Interdum stultus opportuna loquitur...

Thursday, June 23, 2005

USRant: That's More Like It...

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

We all know that I'm not a fan of finance journalism, but today really bears it out. Today's journotrash-du-jour is the front-page headline on Yahoo Finance: "Dow Plunges 166 As Oil Surges Past $60". The pillock who wrote it is called Michael J. Martinez, and he is obviously an dullard or a man who can't read a quote machine.

Oil did not 'surge past $60' - the high for the day in the front-month contract was exactly $60. If this clown is using the out-months as his basis, there's no news -  the September crude contract closed above $60 yesterday. Even the August contract has already been above $60 (on Monday).

Besides, if $60 was so important, the market would have reacted worse on Monday - the first time August crude got through $60.

There is a brilliant Australian-ism for this guy (and for most 'one-line' journalists): Drongo.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 2 repurchase operations.

  • a $6.25billion, overnight repurchase entirely in T-backed collateral; and
  • a $8billion, 14-day repurchase entirely in T-backed collateral.
It's always interesting to see what happens when the money that's handed out to the big boys doesn't come with an embedded profit-guarantee - that is, when it's done at a premium to the Fed Funds rate (FFR). Today's repurchases were performed at 2 and 7 basis points above FFR, and they resulted in zero market traction.

Sure, a 10-a.m. buy based on the repo size yielded a quick 2-point S&P scalp, but 'quick' has to be defined loosely... it took an hour and 45 minutes to accumulate. Slow development of a repo-burst - in the face of a big-assed repo - is always been a tell-tale sign, and I've alluded to it before.

Major US Indices

What did I say last week? To refresh the memory, here's what was in the post-match analysis for the Friday session:

Still, the technical picture alone, says that the market can make new highs (in the Dow - the Nasdaq will never see 5000 again) before the next major fan-splat; the next minor fan-splat should arrive next week.

It's always nice when a plan comes together.

The Dow Jones Industrial Average never exceeded its opening level during today's session; it opened 'UNCH' (it usually does, thanks to the calculation mechanism and the 'specialist' system that opens different stocks at different times). The economic news was neutral (new jobless claims better than expected, new home sales worse than expected).

Sure, oil was stronger - but it did not 'surge past $60' as some journalists have misleadingly stated in their post-match analyses: it topped at precisely $60 in the front-month August contract (the forward months have been above $60 twice in the last week).

Corporate news wasn't bad, either: CNOOC reaffirmed that it is going to bid for Unocal - the former employer of Israel's pet Afghan Hamid Karzai. Makes sense - if China wants to secure  oil and gas supplies, their recent positioning (make friends with Venezuela, make friends in Sudan, make friends with Iran) leads naturally to the acquisition of companies who have connections to US stooges around the planet.

Anyhow - this is by way of saying that there was no obvious catalyst for the market's drop today - except that it didn't have enough low-priced cash pumped in by the Fed (and of course, it also had to fulfill my prophecy).

With the exception of one minor little uptick from 10 a.m. to 11:45, the market had a coast-to-coast decline, eventually closing with a decline of166.49 points (1.57%) at 10421.44 points on the Dow.

The index closed less than 2 Dow points from its low (which was 10419.6), which was set in the final minute.

Within the blue-chip index, only 2 stocks rose - Microsoft (MSFT, +0.96% to $25.31) and Pfizer (PFE, +0.38% to $28.90), which accounted for just 3 Dow points between them. Losers in the Dow numbered 28 and were led by General Motors (GM, -2.84% to $33.83) and 3M (MMM, -2.58% to $75.87), with these two stocks contributing -23 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 292.9m shares to 131.4m.

The broader S&P500 slid 13.15 points (1.08%), to end the session at 1200.73 (note that 1200 was never breached during the session). Within the index, gainers numbered 103, while 391 S&P500 stocks fell for the day. Volume was tilted 2.4:1 in favour of the losers with 1429.15 million units traded in the losers as compared with 606.82 million traded in the winners .

