Interdum stultus opportuna loquitur...

Tuesday, May 03, 2005

USRant: Late Surge Saves Face...

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

Let me tell you what you're not going to get today. You're not going to get an attempt to dissect the statement that accompanied the Fed's decision to raise rates. If those geriatric wankers had any opinion or insight worth a damn, they would be selling it in exchange for a decent salary, rather than sucking at the public teat. If Greenspan had ever had anything half-sensible to say, he would have said it when he was trying to make a living as a consultant (his form - Townsend, Greenspan - went bust).

No, the Fed's kommissars are academics and career bureaucrats. Their contribution - like all central bankers - is negative. Just look at the record of GDP growth for countries before and after they instituted central banking: the zenith of economic growth in the US was in the 19th century. Central planning doesn't work (as Ludwig von Mises pointed out in 1927): we in the west spent trillions of dollars and killed millions of innocent civilians (mostly in South-East Asia) to try and prevent them from even trying Central Planning. All the while that we were being kept scared of the Reds, the creeping cancer of bureaucracy and managerialism was metastasizing to the point where the parasite is now consuming half of the output of the host.

So screw anything that those professional parasites say. The sooner the whole artifice collapses, the better.

Oh - and wasn't I right about the ego-masturbatory rally? Selling the first overbought after the FOMC announcement captured the entire high-low move of the session.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.5billion, overnight repurchase entirely in T-backed collateral. You would think that an honourable bureaucrat would abstain from interfering in markets on the day that they undertake their big dog-and-pony show, but then again the words "honourable" and "bureaucrat" parted company in about the 1920s (when was the last time a senior bureaucrat resigned in protest about something? You get my point).

Major US Indices

After giving Greenspan and his fellow Central Planners the usual ego "rub'n'tug", the market reacted to the FOMC announcement as outlined right here yesterday; it fell. Then, since a lot of people sold the news (and therefore, had stops just above the prior intraday high), da Boyz snapped the market upwards for about ten minutes to try to generate a stop-triggering-induced short covering. It didn't work - although the market managed to get above the pre-FOMC high, it was too obvious.

Some non-FOMC economic data was released during the session, most notably Factory Orders data which shows just how much the US has turned into the Soviet Union. Defence Spending rose 10%, while non-defence capital goods excluding aircraft - the measure of non-Centrally-Planned capital expenditure - actually fell 4%. February's data was also revised lower.

Apart from the Factory Orders data, there was also Chain Store Sales (both reports were weak). So while government is buying military materiel to help in its quest to rip brown children to pieces (especially if they're playing near an oil filed), the actual schlub in Main Street is facing declining real wages, declining capitalisation, and a genuine economic malaise.

In the attempt to snap the market upwards, the Dow actually got above 10300 for almost a whole minute. The index hit an intraday high of 10304.54, about an hour after the FOMC announcement (yes, they increased their fake rate to 3%). From there it fell almost 100 points in 32 minutes, hitting its low at 10208.03 just before 3:10 p.m. - a little bounce ensued. After re-testing the low (and not making a new, lower low) the Dow rallied 50 points in the last four minutes.

The Dow Jones Industrial Average actually managed a gain of 5.25 points (0.05%), closing out the day at 10256.95 points thanks to that last four minutes of action. Tell me that doesn't stink to high heaven!

Within the blue-chip index, 17 stocks rose, the biggest gainers being General Motors (GM, +2.25% to $27.77) and Home Depot (HD, +1.35% to $36.75), which accounted for 8 Dow points between them. Losers in the Dow numbered 13 and were led by Honeywell (HON, -2.38% to $35.30) and Exxon Mobil (XOM, -2.15% to $56.50), with these two stocks contributing -15 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 268.3m shares to 121.2m.

The broader S&P500 dipped 0.99 points (0.09%), ending the day at 1161.17. Within the index, gainers numbered 237, while 258 S&P500 stocks fell for the day. Volume was tilted 1.3:1 in favour of the losers with 1.18 billion units traded in the losers as compared with 903.66 million traded in the winners .

Over at Times Square, the Nasdaq Composite advanced 4.42 points (0.23%), to close at 1933.07, while larger-cap technology issues fared better with the Nasdaq100 adding 3.9 points (0.27%), to end at 1427.61 points. Within the tech benchmark, gainers numbered 60, while 40 Nasdaq100 stocks fell for the day. Volume was tilted 2.3:1 in favour of the winners with 638.62 million traded in the winners compared to 277.32 million in the losers .

