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Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 1 repurchase operation.
- a $4 billion, overnight repurchase entirely in T-backed collateral.
Major US Indices
Well, I said yesterday that I thought the next big move was going to be up - the market was due for a bounce. That said, this session's trajectory was pure fiction.
The only thing that caused today's closing gain was the Fed minutes, in which the FOMC told the market what it wanted to hear. I'm not aware of anything Greenspan has said since the half-truth of 1996, that hasn't been exactly what the stock market wanted - in short, he's Wall Street's bitch, and he's not remotely unhappy about it. It enabled him to get his mitts on a faded journalist (the only sort of individual who would be prepared to marry the loser).
Just before the FOMC minutes were released (at 2 p.m.), the market made a new low at 10360 - still above its January 24th low at 10316, but nonetheless down just over 87 points from yesterday's close. At the same time the "we will still be measured about rate hikes" malarkey was promulgated, the Treasury Budget figures were $3 billion worse than expected.
Tell me what matters more - a massive NPSBR (net public sector borrowing requirement), or the mewlings of a band of wankers who have been utterly wrong about everything since their inception in 1913.
Hmmm... massive debt issuance (increased bond supply)? Or... idiot bureaucrats spinning happy tales? I've always been in the "massive public sector borrowingrequirements lead to higher interest rates" brigade; if that little fundamental of economis doesn't hold true, the Argentina and Brazil ought to have been economic powerhouses (not to mention Weimar Germany).
It doesn't matter though - the bounce was there, and anybody with half a brain could see it coming. I'm not saying I have half a brain, but yesterday's USRant was pretty unambiguous as to the direction - although I didn't think the rally would start 87 pints lower than yesterday's close; my unstated guess was that there would be a big-ass repo and that the rally would start at 10 a.m.; when I saw the repo numbers I thought "Well, there'll be no early-session bounce" and went to bed.
The market opened with a downforce similar to the rear wing of the F2005, slicing through 10400 within the first 25 minutes. The pre-market data was awful - at $61b the trade balance was $2b worse than expected (which points to even greater requirements for inflows of international capital), and chain store sales were pretty slack.
After falling down towards 10350, the market stabilised in the 10360s and traded in a 20-point range above 10363 until the FOMC minutes were released; as I mentioned above, the actual intra-session low was set the minute before they were released.
From there, it was a short-covering rally that developed into a full-on "nuts in the vice" short-squeeze. In a little over an hour the market rallied 150 points as late shorts got torched. It's always the way - trade with a trend when it's stale and you will get handed your head. That is why I vastly prefer "fading" stale trends, and why I will never trade breakouts.
For a start, the breakout condition depends on who your data provider is: as one example my data (along with Yahoo and eSignal) say that the January 24th low in the Dow was 10317, whereas other data sources say that the market never got below 10370. I would be happy if that was true, since it would mean that my "new low for the year before June" statement has been confirmed in all equity indices.
After the vice was tightened to maximum groinal-pain, the Dow Jones Industrial Average was up in the 10520s, eventually posting a session high of 10529.77 (I think we can call that 10530), which was hit just as the MOC imbalance data was released for the NYSE (at 3:30 NY time). From there is was a little dip into the close, with the Dowager eventually showing a closing gain of 59.41 points (0.57%), closing at 10507.97 points.
Within the blue-chip index, 24 stocks rose, the biggest gainers being Home Depot (HD, +2.15% to $38.55) and American International Group (AIG, +2.11% to $53.20), which accounted for 14 Dow points between them. Losers in the Dow numbered 6 and were led by Boeing (BA, -1.60% to $58.45) and General Motors (GM, -0.85% to $29.00), 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 over 8:1, with 365.8m shares traded in the advancing Dow components comared with 46m in the losers.
The broader S&P500 added 6.55 points (0.55%), to end the session at 1187.76. Within the index, gainers numbered 360, while 134 S&P500 stocks fell for the day. Volume was tilted 2.4:1 in favour of the winners with 1439.87 million units traded in the winners as compared with 595.01 million traded in the losers .
The Nasdaq Composite rose 13.28 points (0.67%), to close at 2005.4, while larger-cap technology issues fared better with the Nasdaq100 adding 10.61 points (0.72%), to end at 1489.16 points. Within the tech benchmark, gainers numbered 74, while 25 Nasdaq100 stocks fell for the day. Volume was tilted 3:1 in favour of the winners with 697.73 million traded in the winners compared to 229.04 million in the losers.
NYSE Volume was super-chunky, with 1.98 billion shares changing hands, while Nasdaq Volume was chunky, with 1.93 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10507.97 | 59.41 | 0.57% |
| S&P500 | 1187.76 | 6.55 | 0.55% |
| Nasdaq Composite | 2005.4 | 13.28 | 0.67% |
| Nasdaq100 | 1489.16 | 10.61 | 0.72% |
| NYSE Volume | 1.98bn | - | - |
| Nasdaq Volume | 1.93bn | - | - |
Bellwethers
My 9-stock "bellwethers" group rose by an average of 0.74%; notice that Fannie Mae has had an almost uninterrupted rise since the Wall Street Journal story? Just another example of journalists being so late to any trend (be it stock markets or fashion) that they inevitably send their readers in precisely the wrong direction.