Over at Times Square, the Nasdaq Composite lost 21.37 points (1.02%), to close at 2070.66, while larger-cap technology issues fared worse with the Nasdaq100 losing 18.41 points (1.2%), to end at 1515.95 points. Within the tech benchmark, gainers numbered 17, while 83 Nasdaq100 stocks fell for the day. Volume was tilted 2.8:1 in favour of the losers with 704.73 million traded in the losers compared to 254.45 million in the winners .

NYSE Volume was super-chunky, with 2.01 billion shares changing hands, while Nasdaq Volume was likewise super-chunky (over 2 bill), with 2.05 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10421.44-166.49-1.57%
Nasdaq Composite2070.66-21.37-1.02%
NYSE Volume2.01bn--
Nasdaq Volume2.05bn--


My 9-stock "bellwethers" group fell by an average of 1.89%

  • General Electric (GE) -$0.84 (2.37%) to $34.66;
  • Citigroup (C) -$0.56 (1.18%) to $46.88;
  • Wal Mart (WMT) -$0.91 (1.87%) to $47.88;
  • I.B.M. (IBM) -$1.82 (2.36%) to $75.41;
  • Intel (INTC) -$0.34 (1.25%) to $26.77;
  • Cisco Systems (CSCO) -$0.02 (0.1%) to $19.78;
  • eBay (EBAY) -$1.95 (5.36%) to $34.44;
  • Fannie Mae (FNM) -$0.98 (1.63%) to $59.29; and
  • Freddie Mac (FRE) -$0.59 (0.89%) to $65.92.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 2197 to 1075, for a single-day A/D reading of -1122; and Nasdaq losers exceeded gainers by 2157 to 919. The 10-day moving average of the A/D line fell to 79.4 on the NYSE, while the 10dma of the Nasdaq A/D fell to -134.5.

On the NYSE declining volume was greater than volume in advancing issues by 1384.7 to 587.1 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1372.3 to 621.8 million shares.

277 NYSE-listed stocks rose to new 52-week highs, and 42 posted fresh 52-week lows, while on the Nasdaq there were 140 stocks that hit new 52-week highs, and 56 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)587.14621.84
Declining Volume (m)1384.71372.26
New Highs277140
New Lows4256

Market Sentiment Statistics
CBOE Volatility Index12.091.049.41%
CBOE Nasdaq Volatility Index15.071.037.34%
Equity Put-Call Ratio0.750.057.14%
10-day PCR0.680.022.73%
SPX-VIX Ratio99.3-10.54-9.59%

Bond Market Analysis

Bonds fell at the long end, but only marginally (just 4 ticks on the 30-year bond futures). The yield on the benchmark 30-year Treasury bond rising 0.6 bps to 4.257%.

The middle of the yield curve was broadly lower in price: five year yields rose to 3.744%, and ten-year yields rose to 3.959%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps wider at zero; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 45.0 bps for 10-year AAA, and 91.0 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 10.0 bps wider at 44.0 basis points and the 10-year AAA-A spread 1.0 bps tighter at 12.0 bps.

Treasury Yields
UST 13wk (yld)300%
UST 2Y (yld)3.5900%
UST 5Y (yld)3.7440.0230.62%
UST 10Y (yld)3.9590.0140.35%
UST 30Y (yld)4.2570.0060.14%

The Banks Index dipped 1.15 points (1.15%), to end the session at 98.78; within the index,

  • Northern Trust (NTRS) -$1.14 (2.45%) to $45.31;
  • National City Corp (NCC) -$0.65 (1.86%) to $34.30;
  • Wachovia (WB) -$0.94 (1.85%) to $49.96;
  • North Fork Bancorp (NFB) -$0.50 (1.77%) to $27.80; and
  • US Bancorp (USB) -$0.49 (1.67%) to $28.90.

The Broker-dealer Index rose 0.31 points (0.2%), closing at 155.16; the ticket clippers lined up as follows -

  • E*Trade (ET) +$0.35 (2.55%) to $14.10;
  • Morgan Stanley (MWD) +$1.20 (2.38%) to $51.72;
  • Ameritrade (AMTD) +$0.38 (2.13%) to $18.25;
  • Charles Schwab (SCH) +$0.02 (0.17%) to $11.74; and
  • Legg Mason (LM) -$0.21 (0.25%) to $84.99.