NYSE Volume was super-chunky, with 2.15 billion shares changing hands, while Nasdaq Volume was chunky, with 1.83 billion shares flailing around in cyberspace.

Major Market Statistics
Dow Jones Industrial Average 10256.28 5.25 -0.05%
Nasdaq Composite1933.074.420.23%
NYSE Volume2.15bn--
Nasdaq Volume1.83bn--


My 9-stock "bellwethers" group rose by an average of 0.57%

  • General Electric (GE) -$0.12 (0.33%) to $36.13;
  • Citigroup (C) +$0.27 (0.58%) to $46.80;
  • Wal Mart (WMT) +$0.60 (1.26%) to $48.40;
  • I.B.M. (IBM) -$0.04 (0.05%) to $76.47;
  • Intel (INTC) +$0.28 (1.19%) to $23.83;
  • Cisco Systems (CSCO) +$0.05 (0.29%) to $17.31;
  • eBay (EBAY) +$0.65 (2.06%) to $32.17;
  • Fannie Mae (FNM) +$0.34 (0.63%) to $54.10; and
  • Freddie Mac (FRE) -$0.33 (0.53%) to $61.64.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1678 to 1611, for a single-day A/D reading of -67; and Nasdaq losers exceeded gainers by 1590 to 1478. The 10-day moving average of the A/D line fell to 125.8 on the NYSE, while the 10dma of the Nasdaq A/D rose to -212.3.

On the NYSE declining volume was greater than volume in advancing issues by 1103.7 to 988.2 million shares; Nasdaq advancing volume was greater than volume in decliners by 1114.5 to 687 million shares.

50 NYSE-listed stocks rose to new 52-week highs, and 48 posted fresh 52-week lows, while on the Nasdaq there were 41 stocks that hit new 52-week highs, and 126 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)988.241114.46
Declining Volume (m)1103.68687.04
New Highs5041
New Lows48126

Market Sentiment Statistics
CBOE Volatility Index14.7-0.41-2.71%
CBOE Nasdaq Volatility Index20.13-0.54-2.61%
Equity Put-Call Ratio0.71-0.03-4.05%
10-day PCR0.76-0.01-1.6%
SPX-VIX Ratio792.082.7%

Bond Market Analysis

Didn't I say it yesterday? Yet again, the long bond future dipped to the mid-114s intraday, getting as low as 114 & 20/32; yet again, an inexplicable late-day rally saw all of it taken back. At the same time, Oil fell off a cliff (although it had been weak all session) and equities snapped upwards. The whole thing smells like a prawn trawler on a hot day.

Still - as I've said before - the third break's the charm. There have been two occasions on which an agile trader could have pocketed something approaching half a point (precisely as it was with the trade from 117 in Feb/Mar), and the next drop will signal; "Goodbye, Mr Spalding".

Bonds managed to rise at the long end after the bond futures snapped upward by half a point in the last 4 minutes of the equities session. The yield on the benchmark 30-year Treasury bond dropped 1.3 bps to 4.503%.

The middle of the yield curve was mixed: five year yields rose to 3.888%, and ten-year yields fell to 4.186%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at 9.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 58.0 bps for 10-year AAA, and 85.5 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly wider with the AAA-A spread on 20-years 1.0 bps tighter at 41.0 basis points and the 10-year AAA-A spread 2.0 bps tighter at -1.0 bps. That's not a misprint - 10-year corporates rate 'A' are yielding less than those rated 'AAA'. (It might be a bad tick in the data, and it's not a huge inversion, but why would anybody permit bond yield to defy the credit spectrum? Someone must be expecting a re-rating of some AAAs downwards, or some As upwards.


Treasury Yields
UST 13wk (yld)2.8500%
UST 2Y (yld)3.620.010.28%
UST 5Y (yld)3.8880.0090.23%
UST 10Y (yld)4.186-0.008-0.19%
UST 30Y (yld)4.503-0.013-0.29%

The Banks Index lost 0.03 points (0.03%), to 97.93; within the index,

  • Mellon Financial (MEL) -$0.44 (1.58%) to $27.48;
  • Keycorp (KEY) -$0.31 (0.93%) to $33.03;
  • Zions Bancorp (ZION) -$0.49 (0.69%) to $70.36;
  • M&T Bank Corp (MTB) -$0.57 (0.55%) to $102.84; and
  • Northern Trust (NTRS) -$0.22 (0.48%) to $45.27.

