Interdum stultus opportuna loquitur...

Wednesday, May 25, 2005

USRant: Narrow Range, Another Closing Waft...

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

Sometimes the market does surprising things. In fact most days it does at least one surprising thing. This session saw notable for a couple of reasons: first, the economic data continued to show that the US remains a 'mortgage-led' economy... chain store sales still look pretty soft (up about 3.3% year-on-year - i.e., increasing slower than actual goods-price inflation), while Existing Home Sales blew the consensus number out of the water (actual 7.18m, consensus 6.91m). The State Street Investor Confidence Index fell 5.5 points to 83.9, reflecting a reduction in risk appetite (you will recall that the SSIC actually measures risk-tolerance based on actual portfolios - in other words it doesn't just ask folks what they think...).

And yet the stock market was almost an ocean of calm; sure the repo helped (it always does), but there is now a real sense of fundamental disconnection between bonds and stocks. Bonds think the US is recessionary (in fact the spread from 6month-5yrs shows that unambiguously), while stocks think it's a good time to head upwards; if the bond market is wrong, there will be massive amounts of smart money sent to Money Heaven. If the stock market is wrong, there will be large quantities of dumb money sent to Money Heaven. I know which outcome I would bet on.

That's not to say that I think bonds are a good thing to hold - long term, I think precisely the opposite. I genuinely believe that there is a proper, generational crisis brewing (or being brewed, to phrase it more correctly), and that markets are being 'set up' for the largest transfer of wealth in history (from the herd, to da Boyz). That will see all financial assets getting massacred, and all sorts of screwy outcomes in the short term (including more wars) as financial markets get the rug pulled out.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $5billion, overnight repurchase entirely in T-backed collateral. Although that just hits the notional $5bill cutoff for a 10 a.m. moonshot, the fact that the Existing Homes data was released at the same time meant that no bet was warranted (never take a repo-based position at the time that economic data is released - until after you see the data and compare it to consensus).

Major US Indices

The Dow Jones Industrial Average dipped 19.88 points (0.19%), closing out the day at 10503.68 points. The index hit an intraday high of 10522.68 (at the open - again, an artificial residual due to the 'staggered open' method employed by the NYSE), and fell as low as 10471.91 during the session. The low was set a couple of minutes before noon, NY time.  It's reasonably rare for the index to trade in a 50-point range, and a close right in the middle of the intraday range gives an idea of just how indecisive everything is at present.

Within the blue-chip index, 13 stocks rose, the biggest gainers being Intel (INTC, +1.74% to $26.96) and Boeing (BA, +0.99% to $62.25), which accounted for 8 Dow points between them. Losers in the Dow numbered 17 and were led by General Motors (GM, -2.76% to $31.69 after 'better late than never' Fitch downgraded GM debt to junk) and Mcdonalds (MCD, -1.44% to $30.87). These two stocks contributed 10 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 163.3m shares to 149m.

The broader S&P500 posted a rise of 0.21 points (0.02%), ending the day at 1194.07. Within the index, gainers numbered 205, while 282 S&P500 stocks fell for the day. Volume was tilted 1.2:1 in favour of the winners with 890.34 million units traded in the losers as compared with 732.75 million traded in the winners .

Tech outperformed the broader market - all markets gapped down, but the tech indices closed the intraday gap within half an hour, while the S&P took until 3:15 p.m. NY time. The Nasdaq Composite gained 4.97 points (0.24%), to close at 2061.62, while larger-cap technology issues fared better with the Nasdaq100 adding 5.25 points (0.34%), to end at 1540.47 points. Within the tech benchmark, gainers numbered 46, while 50 Nasdaq100 stocks fell for the day. Volume was tilted 1.7:1 in favour of the winners with 470.29 million traded in the losers compared to 271.12 million in the winners.

NYSE Volume was reasonalby chunky, with 1.66 billion shares changing hands, while Nasdaq Volume was solid, with 1.73 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 10503.68 -19.88 -0.19%
S&P500 1194.07 0.21 0.02%
Nasdaq Composite 2061.62 4.97 0.24%
Nasdaq100 1540.47 5.25 0.34%
NYSE Volume 1.66bn - -
Nasdaq Volume 1.73bn - -


