the losers .

Over at Times Square, the Nasdaq Composite rose 2.99 points (0.16%), to close at 1930.43, while larger-cap technology issues fared better with the Nasdaq100 adding 3.33 points (0.23%), to end at 1423.76 points. Within the tech benchmark, gainers numbered 56, while 44 Nasdaq100 stocks fell for the day. Volume was tilted 1.3:1 in favour of the losers with 469.03 million traded in the winners compared to 375.21 million in the losers .

NYSE Volume was super-chunky, with 2.11 billion shares changing hands, while Nasdaq Volume was chunky, with 1.81 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10198.847.670.47%
Nasdaq Composite1930.432.990.16%
NYSE Volume2.11bn--
Nasdaq Volume1.81bn--


My 9-stock "bellwethers" group rose by an average of 1.07%

  • General Electric (GE) +$0.22 (0.61%) to $36.40;
  • Citigroup (C) +$0.43 (0.92%) to $47.05;
  • Wal Mart (WMT) +$0.29 (0.62%) to $47.29;
  • I.B.M. (IBM) +$1.62 (2.15%) to $77.05;
  • Intel (INTC) +$0.19 (0.81%) to $23.51;
  • Cisco Systems (CSCO) -$0.03 (0.17%) to $17.25;
  • eBay (EBAY) +$0.34 (1.09%) to $31.48;
  • Fannie Mae (FNM) +$1.10 (2.1%) to $53.48; and
  • Freddie Mac (FRE) +$0.92 (1.51%) to $61.74.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1757 to 1515 for a single-day A/D reading of 242; and Nasdaq losers exceeded gainers by 1689 to 1360. The 10-day moving average of the A/D line rose to -38.4 on the NYSE, while the 10dma of the Nasdaq A/D rose to -343.2.

NYSE advancing volume exceeded volume in decliners by 1068.6 to 978.7 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 904.7 to 838.5 million shares.

41 NYSE-listed stocks rose to new 52-week highs, and 124 posted fresh 52-week lows, while on the Nasdaq there were 27 stocks that hit new 52-week highs, and 203 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1068.56838.47
Declining Volume (m)978.7904.7
New Highs4127
New Lows124203

Market Sentiment Statistics
CBOE Volatility Index14.87-0.09-0.6%
CBOE Nasdaq Volatility Index18.7700%
Equity Put-Call Ratio0.950.2739.71%
10-day PCR0.750.056.91%
SPX-VIX Ratio77.80.781.01%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 1.4 basis points to 4.553%.

The middle of the yield curve was broadly higher: five year yields fell to 3.921%, and ten-year yields fell to 4.237%. Treasury duration spreads are getting ridiculous - 61 bps from 20years to 10-years, and less than a percentage point between 2-years and 30-years.

A lot of people get worried when the yield curve inverts - considering it a precursor of recession. It's a rule of thumb that actually gives you good signals, but if you look at history it shows that yield curves invert in about the same quarter as the recession starts (as defined by the Economic Cycle Dating Committee, usually a year after the fact).

In reality, the best heads up that can be had from the yield curve (and the only yield curve indicator you ever need) is the spread from 2-year notes to 10-year bonds. If it's under 1.25% for more than 30 days, the economy is in recession.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 2.0 basis points tighter at 10 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 57.0 bps for 10-year AAA, and 80.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were mixed with the AAA-A spread on 20-years 9.0 bps looser at 53.0 basis points and the 10-year AAA-A spread 1 bp tighter at 1.0 basis points.

Treasury Yields
UST 13wk (yld)2.8200%
UST 2Y (yld)3.61-0.03-0.82%
UST 5Y (yld)3.921-0.033-0.83%
UST 10Y (yld)4.237-0.03-0.7%
UST 30Y (yld)4.553-0.014-0.31%

The Banks Index added 1.22 points (1.27%), ending the day at 97.09; within the index,

  • M&T Bank Corp (MTB) +$2.86 (2.83%) to $103.75;
  • National City Corp (NCC) +$0.89 (2.7%) to $33.86;
  • BB&T Corp (BBT) +$0.81 (2.12%) to $39.06;
  • Golden West Financial (GDW) +$1.31 (2.1%) to $63.66; and
  • Washington Mutual (WM) +$0.82 (2.01%) to $41.57.

The Broker-dealer Index posted a rise of 1.51 points (1.1%), ending the day at 138.65; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.20 (1.97%) to $10.34;
  • Goldman Sachs (GS) +$2.04 (1.93%) to $107.76;
  • Merrill Lynch (MER) +$1.00 (1.87%) to $54.50;
  • Raymond James (RJF) +$0.46 (1.72%) to $27.25; and
  • Jeffries Group (JEF) +$0.61 (1.69%) to $36.73.