- General Electric (GE) +$0.27 (0.75%) to $36.09;
- Citigroup (C) +$0.84 (1.84%) to $46.45;
- Wal Mart (WMT) +$0.12 (0.25%) to $48.63;
- I.B.M. (IBM) -$0.45 (0.52%) to $85.75;
- Intel (INTC) +$0.10 (0.43%) to $23.22;
- Cisco Systems (CSCO) +$0.25 (1.39%) to $18.24;
- eBay (EBAY) -$0.31 (0.91%) to $33.66;
- Fannie Mae (FNM) +$1.24 (2.23%) to $56.77; and
- Freddie Mac (FRE) +$0.76 (1.2%) to $64.00.
Market Breadth & Internals
NYSE advancing Issues exceeded decliners by 2094 to 1196 for a single-day A/D reading of 898; Nasdaq gainers trumped losers by 1685 to 1395. The 10-day moving average of the A/D line rose to 190.9 on the NYSE, while the 10dma of the Nasdaq A/D rose to -200.2.
NYSE advancing volume exceeded volume in decliners by 1246.5 to 704.1 million shares; Nasdaq advancing volume was greater than volume in decliners by 1330.7 to 573.1 million shares.
63 NYSE-listed stocks rose to new 52-week highs, and 89 posted fresh 52-week lows, while on the Nasdaq there were 30 stocks that hit new 52-week highs, and 141 which fell to fresh 52-week lows.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 2094 | 1685 |
| Decliners | 1196 | 1395 |
| Advancing Volume (m) | 1246.52 | 1330.68 |
| Declining Volume (m) | 704.07 | 573.14 |
| New Highs | 63 | 30 |
| New Lows | 89 | 141 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 11.3 | -0.68 | -5.68% |
| CBOE Nasdaq Volatility Index | 16.24 | -0.66 | -3.91% |
| Equity Put-Call Ratio | 0.79 | 0.07 | 9.72% |
| 10-day PCR | 0.73 | 0.02 | 2.17% |
| SPX-VIX Ratio | 105.1 | 6.51 | 6.61% |
Bond Market Analysis
Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 7.6 basis points to 4.657%.
The middle of the yield curve was also higher: five year yields fell to 4.038%, and ten-year yields fell to 4.36%.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 4.0 basis points tighter at 6 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell 10 basis points to 51.0 basis points for 10-year AAA, and a whopping 21.5 basis points to 74.0 basis points for 20-years.
Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were significantly wider with the AAA-A spread on 20-years rising 16.0 basis to 49.0 basis points, and the 10-year AAA-A spread rising a mind-boggling 73.0 basis points to 85.0 basis points.
The wider credit spread in the 10-years looked fishy to me - it looked like something went massively awry in the 10-year A market, because the average yield on 10-year A-rated corporate bonds rose from 5.15% to 5.71% when almost all other rates declined... looks like a "bad tick" to me, but I checked it from two sources.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 2.707 | 0 | 0% |
| UST 2Y (yld) | 3.67 | -0.04 | -1.08% |
| UST 5Y (yld) | 4.038 | -0.08 | -1.94% |
| UST 10Y (yld) | 4.36 | -0.085 | -1.91% |
| UST 30Y (yld) | 4.657 | -0.076 | -1.61% |
The Banks Index rose 1.13 points (1.17%), to 97.96; within the index,
- M&T Bank Corp (MTB) +$2.71 (2.65%) to $105.14;
- Citigroup (C) +$0.84 (1.84%) to $46.45;
- Regions Financial (RF) +$0.58 (1.8%) to $32.85;
- Comerica (CMA) +$0.89 (1.63%) to $55.39; and
- US Bancorp (USB) +$0.46 (1.62%) to $28.87.
The Broker-dealer Index advanced 0.86 points (0.6%), ending the day at 144.69; the ticket clippers lined up as follows -
- Ameritrade (AMTD) +$0.45 (4.21%) to $11.15;
- Raymond James (RJF) +$0.37 (1.25%) to $29.92;
- E*Trade (ET) +$0.12 (1.03%) to $11.75;
- Charles Schwab (SCH) +$0.09 (0.85%) to $10.70; and
- Morgan Stanley (MWD) +$0.41 (0.75%) to $54.75.