The Broker-dealer Index dipped 0.36 points (0.27%), at 134.42; the ticket clippers lined up as follows -

  • Legg Mason (LM) -$1.01 (1.41%) to $70.55;
  • A G Edwards (AGE) -$0.31 (0.79%) to $39.10;
  • Lehman Brothers (LEH) -$0.55 (0.62%) to $87.90;
  • Merrill Lynch (MER) -$0.28 (0.53%) to $52.80; and
  • Raymond James (RJF) -$0.10 (0.37%) to $26.70.

The Philadelphia SOX (Semiconductor) index lost 0.19 points (0.05%), closing at 385.08

  • Marvell Tech Group (MRVL) -$0.68 (2.01%) to $33.17;
  • Maxim Integrated (MXIM) -$0.46 (1.23%) to $36.89;
  • Freescale Semiconductors (FSL-B) -$0.22 (1.19%) to $18.29;
  • KLA-Tencor (KLAC) -$0.34 (0.87%) to $38.86; and
  • Xilinx (XLNX) -$0.22 (0.83%) to $26.33.

Gold & Silver Markets

Gold fell by another $2.80 (0.65%) to close at $426.70 per ounce. No big shock there.

Gold Bugs Index advanced 2.93 points (1.65%), at 180.71

  • Golden Star (GSS) +$0.16 (6.64%) to $2.57;
  • Coeur d'Alene (CDE) +$0.14 (4.55%) to $3.22;
  • Hecla Mining (HL) +$0.19 (4.18%) to $4.74;
  • Goldcorp (GG) +$0.51 (3.97%) to $13.35; and
  • Randgold Resources (GOLD) +$0.47 (3.97%) to $12.31.

Silver rose $0.02 (0.23%) to close at $6.85 per ounce. The Gold and Silver Index (XAU) gained 0.92 points (1.1%), at 84.57 points.

  • Goldcorp (GG) +$0.51 (3.97%) to $13.35;
  • Meridian Gold (MDG) +$0.56 (3.68%) to $15.76;
  • Durban Rooderpoert Deep (DROOY) +$0.02 (2.99%) to $0.69; and
  • Anglogold Ashanti (AU) +$0.62 (1.94%) to $32.54.
Precious Metals and Indices
PHLX Gold and Silver Index84.570.921.1%
AMEX Gold BUGS Index180.712.931.65%

Oil Market

Oil lost more ground, shedding $1.48 per barrel and closing at $49.42 per barrel. There was no real news to drive prices lower, so it's just nuffnuffs moving to the short side of the boat... we all know how that ends.

After the market closed, the Venezuelan Energy minister (Ramirez) declared that the Venezuelan government would keep the US-based Citgo refinery arm of Petroleos de Venezuela SA (PVdSA). Recent speculation had thought that the Venezuelans were going to sell it off.

He also declared that all existing contracts between Venezuela and foreign oil companies were illegal, and requires all companies operating in Venezuela to sign new contracts that have a higher tax burden. Watch that little nugget feed through to oil prices tomorrow!

While I usually fulminate against governmental interference in markets, this is not a move I object to. The prior agreements were struck while Venezuela had a government that was corrupt and heavily influenced by Washington... as such, the initial contracts did not reflect a market outcome of the sale of the national resources of Venezuela. They were instead a 'crony-capitalist' outcome whereby the resources were sold at a discount (with low tax rates, to boot) so that the former government members would continue to be the recipient of corrupt private payments from Washington.

The Oil and Gas Index (XOI) slid 14.8 points (1.79%), to 813.15

  • Sunoco (SUN) -$3.97 (3.96%) to $96.40;
  • ConocoPhillips (COP) -$3.20 (3%) to $103.50; and
  • Marathon Oil (MRO) -$1.14 (2.38%) to $46.71.

The Oil service stocks (OSX) Index shed 3.49 points (2.63%), to end the session at 129.02

  • Global Industries (GLBL) -$0.44 (4.4%) to $9.57;
  • Transocean (RIG) -$2.02 (4.2%) to $46.10; and
  • Smith International (SII) -$2.06 (3.44%) to $57.90.
Energy Complex
Reuters CRB299.69-3.2-1.06%
Crude Oil Light Sweet49.42-1.48-2.91%
Heating Oil1.435-0.03-2.06%
Natural Gas6.515-0.18-2.62%
Unleaded Gas1.4537-0.06-3.92%
AMEX Oil Index813.15-14.8-1.79%
Oil Service Index129.02-3.49-2.63%

Currency Markets

USD Exchange Rates
US Dollar Index84.42-0.09-0.11%
Australian Dollar0.7743-0.0049-0.63%
Swiss Franc1.1967-0.0005-0.04%
Canadian Dollar0.79860.00220.28%