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Economic data soft? Hell, that ain't a problem... just get a bureaucrat to make a baseball analogy or two, and give the hopeful something to cling to. If it wasn't so cheesy it would be funny. This session we had the ISM (formerly the NAPM) Survey; I've already mentioned how it's a pointless number, but folks still actually believe in it... it was 51.4, short of consensus expectations for 52.0.
At precisely the same time, Construction Spending numbers were also slightly softer than expectations (0.5% growth versus expectations of 0.6%) - but the key was the waffling bureaucrat who helped the market 'absorb' those squishy numbers.
See, some guy (Richard Fisher) who is in charge of one of the Fed's branches (Dallas) weighed in... the Fed is 'eight innings in' to its tightening cycle, he reckons; that is shorthand for the next tightening being the last. In other words, the Fed couldn't give a shit about fixing the property bubble (which Greenspan has belatedly recognised), nor about other types of asset and goods inflation: they've sold the economy a bill of goods by getting them to concentrate of 'core' inflation and hedonicised output numbers.
The name Fisher conjures up visions of 1929. After all it was another Fisher (Irving) whose prognostications about stock prices in 1929 are now so famous. Permanently high plateau (Oct 1929), no recession after the crash (Nov 1929), things are looking up (1930).
The data was soft, but the market absolutely rocketed the moment Fisher's 'end of the tightening cycle' left his bureaucratic gob. The Dow rose 110 points in the following 90 minutes.
It's the same strange hope that was present in the Australian market; the idea that a an increase in the shitfulness of the economic statistics will prevent the Soviet-style central monetary planners from hiking rates.Here's a hint for you... bad economic statistics means falling profits. Falling profits means less free cash flows to equity. In a market already starved of distributable cash, a slowing economy is not going to help, regardless of the fact that you get to use a lower hurdle to discount future cash flows.
Oh - another reason proffered for the sudden change of heart, is the 'Non' vote by the French (and the 'Nr' vote by the Dutch) over the EU constitution. Sure, it has affected nuffnuff analyses of the prospects for the Euro - but the Euro has done just fine without another massive wad of paper giving bureaucrats the right to interfere in economic affairs... that's half the strength of the entire eurozone.What have the markets become? A vehicle for the expression of a preference for central planning? Hanging on the every word of people who can't cut it in private enterprise (like Greenspan), getting antsy about the failure of a socialist cancer at the heart of Europe... hardly what would happen under a genuine 'free enterprise' culture.
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 1 repurchase operation - a $3.5billion, overnight repurchase entirely in T-backed collateral. With that little money on the table, even the bureaucratic jawboning shouldn't have resulted in a rally that genuinely 'stuck'.
Major US Indices
The Dow Jones Industrial Average advanced 82.39 points (0.79%), closing out the day at 10549.87 points. The index hit an intraday high of 10586.37 just after 11:30 a.m. NY time, having opened with a little dip to a low at 10457.91 points.
Within the blue-chip index, 24 stocks rose, the biggest gainers being Alcoa (AA, +2.07% to $27.65) and Procter & Gamble (PG, +1.76% to $56.15), which accounted for 11 Dow points between them. Losers in the Dow numbered 6 and were led by General Motors (GM, -0.44% to $31.39) and SBC Communications (SBC, -0.43% to $23.29), with these two stocks contributing -2 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 312.3m shares to 42.7m.
The broader S&P500 rose 10.72 points (0.9%), at 1202.22. Within the index, gainers numbered 402, while 90 S&P500 stocks fell for the day. Volume was tilted 5.6:1 in favour of the winners with 1.43 billion units traded in the winners as compared with 255.02 million traded in the losers .
Over at Times Square, the Nasdaq Composite added 19.64 points (0.95%), to close at 2087.86, while larger-cap technology issues fared better with the Nasdaq100 adding 16.87 points (1.09%), to end at 1559.5 points. Within the tech benchmark, gainers numbered 81, while 17 Nasdaq100 stocks fell for the day. Volume was tilted 9.1:1 in favour of the winners with 643.09 million traded in the winners compared to 70.41 million in the losers .