My 9-stock "bellwethers" group rose by an average of 0.30%

  • General Electric (GE) -$0.11 (0.3%) to $37.07;
  • Citigroup (C) +$0.11 (0.23%) to $47.71;
  • Wal Mart (WMT) -$0.20 (0.42%) to $47.65;
  • I.B.M. (IBM) -$0.70 (0.91%) to $75.81;
  • Intel (INTC) +$0.46 (1.74%) to $26.96;
  • Cisco Systems (CSCO) +$0.45 (2.3%) to $20.00;
  • eBay (EBAY) -$0.22 (0.59%) to $36.89;
  • Fannie Mae (FNM) +$0.60 (1.05%) to $58.00; and
  • Freddie Mac (FRE) -$0.23 (0.36%) to $64.29.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1672 to 1604, for a single-day A/D reading of -68; and Nasdaq losers exceeded gainers by 1601 to 1415. The 10-day moving average of the A/D line fell to 464.4 on the NYSE, while the 10dma of the Nasdaq A/D fell to 179.0.

On the NYSE declining volume was greater than volume in advancing issues by 832.1 to 793 million shares; Nasdaq advancing volume was greater than volume in decliners by 999.6 to 658.6 million shares.

83 NYSE-listed stocks rose to new 52-week highs, and 24 posted fresh 52-week lows, while on the Nasdaq there were 70 stocks that hit new 52-week highs, and 49 which fell to fresh 52-week lows.

Volatility - as measured by the VIX - continues to get shaved again - it beggars belief that the bond market is clearly pricing in a reasonably deep recession, while the VIX says that option buyers think there's nothing but blue sky ahead. Note also that the Put-Call Ratio numbers are behaving badly - yesterday at the close the PCR reading was 0.68 (pretty neutral), however two hours later the CBOE's data showed the PCR at 0.51 (pretty damn low)... I'm not sure how to resolve this, short of providing an update to the PCR numbers a coule of hours after the close.

Market Breadth Statistics

NYSE Nasdaq
Advancers 1604 1415
Decliners 1672 1601
Advancing Volume (m) 792.96 999.63
Declining Volume (m) 832.06 658.57
New Highs 83 70
New Lows 24 49

Market Sentiment Statistics
Index Close Gain(Loss) %
CBOE Volatility Index 12.69 -0.26 -2.01%
CBOE Nasdaq Volatility Index 15.84 -0.2 -1.25%
Equity Put-Call Ratio 0.72 0.04 5.88%
10-day PCR 0.69 0.01 1.01%
SPX-VIX Ratio 94.1 1.91 2.07%

Bond Market Analysis

Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.1 bps to 4.366%. The 30-year Treasury future is now insanely overbought; it looks like a market that's not being allowed to 'price'... you might recall that in the 1950s the Fed simply stood as buyer of T-bonds  in whatever quantity was required to hold long rates down: I don't believe that's what's happening today... I think it's just that smart money is looking for somewhere to hide, and is trying to hide somewhere that it thinks has a relatively low default risk.

The middle of the yield curve was broadly higher (in price): five year yields fell to 3.782%, and ten-year yields fell to 4.037%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at 10.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 48.0 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 mixed with the AAA-A spread on 20-years 6.0 bps tighter at 37.0 basis points and the 10-year AAA-A spread 12.0 bps looser at 9.0 bps. That 10-year AAA-A spread is behaving stupidly - it is gyrating around like a mad woman in the snow.

Treasury Yields
Index Close Gain(Loss) %
UST 13wk (yld) 2.882 0 0%
UST 2Y (yld) 3.58 -0.02 -0.56%
UST 5Y (yld) 3.782 -0.042 -1.1%
UST 10Y (yld) 4.037 -0.035 -0.86%
UST 30Y (yld) 4.366 -0.021 -0.48%

The Banks Index shed 0.3 points (0.3%), to 99.18; within the index,

  • Fifth Third Bancorp (FITB) -$0.59 (1.36%) to $42.76;
  • North Fork Bancorp (NFB) -$0.32 (1.16%) to $27.28;
  • Golden West Financial (GDW) -$0.61 (0.98%) to $61.80;
  • Keycorp (KEY) -$0.29 (0.87%) to $33.05; and
  • US Bancorp (USB) -$0.24 (0.81%) to $29.37.

The Broker-dealer Index slid 1.22 points (0.83%), to 145.17; the ticket clippers lined up as follows -

  • Jeffries Group (JEF) -$0.68 (1.86%) to $35.89;
  • Raymond James (RJF) -$0.50 (1.81%) to $27.15;
  • E*Trade (ET) -$0.17 (1.38%) to $12.12;
  • Merrill Lynch (MER) -$0.74 (1.34%) to $54.41; and
  • Charles Schwab (SCH) -$0.15 (1.3%) to $11.43.

