Interdum stultus opportuna loquitur...

Friday, July 01, 2005

USRant: 10250 Holds in Post-FOMC Sag...

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

The FOMC decision has come and gone - and as usual they did precisely as expected (a 25 basis point rise in the Fed Funds target to 3.25%). The market trajectory over the last week was not in keeping with the usual pre-FOMC bias - the usual path is a vaguely upside tilt up to the day itself, then a huge hagiographic burst right up to the moment of the decision... followed by a sag into the close.

This week we got a modest upwards tilt in the early part of the week, but today's action was ungratifying for the bulls (albeit without breaking the important 10250 closing barrier that I have written about for over a week now). A pop on the open after reasonable economic data turned sour quite quickly, with the Dow popping up above 10400 in the first ten minutes of trade and then reversing hard (the Dow was only down 3 points when the FOMC decision was announced, so the post-FOMC sag was realised).

Because financial markets just can't help themselves when the big-bank-Sugar-Daddy is on the front pages, there was still a modest uptick in the half-hour before the FOMC decision was announced - about 30 points of Dow gain between 1:30 p.m. and 2:15 p.m. NY time. But it all got given back with interest.

Economic data was mixed but broadly positive -

  • New Jobless Claims better than expectations (310k actual vs consensus of 318k);
  • Personal Income (actual 0.2%; expected 0.4%) and Consumption Spending (actual zero; expected 0.2%) worse than expected;
  • Chicago NAPM at 53.6 (consensus was for 53.0).
All things considered, the data was just 'OK' (the weak consumption spending number should have been the biggest concern, and it was).

Federal Reserve Open Market Operations

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

  • a $12billion, 14-day repurchase with $5.985billion in T-backed collateral ; and
  • a $5.5billion, 5-day repurchase with none of it in T-backed collateral.
It's not unusual for the Fed to deprive da Boyz of repo dosh on FOMC decision days - it gives the appearance of even-handedness. Still, the massive injections into the Mortgage-backed and Agency-backed market indicates yet another set of dislocations regarding the Fannie and Freddie Show. Last time the Fed issued this much repo dough to the mortgage and agency markets was in the weeks before the sacking (oops... resignation, of course) of Fannie Mae CEO Franklin Raines during Fannie's earnings-manipulation frisson.

Major US Indices

As I mentioned - an initial 'pop' (worth almost 40 Dow points) lasted all of ten minutes, and then reversed with a little bit of venom. By the time da Boyz realised that their Sugar Daddy was about to speak it was 1:30 p.m., and the Dow was down at 10350-ish. A mini-rally right through to the actual announcement took the Dow back to within a hair of unchanged, and then the splat hit the fan. For the remainder of the session the selling was in earnest.

The Dow Jones Industrial Average closed with a loss of 99.51 points (0.96%) at 10274.97 points. The index hit an intraday high of 10412.79 after just ten minutes of trade, and fell as low as 10267.22 (the low was set 90 seconds before the closing buzzer).

Within the blue-chip index, only 2 stocks rose - Boeing (BA, +7.02% to $66.00) and Home Depot (HD, +0.26% to $38.90), which accounted for 34 Dow points between them. Boeing's move is a little strange - all it did was appoint a new CEO - its third since December 2003. Still, the thing fell almost 4% yesterday, so half of the gain was just an oversold bounce - the rest was idiocy by numbnuts who think that one guy can reverse a stalling industrial segment (airplane manufacturers across the globe survive solely on government handouts - in the US they pretend not to give them... they call it 'defence contracts' instead; in Europe they just cut the plane-maker a cheque).

Losers in the Dow numbered 28 and were led by 3M (MMM, -4.92% to $72.30) and Du Pont (DD, -3.63% to $43.01), with these two stocks contributing -41 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 412.1m shares to 24.8m (how's that for a volume tilt!).

The broader S&P500 shed 8.52 points (0.71%), ending the day at 1191.33 - remember what I said the other day about providing a floor at 1200 under the S&P for the post-FOMC sag? Within the index, gainers numbered 136, while 356 S&P500 stocks fell for the day. Volume was tilted 3.5:1 in favour of the losers with 1516.41 million units traded in the losers as compared with 429.81 million traded in the winners .