The Philadelphia SOX (Semiconductor) index dipped 0.89 points (0.23%), to end the session at 387.73

  • ST Microelectronic (STM) -$0.87 (5.57%) to $14.74;
  • Marvell Tech Group (MRVL) -$0.51 (1.49%) to $33.65;
  • KLA-Tencor (KLAC) -$0.41 (1%) to $40.50;
  • Broadcom (BRCM) -$0.30 (0.99%) to $29.90; and
  • Advanced Micro Devices (AMD) -$0.11 (0.75%) to $14.51.

Gold & Silver Markets

Gold fell by $4.90 (1.12%) to close at $433 per ounce. As with pretty much every market, the turn happened at 10 a.m., with the arrival of the repo dough in big-house pockets. It's pretty clear that someone was given a heads-up about the oil data, because the data prior to the oil inventory report was a picture of an economy whose only growth mechanism is housing refinance.

For those playing at home, if your only growth mechanism is housing refinance, that's a bad thing. When almost half of all new mortgages are adjustable rate, and more than a quarter are interest only, it means that the marginal house buyer sets prices based on highly suspect arithmetic (i.e., people use ARMS and interest-only to scale up the house size of the house rather than scaling down the repayment on a given house). As these buyers enter the market, it is their overpaying that is setting house prices on fire, and fuelling the equity cash-out craze.

That little vignette belongs somewhere other than the Gold area, but too bad...

Gold Bugs Index shed 5.88 points (3.18%), closing at 178.89

  • Newmont Mining (NEM) -$2.55 (6.34%) to $37.70;
  • Glamis Gold (GLG) -$0.84 (5.74%) to $13.79;
  • Coeur d'Alene (CDE) -$0.19 (5.64%) to $3.18;
  • Eldorado Gold (EGO) -$0.11 (4.51%) to $2.33; and
  • Goldcorp (GG) -$0.60 (4.42%) to $12.99.

Silver fell by $0.12 (1.61%) to close at $7.13 per ounce. The Gold and Silver Index (XAU) lost 3.5 points (4.02%), to end the session at 83.55 points.

  • Newmont Mining (NEM) -$2.55 (6.34%) to $37.70;
  • Placer Dome (PDG) -$0.79 (5.41%) to $13.80;
  • Goldcorp (GG) -$0.60 (4.42%) to $12.99; and
  • Meridian Gold (MDG) -$0.64 (4.01%) to $15.33.
Precious Metals and Indices
PHLX Gold and Silver Index83.55-3.5-4.02%
AMEX Gold BUGS Index178.89-5.88-3.18%

Oil Market

Oil dropped like a rock after the EIA Petroleum Status Report which reported a 5.5 million barrel increase in crude oil inventories. Front-month crude fell $2.93 per barrel (5.4%), closing at $51.35 per barrel - which is really quiet strange since the inventories data weren't actually that good.

After all, Gasoline inventories are more important than Crude inventories, because the bottleneck between crude inventories and the gas tank is that current lack of refining capacity. Gasoline inventories actually fell - and I'm not aware of anybody stupid enough to fill up their SUVs with straight crude.

The Oil and Gas Index (XOI) dipped 20.75 points (2.48%), to end the session at 816.78

  • Amerada Hess (AHC) -$3.40 (3.56%) to $92.10;
  • Occidental Petroleum (OXY) -$2.38 (3.31%) to $69.54; and
  • ChevronTexaco (CVX) -$1.62 (3.02%) to $52.00.

The Oil service stocks (OSX) Index dipped 4.52 points (3.33%), at 131.38

  • Tidewater (TDW) -$1.53 (4.2%) to $34.91;
  • BJ Services (BJS) -$2.16 (4.15%) to $49.84; and
  • Nabors Industries (NBR) -$2.36 (4.08%) to $55.46.
Energy Complex
Reuters CRB305.88-3.9-1.26%
Crude Oil Light Sweet51.35-2.93-5.4%
Heating Oil1.47-0.04-2.97%
Natural Gas6.748-0.4-5.62%
Unleaded Gas1.535-0.09-5.77%
AMEX Oil Index816.78-20.75-2.48%
Oil Service Index131.38-4.52-3.33%

Currency Markets

The USDX fell as low as 83.87 after the awful Durable Goods data, but had already started to bounce a half-hour before the Crude Oil Inventories numbers were released. Every market absolutely reeked of information leakage; equities, Gold, Oil, currencies... they all started their big intraday moves at 10 a.m., but the oil data wasn't released until 10:30.

USD Exchange Rates
US Dollar Index84.170.190.23%
Australian Dollar0.7761-0.002-0.26%
Swiss Franc1.19240.0060.51%
Canadian Dollar0.8004-0.0024-0.3%