Interdum stultus opportuna loquitur...

Thursday, June 23, 2005

USRant: Going Nowhere Fast...

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

Ford issues a profit warning; Morgan Stanley's earnings fall 24%; sign, sign, everywhere a sign. The only economic data point was also awful: that was the MBA's Purchase Applications number, which fell 9.4% for the week despite a fall in mortgage rates. Of even more interest was that the refinancing component of the index fell 13.8%.

This one datapoint does not mean the end of the mortgage bubble in the US, but it certainly looks like a candidate for the end of the beginning of the end. The fact that long end rates are in free-fall should help alleviate any additional short-term declines in the housing market though.

The market ignored it all like a NeoTrot ignores common sense and human decency - after all, oil prices softened from near-record levels, and that's all the touts needed... at least that's all they thought they needed.

The softening in oil prices was a little unexpected (although anyone who read the last few USRants saw it coming) given the data. After all, oil inventory data showed a fall in crude stocks of 1.6 million barrels, a fall in refinery capacity utilisation, and a fall in low-sulphur distillate (automotive fuels). The only bright spot was an increase in high sulphur distillate stocks (which includes heating fuel) - not terribly important in the middle of summer.

The bond market is getting very worrying, too. The long end is looking suicidal; 10-year yields are under 4% again - less than 1 percentage point above Fed Funds. 30-year bonds added another full point (actually they rose 1&6/32), which you ordinarily wouldn't see unless there was some really weak data (and not just the mortgage stats).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1a single repurchase operation - a $6.25billion, overnight repurchase entirely in T-backed collateral. The operation was undertaken at a 2 basis point discount to Fed Funds.

Major US Indices

The Dow Jones Industrial Average opened with a bit of a roar, adding 47 points in the first 5 minutes of trade (at which point its session high was set - at 10646.24 points). The expected repo pump didn't eventuate to any extent worth writing about (the S&P futures rose 2 points between 10 a.m. and 10:30, though - so it wasn't a complete loss). After that, the Dow stalled trying to get past its opening high, dropping 50 points in the following half-hour. The rest of the session was a sideways-to-down waft, eventually showing a headline fall of11.74 points (0.11%), closing out the day at 10587.93 points.

Within the blue-chip index, 14 stocks rose, the biggest gainers being International Business Machines (IBM, +1.07% to $77.23) and 3M (MMM, +0.89% to $77.88), which accounted for 12 Dow points between them. Losers in the Dow numbered 15 and were led by General Motors (GM, -3.04% to $34.82) and Caterpillar (CAT, -1.59% to $100.57), with these two stocks contributing -21 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 194m shares to 112.6m.

The broader S&P500 advanced 0.27 points (0.02%), closing at 1213.88. Within the index, gainers numbered 261, while 228 S&P500 stocks fell for the day. Volume was pretty evenly divided between advancers and decliners with 795.92 million units traded in the winners as compared with 782.45 million traded in the losers.

Over at Times Square, the Nasdaq Composite advanced 0.96 points (0.05%), to close at 2092.03, while larger-cap technology issues fared worse with the Nasdaq100 losing 2.12 points (0.14%), to end at 1534.36 points. Within the tech benchmark, gainers numbered 45, while 54 Nasdaq100 stocks fell for the day. Volume was tilted 1.6:1 in favour of the losers with 393.82 million traded in the losers compared to 246.70 million in the winners .

NYSE Volume was super-chunky, with 1.82 billion shares changing hands, while Nasdaq Volume was chunky, with 1.71 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10587.93-11.74-0.11%
Nasdaq Composite2092.030.960.05%
NYSE Volume1.82bn--
Nasdaq Volume1.71bn--


My 9-stock "bellwethers" group fell by an average of 0.36%

  • General Electric (GE) -$0.43 (1.19%) to $35.72;
  • Citigroup (C) +$0.12 (0.25%) to $47.44;
  • Wal Mart (WMT) +$0.26 (0.54%) to $48.79;
  • I.B.M. (IBM) +$0.82 (1.07%) to $77.23;
  • Intel (INTC) -$0.07 (0.26%) to $27.11;
  • Cisco Systems (CSCO) +$0.03 (0.15%) to $19.80;
  • eBay (EBAY) -$0.51 (1.38%) to $36.39;
  • Fannie Mae (FNM) -$0.81 (1.33%) to $60.27; and
  • Freddie Mac (FRE) -$0.72 (1.07%) to $66.51.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1915 to 1364 for a single-day A/D reading of 551; Nasdaq gainers trumped losers by 1593 to 1423. The 10-day moving average of the A/D line rose to 343.2 on the NYSE, while the 10dma of the Nasdaq A/D rose to 107.8.

NYSE advancing volume exceeded volume in decliners by 978.5 to 757.1 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 876.4 to 791.9 million shares.

246 NYSE-listed stocks rose to new 52-week highs, and 33 posted fresh 52-week lows, while on the Nasdaq there were 138 stocks that hit new 52-week highs, and 44 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)978.5791.91
Declining Volume (m)757.08876.38
New Highs246138
New Lows3344

Market Sentiment Statistics
CBOE Volatility Index11.05-0.03-0.27%
CBOE Nasdaq Volatility Index14.040.614.54%
Equity Put-Call Ratio0.7-0.07-9.09%
10-day PCR0.660.011.54%
SPX-VIX Ratio109.90.320.29%

Bond Market Analysis

Bonds rose hard at the long end, with the yield on the benchmark 30-year Treasury bond shedding 8.2 bps to 4.251%. That is a massive move, as I mentioned in the opening remarks. Bonds all over the world are doing the same - the yield on the Bund is 3.11% now - and in my view it can't possibly be just because of the rate cut by a minor European central bank yesterday.