Over at Times Square, the Nasdaq Composite lost 11.93 points (0.58%), to close at 2056.96, while larger-cap technology issues fared worse with the Nasdaq100 losing 10.59 points (0.7%), to end at 1493.52 points - interesting that the Nasdaq100 closed below 1500 (although the Nasdaq100 futures set its low at exactly 1500 and closed at 1503). Within the tech benchmark, gainers numbered 16, while 82 Nasdaq100 stocks fell for the day. Volume was tilted 6.0:1 in favour of the losers with 641.30 million traded in the losers compared to 107.43 million in the winners .

NYSE Volume was super-chunky, with 2.07 billion shares changing hands, while Nasdaq Volume was chunky, with 1.77 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10274.97-99.51-0.96%
Nasdaq Composite2056.96-11.93-0.58%
NYSE Volume2.07bn--
Nasdaq Volume1.77bn--


My 9-stock "bellwethers" group fell by an average of 0.70%

  • General Electric (GE) -$0.35 (1%) to $34.65;
  • Citigroup (C) -$0.55 (1.18%) to $46.23;
  • Wal Mart (WMT) -$0.34 (0.7%) to $48.20;
  • I.B.M. (IBM) -$0.53 (0.71%) to $74.20;
  • Intel (INTC) -$0.23 (0.88%) to $26.02;
  • Cisco Systems (CSCO) -$0.28 (1.45%) to $19.08;
  • eBay (EBAY) +$0.11 (0.33%) to $33.01;
  • Fannie Mae (FNM) -$0.43 (0.73%) to $58.40; and
  • Freddie Mac (FRE) +$0.03 (0.05%) to $65.23.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1751 to 1545, for a single-day A/D reading of -206 (which is not that bad considering the headline falls); and Nasdaq losers exceeded gainers by 1710 to 1347. The 10-day moving average of the A/D line fell to 175.5 on the NYSE, while the 10dma of the Nasdaq A/D fell to -31.9.

On the NYSE declining volume was greater than volume in advancing issues by 1407.5 to 647.8 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1213 to 475.3 million shares.

211 NYSE-listed stocks rose to new 52-week highs, and 32 posted fresh 52-week lows, while on the Nasdaq there were 119 stocks that hit new 52-week highs, and 34 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)647.78475.31
Declining Volume (m)1407.491212.96
New Highs211119
New Lows3234

Market Sentiment Statistics
CBOE Volatility Index12.040.272.29%
CBOE Nasdaq Volatility Index14.4600%
Equity Put-Call Ratio0.65-0.06-8.45%
10-day PCR0.72-0.02-2.24%
SPX-VIX Ratio98.9-2.99-2.94%

Bond Market Analysis

I mentioned yesterday the possibility of a rise back to around 119 for the third bite of the bond-short cherry; the 30-year future just failed to make it - falling one tick short (it set its high at 118&31/32 before turning to close at 118&24/32). today's low in the bond was 118&1/32 - so everyone had the chance of taking a $1000 gain in two sessions and attempting to re-load (short, of course) at higher levels.

The yield on the benchmark 30-year Treasury bond shedding 4.6 bps to 4.219%.

The middle of the yield curve was broadly higher in price: five year yields fell to 3.725%, and ten-year yields fell to 3.945%. So five-year yields and now less than 50 basis points above Fed Funds, and Greensplatt thinks that's nothing to worry about (he doesn't give a shit - he collects his Social Security cheque every month like all aging Randians... weren't they all about individual responsibility?)

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at 2.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 51.0 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 broadly wider with the AAA-A spread on 20-years 4.0 bps tighter at 37.0 basis points and the 10-year AAA-A spread 2.0 bps tighter at 7.0 bps.

Treasury Yields
UST 13wk (yld)3.0600%
UST 2Y (yld)3.62-0.02-0.55%
UST 5Y (yld)3.725-0.044-1.17%
UST 10Y (yld)3.945-0.045-1.13%
UST 30Y (yld)4.219-0.046-1.08%

The Banks Index dipped 0.41 points (0.41%), to end the session at 99.06; within the index,

  • Bank Of America (BAC) -$1.30 (2.77%) to $45.61;
  • Wachovia (WB) -$1.31 (2.57%) to $49.60;
  • Bank Of NY (BK) -$0.54 (1.84%) to $28.78;
  • JPMorganChase (JPM) -$0.64 (1.78%) to $35.32; and
  • State Street (STT) -$0.84 (1.71%) to $48.25.