The Philadelphia SOX (Semiconductor) index added 6.57 points (1.55%), to 430.43

  • Marvell Tech Group (MRVL) +$1.68 (4.22%) to $41.48;
  • KLA-Tencor (KLAC) +$1.57 (3.61%) to $45.02;
  • Applied Materials (AMAT) +$0.45 (2.81%) to $16.48;
  • Novellus Systems (NVLS) +$0.55 (2.17%) to $25.88; and
  • Intel (INTC) +$0.46 (1.74%) to $26.96.

Gold & Silver Markets

Gold rose $0.7 (0.17%) to close at $418.20 per ounce; it got up as high as $419.40 during the ACCESS session, but weakened pretty much from the day-session open setting a low of $417.40 at 1 p.m. NY time. How nice - a 2-dollar range, and closing right in the middle. That would be hard to do by accident.

The Gold Bugs Index advanced 4.41 points (2.49%), closing at 181.35

  • Randgold Resources (GOLD) +$0.72 (6.16%) to $12.40;
  • Gold Fields (GFI) +$0.52 (5.22%) to $10.48;
  • Hecla Mining (HL) +$0.19 (4.57%) to $4.35;
  • Kinross Gold (KGC) +$0.18 (3.44%) to $5.41; and
  • Goldcorp (GG) +$0.44 (3.41%) to $13.34.

Silver rose $0.03 (0.43%) to close at $7.02 per ounce. The Gold and Silver Index (XAU) gained 2.02 points (2.46%), at 83.98 points.

  • Gold Fields (GFI) +$0.52 (5.22%) to $10.48;
  • Placer Dome (PDG) +$0.50 (3.91%) to $13.30;
  • Kinross Gold (KGC) +$0.18 (3.44%) to $5.41; and
  • Goldcorp (GG) +$0.44 (3.41%) to $13.34.
Precious Metals and Indices
Index Close Gain(Loss) %
Gold 418.20 0.70 0.17%
Silver 7.02 0.03 0.43%
PHLX Gold and Silver Index 83.98 2.02 2.46%
AMEX Gold BUGS Index 181.35 4.41 2.49%

Oil Market

Oil was firmer, rising by $0.62 per barrel, closing at $49.82 per barrel. For the first two hours, the oil market fought with itself over the meaning of Chavez' remarks yesterday about breaking ties with the US. Venezuela is the source of about 14% of all crude imports; if Chavez decides to punitively redirect oil exports from Venezuela to China and Russia, the US is screwed economically.

After being wrestled down to just under $49, the market stabilised; the moment $49 was tested from above a second time (and held), the oil market took off, looking for $50... and it stopped at $49.94 and promptly dropped over 30c a barrel. Obviously somebody thought it was sensible to short using $50 as a stop; it will be interesting to see the Petroleum Status Report tomorrow.

The Oil and Gas Index (XOI) advanced 6.48 points (0.8%), ending the day at 813.13

  • Sunoco (SUN) +$1.87 (1.89%) to $101.00;
  • Kerr Mcgee (KMG) +$1.10 (1.55%) to $72.25; and
  • ConocoPhillips (COP) +$0.99 (0.96%) to $104.34.

The Oil service stocks (OSX) Index posted a rise of 0.46 points (0.35%), to end the session at 130.24

  • Transocean (RIG) +$1.18 (2.54%) to $47.60;
  • Rowan Companies (RDC) +$0.35 (1.33%) to $26.58; and
  • Weatherford International (WFT) +$0.49 (0.97%) to $50.94.
Energy Complex
Index Close Gain(Loss) %
Reuters CRB 296.72 0.25 0.08%
Crude Oil Light Sweet 49.82 0.62 1.26%
Heating Oil 1.3875 0.02 1.54%
Natural Gas 6.329 -0.08 -1.19%
Unleaded Gas 1.424 0.02 1.68%
AMEX Oil Index 813.13 6.48 0.8%
Oil Service Index 130.24 0.46 0.35%

Currency Markets

USD Exchange Rates
Index Close Gain(Loss) %
US Dollar Index 86.38 0.02 0.02%
Euro 1.2583 0.0008 0.06%
Yen 107.62 -0.01 -0.01%
Sterling 1.8272 -0.003 -0.16%
Australian Dollar 0.7628 0.0036 0.47%
Swiss Franc 1.2284 -0.0021 -0.17%
Canadian Dollar 0.7938 -0.0007 -0.09%