Interdum stultus opportuna loquitur...

Thursday, May 12, 2005

USRant: Cheap Crap Isn't Selling? Amazing.

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Jobless claims a little worse than consensus (340K vs consensus 330k); Retail Trade much stronger than expected (1.1% vs consensus of 0.6%). So it certainly wasn't the data. Plenty of Fed repurchase ($18 billion worth), so it wasn't an absence of liquidity. Wal-Mart warned that its profits for the entire quarter would be lower than the current consensus guess, and also managed to miss Wall Street's estimates of current earnings. WMT posted 55c a share (58c including a 3c one-time gain), and the market didn't like it.

Perhaps of greater interest is the litigation risk to WMT as a result of the ongoing investigation into its hiring and personnel management practices; that also got some steam yesterday.

Still, Target managed to beat estimates, so it's hard to read anything more widespread about consumer spending, in WMT's result.

Federal Reserve Open Market Operations

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

  • a $9billion, overnight repurchase entirely in T-backed collateral; and
  • a $9billion, 14-day repurchase entirely in T-backed collateral.

On a normal day, that amount of hot-sauce would pretty much guarantee a big whoooosh upwards starting at or about 10 a.m.; today... not so much.

Sure, the Dow rose 40 points between 10 a.m. and 10:20 - and the S&P added 5 points - so a punt on the long side based solely on the repo numbers would not have been an unmitigated disaster. However with $18 billion under the belt, it would have been tempting to try and swing for the fences (thereby giving everything back eventually - but there was a 3-hour period during which the trade was in and out of the green... with that much repo, that little follow-through is as good a warning as anyone ought to need).

Major US Indices

The big repo helped a somewhat feeble, non-sticky bounce from 10 a.m. to set the session high in the Dow (10322 points) at about 10:20 a.m. NY time. The bounce didn't stick because there were no shorts to squeeze - they all got squeezed during yesterday's Cessna-led bounce. From there, there was a significant attempt to keep the Dow within striking distance of 10300 - that was working nicely until just after 1 p.m., when everything started to get some downwards traction.

By the close, the Dow Jones Industrial Average was red to the tune of 110.77 points (1.08%), closing out the day at 10189.48 points. The index as low as 10183.43 points, and the low was reached with 25 minutes left in the session.

Within the blue-chip index, 5 stocks rose, the biggest gainers being Merck (MRK, +0.42% to $33.64) and Microsoft (MSFT, +0.36% to $25.00), which accounted for 2 Dow points between them. Losers in the Dow numbered 25 and were led by Exxon Mobil (XOM, -4.31% to $54.82) and Alcoa (AA, -2.99% to $27.55), with these two stocks contributing -25 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 204.2m shares to 175.1m.

The broader S&P500 slid 11.75 points (1%), to 1159.36; note that although 1160 was identified as a key closing level a couple of sessions ago, that number doesn't apply anymore. To generate further significant declines, the S&P had to close below 1156 today. As it is, bad news will be 'bad', but the S&P is now primed for a bounce if it gets any reason to do so.

Within the S&P, gainers numbered 88, while 408 S&P500 stocks fell for the day. Volume was tilted 1.9:1 in favour of the losers with 1218.72 million units traded in the losers as compared with 655.80 million traded in the winners .

Over at Times Square, the Nasdaq Composite declined 7.67 points (0.39%), to close at 1963.88, while larger-cap technology issues fared better with the Nasdaq100 losing 4.76 points (0.33%), to end at 1454.79 points. Within the tech benchmark, gainers numbered 36, while 62 Nasdaq100 stocks fell for the day. Volume was tilted 1.7:1 in favour of the winners with 493.90 million traded in the losers compared to 294.11 million in the winners .