The Philadelphia SOX (Semiconductor) index rose 1.57 points (0.36%), to 435.25

  • Maxim Integrated (MXIM) +$1.00 (2.61%) to $39.31;
  • Broadcom (BRCM) +$0.84 (2.31%) to $37.27;
  • Micron Technology (MU) +$0.23 (2.17%) to $10.83;
  • Freescale Semiconductors (FSL-B) +$0.42 (1.89%) to $22.64; and
  • Marvell Tech Group (MRVL) +$0.32 (0.82%) to $39.47.

Gold & Silver Markets

Gold rose $5.10 (1.16%) to close at $443.20 per ounce. I have a sneaking suspicion that I've stuffed up here - that perhaps the closing quote is the August contract, but it's being compared to yesterday's close in the July. If So I will correct it tomorrow.

More importantly, check out the divergence between Gold and the USD over the last month; the USD hasn't budged much from the 89s, and yet Gold has stacked on about ten bucks. something's gotta give, and I think it's more likely to be Gold in the short term. The USD is screwed long term, but Gold still has some nuffie-killing to perform.

The Gold Bugs Index advanced 1.28 points (0.65%), ending the day at 197.7

  • Golden Star (GSS) +$0.12 (3.91%) to $3.19;
  • Glamis Gold (GLG) +$0.50 (3.06%) to $16.83;
  • Kinross Gold (KGC) +$0.13 (2.26%) to $5.87;
  • Hecla Mining (HL) +$0.07 (1.55%) to $4.58; and
  • Goldcorp (GG) +$0.21 (1.36%) to $15.66.

Silver rose $0.01 (0.18%) to close at $7.27 per ounce. The Gold and Silver Index (XAU) gained 0.49 points (0.54%), ending the day at 91.79 points.

  • Kinross Gold (KGC) +$0.13 (2.26%) to $5.87;
  • Anglogold Ashanti (AU) +$0.51 (1.49%) to $34.70;
  • Goldcorp (GG) +$0.21 (1.36%) to $15.66; and
  • Gold Fields (GFI) +$0.14 (1.32%) to $10.71.
Precious Metals and Indices
PHLX Gold and Silver Index91.790.490.54%
AMEX Gold BUGS Index197.71.280.65%

Oil Market

Oil was firmer, rising by $1.18 per barrel, closing at $59.56 per barrel. Its session high (basis the front-month August contract) was exactly $60, and do not let any journalist tell you otherwise.

The cash quote for WTI crude closed at $57.85 yesterday, and will not have exceeded $59.10 today (the cash quote is not posted until about 8 p.m. US time, but it can be broadly inferred from the price move of the front-month), so talk of oil 'surging' through $60 is bullshit that you could only expect from a journalist scratching around for a one-line reason why the market splatted today.

The Oil and Gas Index (XOI) dipped 0.26 points (0.03%), ending the day at 897.19

  • ChevronTexaco (CVX) -$0.94 (1.61%) to $57.33;
  • Exxon Mobil (XOM) -$0.65 (1.09%) to $59.02; and
  • ConocoPhillips (COP) -$0.40 (0.68%) to $58.01.

The Oil service stocks (OSX) Index advanced 1.44 points (0.98%), to 147.92

  • Transocean (RIG) +$1.28 (2.29%) to $57.13;
  • Noble Corp (NE) +$1.36 (2.2%) to $63.23; and
  • National Oilwells/Varco (NOV) +$0.84 (1.8%) to $47.55.
Energy Complex
Reuters CRB313.031.010.32%
Crude Oil Light Sweet59.561.182.02%
Heating Oil1.67410.052.77%
Natural Gas7.5090.010.13%
Unleaded Gas1.6550.032.02%
AMEX Oil Index897.19-0.26-0.03%
Oil Service Index147.921.440.98%

Currency Markets

USD Exchange Rates
US Dollar Index89.030.470.53%
Australian Dollar0.7726-0.0062-0.8%
Swiss Franc1.27890.00690.54%
Canadian Dollar0.81170.00160.2%