The Broker-dealer Index shed 1.07 points (0.67%), closing at 159.69; the ticket clippers lined up as follows -

  • Jeffries Group (JEF) -$0.88 (2.27%) to $37.89;
  • Legg Mason (LM) -$2.07 (1.95%) to $104.11;
  • Morgan Stanley (MWD) -$0.85 (1.59%) to $52.47;
  • Merrill Lynch (MER) -$0.65 (1.17%) to $55.01; and
  • Charles Schwab (SCH) -$0.11 (0.97%) to $11.28.

The Philadelphia SOX (Semiconductor) index declined 2.3 points (0.55%), ending the day at 419.07

  • Micron Technology (MU) -$0.24 (2.3%) to $10.21;
  • Teradyne (TER) -$0.23 (1.89%) to $11.97;
  • ST Microelectronic (STM) -$0.27 (1.67%) to $15.94;
  • Marvell Tech Group (MRVL) -$0.46 (1.2%) to $37.97; and
  • Infineon Tech (IFX) -$0.09 (0.96%) to $9.25.

Gold & Silver Markets

Gold fell by $1.60 (0.36%) to close at $436.80 per ounce. It's primed, but everybody's nervous about what happened last time Gold stuck its head above $440...

The Gold Bugs Index lost 1.54 points (0.76%), ending the day at 201.56

  • Golden Star (GSS) -$0.10 (3.13%) to $3.10;
  • Hecla Mining (HL) -$0.09 (1.94%) to $4.56;
  • Newmont Mining (NEM) -$0.70 (1.76%) to $39.03;
  • Randgold Resources (GOLD) -$0.25 (1.75%) to $14.06; and
  • Goldcorp (GG) -$0.22 (1.38%) to $15.78.

Silver fell by $0.03 (0.42%) to close at $7.05 per ounce. The Gold and Silver Index (XAU) lost 1.54 points (1.63%), to 93.01 points.

  • Durban Rooderpoert Deep (DROOY) -$0.05 (5.38%) to $0.88;
  • Barrick Gold (ABX) -$0.77 (2.98%) to $25.03;
  • Anglogold Ashanti (AU) -$0.79 (2.16%) to $35.73; and
  • Placer Dome (PDG) -$0.33 (2.1%) to $15.38.
Precious Metals and Indices
PHLX Gold and Silver Index93.01-1.54-1.63%
AMEX Gold BUGS Index201.56-1.54-0.76%

Oil Market

Oil lost ground, shedding another $0.60 per barrel, closing at $56.55 per barrel. I still don't think that this is 'the' pullback in Crude - it started in the wrong place. Still, it's performing its function - cutting the heart out of idiots who bought like blazes when the market broke $60.

The Oil and Gas Index (XOI) shed 6.43 points (0.72%), to 888.8

  • BP (BP) -$1.17 (1.84%) to $62.38;
  • Exxon Mobil (XOM) -$0.97 (1.66%) to $57.47; and
  • ChevronTexaco (CVX) -$0.84 (1.48%) to $55.92.

The Oil service stocks (OSX) Index slid 0.2 points (0.14%), ending the day at 146.15

  • Cooper Cameron (CAM) -$0.83 (1.32%) to $62.05;
  • Weatherford International (WFT) -$0.64 (1.09%) to $57.98; and
  • Schlumberger (SLB) -$0.79 (1.03%) to $75.94.
Energy Complex
Reuters CRB306.91-1.88-0.61%
Crude Oil Light Sweet56.55-0.6-1.05%
Heating Oil1.640.021.08%
Natural Gas6.99-0.11-1.49%
Unleaded Gas1.573-0.01-0.88%
AMEX Oil Index888.8-6.43-0.72%
Oil Service Index146.15-0.2-0.14%

Currency Markets

USD Exchange Rates
US Dollar Index89.09-0.02-0.02%
Australian Dollar0.76250.00060.08%
Swiss Franc1.2812-0.0011-0.09%
Canadian Dollar0.81630.00230.28%