One more pop upwards and the long bond is very shortable. Very, very shortable. It's already the case that the US is in recession (the 2-10 year spread, along with 10 of the other of my 13 Horsemen, tells you that), but that shouldn't be enough to save the US bond market; supply and demand is massively tilted - longer run - to supply, with the US having eye-popping deficits as far as the eye can see. that's not a world of falling bond prices - which makes it obvious that someone (read: the Fed) is using offshore ('Carribbean') mechanisms to shore up the bond market.

The middle of the yield curve was broadly higher in price as well: five year yields fell to 3.721%, and ten-year yields fell to 3.945%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at -1.0 basis points - you get a discount over Treasuries for taking on corporate paper. Madness

Spreads between longer dated Treasuries and their corporate AAA counterparts rose to 42.0 bps for 10-year AAA, and 93.0 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 2.0 bps tighter at 34.0 basis points and the 10-year AAA-A spread 2.0 bps looser at 13.0 bps.

Treasury Yields
UST 13wk (yld)2.96200%
UST 2Y (yld)3.59-0.08-2.18%
UST 5Y (yld)3.721-0.119-3.1%
UST 10Y (yld)3.945-0.104-2.57%
UST 30Y (yld)4.251-0.082-1.89%

The Banks Index added 0.31 points (0.31%), at 99.93; within the index,

  • Bank Of NY (BK) +$0.29 (0.99%) to $29.58;
  • Northern Trust (NTRS) +$0.45 (0.98%) to $46.45;
  • PNC Financial Services (PNC) +$0.47 (0.86%) to $55.27;
  • Regions Financial (RF) +$0.28 (0.83%) to $34.21; and
  • Mellon Financial (MEL) +$0.23 (0.82%) to $28.40.

The Broker-dealer Index gained 4.44 points (2.95%), closing at 154.85; the ticket clippers lined up as follows -

  • Ameritrade (AMTD) +$3.05 (20.58%) to $17.87;
  • E*Trade (ET) +$0.84 (6.51%) to $13.75;
  • Charles Schwab (SCH) +$0.15 (1.3%) to $11.72;
  • Lehman Brothers (LEH) +$1.23 (1.26%) to $98.92; and
  • Jeffries Group (JEF) +$0.29 (0.77%) to $38.18.

The Philadelphia SOX (Semiconductor) index rose 2.32 points (0.54%), to 433.68

  • Taiwan Semiconductors (TSM) +$0.20 (2.17%) to $9.41;
  • Infineon Tech (IFX) +$0.18 (1.95%) to $9.43;
  • National Semiconductors (NSM) +$0.39 (1.84%) to $21.56;
  • Texas Instruments (TXN) +$0.34 (1.21%) to $28.34; and
  • Applied Materials (AMAT) +$0.20 (1.2%) to $16.89.

Gold & Silver Markets

Gold fell by $0.80 (0.18%) to close at $438.10 per ounce in a pretty dull session. Again, the overnight (Asian) session saw Gold weaker, and again the day session repaired the damage.

The Gold Bugs Index slid 2.53 points (1.27%), ending the day at 196.42

  • Eldorado Gold (EGO) -$0.13 (4.92%) to $2.51;
  • Hecla Mining (HL) -$0.15 (3.22%) to $4.51;
  • Golden Star (GSS) -$0.07 (2.23%) to $3.07;
  • Coeur d'Alene (CDE) -$0.07 (1.94%) to $3.53; and
  • Kinross Gold (KGC) -$0.09 (1.54%) to $5.74.

Silver fell by $0.05 (0.62%) to close at $7.26 per ounce. The Gold and Silver Index (XAU) lost 0.48 points (0.52%), to 91.3 points.

  • Durban Rooderpoert Deep (DROOY) -$0.03 (2.65%) to $1.10;
  • Anglogold Ashanti (AU) -$0.54 (1.55%) to $34.19;
  • Kinross Gold (KGC) -$0.09 (1.54%) to $5.74; and
  • Goldcorp (GG) -$0.18 (1.15%) to $15.45.
Precious Metals and Indices
PHLX Gold and Silver Index91.3-0.48-0.52%
AMEX Gold BUGS Index196.42-2.53-1.27%

Oil Market

Oil lost ground, shedding another $0.52 per barrel despite weak oil inventories data, closing at $58.38 per barrel. It's all part of the usual "kill the breakout traders" fun and games...

The Oil and Gas Index (XOI) advanced 2.3 points (0.26%), to 897.45

  • Marathon Oil (MRO) +$1.20 (2.27%) to $54.05;
  • Sunoco (SUN) +$0.88 (0.78%) to $114.41; and
  • Occidental Petroleum (OXY) +$0.34 (0.43%) to $78.86.

The Oil service stocks (OSX) Index advanced 1.54 points (1.06%), to end the session at 146.48

  • Halliburton (HAL) +$1.24 (2.69%) to $47.40;
  • Tidewater (TDW) +$0.78 (2.09%) to $38.09; and
  • Transocean (RIG) +$1.07 (1.95%) to $55.85.
Energy Complex
Reuters CRB312.020.330.11%
Crude Oil Light Sweet58.38-0.52-0.88%
Heating Oil1.62900.31%
Natural Gas7.499-0.01-0.17%
Unleaded Gas1.62230.010.45%
AMEX Oil Index897.452.30.26%
Oil Service Index146.481.541.06%

Currency Markets

USD Exchange Rates
US Dollar Index88.560.440.5%
Australian Dollar0.7788-0.0021-0.27%
Swiss Franc1.2720.00620.49%
Canadian Dollar0.8101-0.0018-0.22%