NYSE Volume was super-chunky, with 1.99 billion shares changing hands, while Nasdaq Volume was chunky, with 1.78 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10189.48-110.77-1.08%
Nasdaq Composite1963.88-7.67-0.39%
NYSE Volume1.99bn--
Nasdaq Volume1.78bn--


My 9-stock "bellwethers" group fell by an average of 0.62%

  • General Electric (GE) -$0.32 (0.88%) to $35.87;
  • Citigroup (C) -$0.29 (0.62%) to $46.41;
  • Wal Mart (WMT) -$0.95 (1.95%) to $47.65;
  • I.B.M. (IBM) -$0.66 (0.9%) to $72.62;
  • Intel (INTC) +$0.07 (0.28%) to $24.84;
  • Cisco Systems (CSCO) +$0.15 (0.81%) to $18.70;
  • eBay (EBAY) +$0.58 (1.75%) to $33.80;
  • Fannie Mae (FNM) -$1.39 (2.5%) to $54.28; and
  • Freddie Mac (FRE) -$0.97 (1.55%) to $61.77.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2364 to 931, for a single-day A/D reading of -1433; that's a little extreme and indicates the strange, manic-depressive nature that has predominated trade in recent weeks. Nasdaq losers exceeded gainers by 1912 to 1132. The 10-day moving average of the A/D line fell to -61.4 on the NYSE, while the 10dma of the Nasdaq A/D fell to -174.1.

On the NYSE declining volume was greater than volume in advancing issues by 1587.2 to 380.6 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 909.9 to 845.7 million shares.

69 NYSE-listed stocks rose to new 52-week highs, and 77 posted fresh 52-week lows, while on the Nasdaq there were 53 stocks that hit new 52-week highs, and 86 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)380.6845.74
Declining Volume (m)1587.24909.89
New Highs6953
New Lows7786

Market Sentiment Statistics
CBOE Volatility Index16.121.6711.56%
CBOE Nasdaq Volatility Index18.810.945.26%
Equity Put-Call Ratio0.850.113.33%
10-day PCR0.750.033.58%
SPX-VIX Ratio71.9-9.13-11.26%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding another 2.6 bps to 4.523%.

The middle of the yield curve was broadly higher: five year yields fell to 3.87%, and ten-year yields fell to 4.181%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were unchanged at 7.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell by 3-4 bps to 48.0 bps for 10-year AAA, and 83.5 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 4.0 bps tighter at 50.0 basis points and the 10-year AAA-A spread 43.0 bps looser at 52.0 bps. I think there's a bad tick in the 10-year A data - it's showing a seasoned yield of 5.16% - and increase of 27bps in a single session... so either it's a bad tick, or the index components changed, or some 10-year A holders just got smashed.

Treasury Yields
UST 13wk (yld)2.81600%
UST 2Y (yld)3.63-0.03-0.82%
UST 5Y (yld)3.87-0.033-0.85%
UST 10Y (yld)4.181-0.021-0.5%
UST 30Y (yld)4.523-0.026-0.57%

The Banks Index declined 0.82 points (0.84%), to 97.03; within the index,

  • Golden West Financial (GDW) -$0.99 (1.57%) to $62.07;
  • Zions Bancorp (ZION) -$1.10 (1.54%) to $70.36;
  • Northern Trust (NTRS) -$0.68 (1.48%) to $45.34;
  • Regions Financial (RF) -$0.49 (1.46%) to $33.03; and
  • Bank Of NY (BK) -$0.41 (1.46%) to $27.65.

The Broker-dealer Index shed 2.93 points (2.04%), to 140.57; the ticket clippers lined up as follows -

  • Jeffries Group (JEF) -$2.06 (5.71%) to $34.03;
  • Goldman Sachs (GS) -$3.53 (3.4%) to $100.22;
  • E*Trade (ET) -$0.34 (2.75%) to $12.04;
  • Bear Stearns (BSC) -$2.51 (2.63%) to $93.09; and
  • A G Edwards (AGE) -$0.89 (2.2%) to $39.53.