NYSE Volume was super-chunky, with 1.84 billion shares changing hands, while Nasdaq Volume was chunky, with 1.83 billion shares being shifted around like poker chips.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10549.87 | 82.39 | 0.79% |
| S&P500 | 1202.22 | 10.72 | 0.9% |
| Nasdaq Composite | 2087.86 | 19.64 | 0.95% |
| Nasdaq100 | 1559.5 | 16.87 | 1.09% |
| NYSE Volume | 1.84bn | - | - |
| Nasdaq Volume | 1.83bn | - | - |
Bellwethers
My 9-stock "bellwethers" group rose by an average of 1.45%
- General Electric (GE) +$0.45 (1.23%) to $36.94;
- Citigroup (C) +$0.61 (1.3%) to $47.70;
- Wal Mart (WMT) +$0.69 (1.46%) to $47.91;
- I.B.M. (IBM) +$1.29 (1.71%) to $76.85;
- Intel (INTC) +$0.33 (1.22%) to $27.29;
- Cisco Systems (CSCO) +$0.24 (1.24%) to $19.64;
- eBay (EBAY) +$1.11 (2.92%) to $39.11;
- Fannie Mae (FNM) -$0.28 (0.47%) to $58.94; and
- Freddie Mac (FRE) +$1.60 (2.46%) to $66.68.
Market Breadth & Internals
NYSE advancing Issues exceeded decliners by 2438 to 886 for a single-day A/D reading of 1552; manic. Nasdaq gainers trumped losers by 1993 to 1095. The 10-day moving average of the A/D line rose to 645.9 on the NYSE, while the 10dma of the Nasdaq A/D rose to 295.9.
NYSE advancing volume exceeded volume in decliners by 1410.5 to 384.1 million shares; Nasdaq advancing volume was greater than volume in decliners by 1410.1 to 388.2 million shares.
220 NYSE-listed stocks rose to new 52-week highs, and 23 posted fresh 52-week lows, while on the Nasdaq there were 111 stocks that hit new 52-week highs, and 55 which fell to fresh 52-week lows.
| Market Breadth Statistics | ||
|
|
NYSE | Nasdaq |
| Advancers | 2438 | 1993 |
| Decliners | 886 | 1095 |
| Advancing Volume (m) | 1410.48 | 1410.06 |
| Declining Volume (m) | 384.07 | 388.15 |
| New Highs | 220 | 111 |
| New Lows | 23 | 55 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 12.36 | -0.93 | -7% |
| CBOE Nasdaq Volatility Index | 15.87 | -0.21 | -1.31% |
| Equity Put-Call Ratio | 0.6 | 0 | 0% |
| 10-day PCR | 0.66 | -0.01 | -2.07% |
| SPX-VIX Ratio | 97.3 | 7.61 | 8.49% |
Bond Market Analysis
Bonds rose strongly at the long end, with the yield on the benchmark 30-year Treasury bond shedding 8.4 bps to 4.263%. The 30-year T-bond future closed at 118&13/32; it is so ripe for a fall that I almost salivate when I think about it.
The middle of the yield curve
was broadly higher: five year yields fell to 3.635%, and ten-year
yields fell to 3.907%. There is now less than 50 basis points between
the yield on 2-year notes and the yield on 10-year bonds; that is
insane, and only happens during recessions. Shorting the long end of
the curve is such a slam-dunk that I am actually too contrarian to do
it (it's a Catch-22... if it's that obvious, it must be a trap). Not
yet, anyhow...
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at 5.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 73.0 bps for 10-year AAA, and 101.5 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 9.0 bps wider at 50.0 basis points and the 10-year AAA-A spread unchanged at -19.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 2.907 | 0 | 0% |
| UST 2Y (yld) | 3.46 | -0.1 | -2.81% |
| UST 5Y (yld) | 3.635 | -0.118 | -3.14% |
| UST 10Y (yld) | 3.907 | -0.099 | -2.47% |
| UST 30Y (yld) | 4.263 | -0.084 | -1.93% |
The Banks Index rose 0.99 points (1.01%), to 99.48; within the index,
- Keycorp (KEY) +$0.80 (2.47%) to $33.22;
- Mellon Financial (MEL) +$0.59 (2.13%) to $28.35;
- Zions Bancorp (ZION) +$1.49 (2.1%) to $72.33;
- BB&T Corp (BBT) +$0.77 (1.93%) to $40.69; and
- Comerica (CMA) +$1.01 (1.81%) to $56.88.