The Philadelphia SOX (Semiconductor) index slid 0.47 points (0.11%), to 413.14
- Texas Instruments (TXN) -$0.48 (1.94%) to $24.22;
- Freescale Semiconductors (FSL-B) -$0.33 (1.85%) to $17.51;
- Marvell Tech Group (MRVL) -$0.37 (1.04%) to $35.08;
- Altera (ALTR) -$0.14 (0.71%) to $19.48; and
- ST Microelectronic (STM) -$0.09 (0.55%) to $16.40.
Gold & Silver Markets
Gold fell by $0.10 (0.02%) to close at $428 per ounce. It was a pretty bland day - Gold managed to rise above $430 and hit a session high of $432.40 before selling back down to almost unchanged.
Gold Bugs Index shed 1.68 points (0.85%), ending the day at 196.35
- Iamgold (IAG) -$0.18 (2.99%) to $5.84;
- Harmony Gold (HMY) -$0.19 (2.49%) to $7.43;
- Randgold Resources (GOLD) -$0.19 (1.5%) to $12.45;
- Eldorado Gold (EGO) -$0.04 (1.45%) to $2.71; and
- Agnico Eagle (AEM) -$0.21 (1.45%) to $14.25.
Silver fell by $0.10 (1.38%) to close at $7.15 per ounce. The Gold and Silver Index (XAU) lost 0.43 points (0.47%), ending the day at 91.95 points.
- Harmony Gold (HMY) -$0.19 (2.49%) to $7.43;
- Agnico Eagle (AEM) -$0.21 (1.45%) to $14.25;
- Goldcorp (GG) -$0.19 (1.36%) to $13.80; and
- Gold Fields (GFI) -$0.14 (1.23%) to $11.20.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 428.00 | -0.10 | -0.02% |
| Silver | 7.15 | -0.10 | -1.38% |
| PHLX Gold and Silver Index | 91.95 | -0.43 | -0.47% |
| AMEX Gold BUGS Index | 196.35 | -1.68 | -0.85% |
Oil Market
Well, what can I say... talk about getting out of the wrong side of the Crude strangle! Yesterday I advocated closing the short leg, but keeping the call on the basis that crude would bounce. Crude bounced all right - it got up to $54 early in the session - but boy did it ever reverse hard. The call is going to expire worthless, and the overall switch out of the short futures and into the option strangle will be a bad decision in hindsight.
The preferred energy exposure - right from the get-go - was Heating Oil. Yesterday I advocated the exact opposite for the HO strangle - exit the call for whatever you could get, and ride the put to expiration. Well, the best you could have got for the $1.62 call was 7.2 ticks ($30.24) - it's the only price it traded at during the session.
But the put... what a ripper. It rose again to 153.6 ticks ($645.20); it's now gained just over 100 ticks since the inception of the trade, and is now worth more on its own than the entire trade cost at inception (that cost was 100.6 ticks, or $422.52).
All up, the $30.24 from the sale of the call plus the current value of the put, place the aggregate trade value at $675.44, a gain of 59.8% since the switch from the profitable short futures to the options strangle (less than a week, and risking only about 20% of the profits from the initial short futures).
That sounds all well and good, but the fact is that if the futures short had been left alone, it would have gained about another five thousand dollars (albeit with a higher outlay) since the switch to the options strangle.
Anyhow, overall for the session Oil reverse hard after early strength. It eventually closed having lost $2.21 per barrel, closing at $51.47 per barrel.
The Oil and Gas Index (XOI) dipped 12.38 points (1.44%), at 848.21
- Marathon Oil (MRO) -$1.35 (2.78%) to $47.15;
- Sunoco (SUN) -$2.43 (2.3%) to $103.19; and
- ChevronTexaco (CVX) -$1.13 (1.99%) to $55.74.
The Oil service stocks (OSX) Index lost 2.69 points (1.92%), to end the session at 137.3
- GlobalSantaFe (GSF) -$1.00 (2.69%) to $36.13;
- Tidewater (TDW) -$0.93 (2.41%) to $37.65; and
- Transocean (RIG) -$1.22 (2.32%) to $51.38.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 302.63 | -1.55 | -0.51% |
| Crude Oil Light Sweet | 51.47 | -2.21 | -4.12% |
| Heating Oil | 1.459 | -0.03 | -2.05% |
| Natural Gas | 7.077 | -0.23 | -3.12% |
| Unleaded Gas | 1.525 | -0.03 | -1.83% |
| AMEX Oil Index | 848.21 | -12.38 | -1.44% |
| Oil Service Index | 137.3 | -2.69 | -1.92% |
Currency Markets
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 84.45 | 0.29 | 0.34% |
| Euro | 1.2918 | -0.0052 | -0.4% |
| Yen | 107.75 | -0.02 | -0.02% |
| Sterling | 1.8919 | 0.0016 | 0.08% |
| Australian Dollar | 0.7754 | 0.0001 | 0.01% |
| Swiss Franc | 1.1985 | 0.005 | 0.42% |
| Canadian Dollar | 0.8078 | -0.0025 | -0.31% |