The Philadelphia SOX (Semiconductor) index posted a rise of 1.15 points (0.29%), to 397.02

  • Teradyne (TER) +$0.30 (2.61%) to $11.80;
  • Marvell Tech Group (MRVL) +$0.84 (2.45%) to $35.19;
  • Micron Technology (MU) +$0.16 (1.6%) to $10.16;
  • Altera (ALTR) +$0.31 (1.51%) to $20.84; and
  • Advanced Micro Devices (AMD) +$0.21 (1.39%) to $15.30.

Gold & Silver Markets

Gold fell by $4.90 (1.15%) to close at $422.90 per ounce. Finally Gold starts doing what it's meant to do.

Note: by "what it's meant to do", I'm not talking about Gold acting as a genuine store of non-depreciating value and reflecting inflationary expectations better than the bond market - that's what it's 'meant' to do in a broader sense. No, ... I mean "do what I thought it would", which was fall.

The Gold Bugs Index dipped 7.12 points (3.96%), at 172.83

  • Hecla Mining (HL) -$0.31 (6.68%) to $4.33;
  • Freeport McMoran (FCX) -$2.18 (6.18%) to $33.07;
  • Meridian Gold (MDG) -$0.77 (4.84%) to $15.14;
  • Randgold Resources (GOLD) -$0.60 (4.77%) to $11.99; and
  • Glamis Gold (GLG) -$0.66 (4.64%) to $13.57.

Silver fell by $0.13 (1.76%) to close at $6.96 per ounce. The Gold and Silver Index (XAU) lost 3.03 points (3.63%), ending the day at 80.33 points.

  • Freeport McMoran (FCX) -$2.18 (6.18%) to $33.07;
  • Placer Dome (PDG) -$0.64 (4.85%) to $12.56;
  • Meridian Gold (MDG) -$0.77 (4.84%) to $15.14; and
  • Agnico Eagle (AEM) -$0.57 (4.56%) to $11.94.
Precious Metals and Indices
PHLX Gold and Silver Index80.33-3.03-3.63%
AMEX Gold BUGS Index172.83-7.12-3.96%

Oil Market

Oil got smacked hard again (on little or no news), shedding $1.57 per barrel (3.12%), closing at $48.73 per barrel. At one stage it was down $2 a barrel, and hit a new 10-week low. The Crude market has dropped over $3 in two sessions - and yet yesterday's inventories data really wasn't that bearish for Crude prices. Odd. It also means (technically) that oil will have to spend some time travelling sideways-to-down before it can even think of making another decent leg up.

The Oil and Gas Index (XOI) shed 30.56 points (3.68%), ending the day at 800.12

  • Marathon Oil (MRO) -$2.45 (5.05%) to $46.02;
  • Sunoco (SUN) -$5.06 (4.96%) to $97.02; and
  • Amerada Hess (AHC) -$4.54 (4.79%) to $90.18.

The Oil service stocks (OSX) Index dipped 6.02 points (4.54%), ending the day at 126.46

  • National Oilwells/Varco (NOV) -$2.43 (5.52%) to $41.63;
  • Transocean (RIG) -$2.60 (5.46%) to $45.02; and
  • Tidewater (TDW) -$1.90 (5.37%) to $33.48.
Energy Complex
Reuters CRB296.02-4.93-1.64%
Crude Oil Light Sweet48.73-1.57-3.12%
Heating Oil1.381-0.02-1.6%
Natural Gas6.52-0.14-2.1%
Unleaded Gas1.437-0.04-2.54%
AMEX Oil Index800.12-30.56-3.68%
Oil Service Index126.46-6.02-4.54%

Currency Markets

The USD gained a full cent against the Euro last night, which is an interesting development. It's not quite out of the woods yet (as far as a possible re-acceleration in the decline in the USDX is concerned), but for the moment the US dollar seems to have found its footing. If it's just yesterday's "surprising" trade gap numbers I would be dismayed at the lack of analysis - the economic numbers aren't any basis for enthusiasm about the USD.

USD Exchange Rates
US Dollar Index85.540.650.77%
Australian Dollar0.7653-0.0091-1.18%
Swiss Franc1.21540.00950.79%
Canadian Dollar0.7992-0.002-0.25%