The Broker-dealer Index added 1.81 points (1.25%), ending the day at 147.07; the ticket clippers lined up as follows -
- Legg Mason (LM) +$2.11 (2.57%) to $84.23;
- Jeffries Group (JEF) +$0.84 (2.37%) to $36.30;
- Morgan Stanley (MWD) +$1.11 (2.27%) to $50.05;
- Merrill Lynch (MER) +$0.90 (1.66%) to $55.17; and
- Raymond James (RJF) +$0.39 (1.45%) to $27.30.
The Philadelphia SOX (Semiconductor) index posted a rise of 3.16 points (0.74%), ending the day at 432.11
- Advanced Micro Devices (AMD) +$0.32 (1.95%) to $16.72;
- Teradyne (TER) +$0.25 (1.92%) to $13.26;
- Freescale Semiconductors (FSL-B) +$0.35 (1.73%) to $20.58;
- ST Microelectronic (STM) +$0.26 (1.67%) to $15.85; and
- Xilinx (XLNX) +$0.37 (1.33%) to $28.14.
Gold & Silver Markets
Gold fell by another $1 (0.24%) to close at $415.30 per ounce.
The Gold Bugs Index rose 4.89 points (2.63%), at 190.67
- Coeur d'Alene (CDE) +$0.18 (5.39%) to $3.52;
- Iamgold (IAG) +$0.32 (4.96%) to $6.77;
- Harmony Gold (HMY) +$0.30 (3.92%) to $7.95;
- Gold Fields (GFI) +$0.43 (3.91%) to $11.43; and
- Glamis Gold (GLG) +$0.52 (3.64%) to $14.80.
Silver rose $0.07 (0.91%) to close at $7.52 per ounce. The Gold and Silver Index (XAU) gained 1.7 points (1.97%), at 87.97 points.
- Harmony Gold (HMY) +$0.30 (3.92%) to $7.95;
- Gold Fields (GFI) +$0.43 (3.91%) to $11.43;
- Goldcorp (GG) +$0.43 (3.16%) to $14.03; and
- Meridian Gold (MDG) +$0.49 (2.97%) to $17.01.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 415.30 | -1.00 | -0.24% |
| Silver | 7.52 | 0.07 | 0.91% |
| PHLX Gold and Silver Index | 87.97 | 1.7 | 1.97% |
| AMEX Gold BUGS Index | 190.67 | 4.89 | 2.63% |
Oil Market
Oil was very strong, rising by $2.63 per barrel (over 5%) to close at $54.60 per barrel. IT didn't have a weak moment during the entire session - yet again, there looks to have been information leakage about tomorrow's Oil Inventories data.
The Oil and Gas Index (XOI) gained 14.47 points (1.75%), closing at 840.88
- Sunoco (SUN) +$3.13 (3.05%) to $105.68;
- Amerada Hess (AHC) +$2.58 (2.78%) to $95.43; and
- Occidental Petroleum (OXY) +$1.70 (2.33%) to $74.80.
The Oil service stocks (OSX) Index advanced 1.31 points (0.97%), closing at 135.8
- Nabors Industries (NBR) +$1.65 (2.99%) to $56.76;
- Transocean (RIG) +$0.80 (1.61%) to $50.59; and
- Global Industries (GLBL) +$0.13 (1.52%) to $8.67.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 304.33 | 3.44 | 1.14% |
| Crude Oil Light Sweet | 54.6 | 2.63 | 5.06% |
| Heating Oil | 1.54 | 0.09 | 6.24% |
| Natural Gas | 6.789 | 0.41 | 6.43% |
| Unleaded Gas | 1.5442 | 0.08 | 5.3% |
| AMEX Oil Index | 840.88 | 14.47 | 1.75% |
| Oil Service Index | 135.8 | 1.31 | 0.97% |
Currency Markets
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 88.1 | 1.68 | 1.94% |
| Euro | 1.2177 | -0.0125 | -1.02% |
| Yen | 108.74 | 0.19 | 0.18% |
| Sterling | 1.809 | -0.0079 | -0.43% |
| Australian Dollar | 0.7493 | -0.0063 | -0.83% |
| Swiss Franc | 1.2574 | 0.0096 | 0.77% |
| Canadian Dollar | 0.8007 | 0.004 | 0.5% |
