Interdum stultus opportuna loquitur...

Wednesday, July 13, 2005

USRant: Indestructible Certificates and Other Oddities...

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T he first word that pops into my head when I see today's numbers is "Hmmmm....". It's not even really a word, I guess. It's one of those noises that your brain makes when you discover that a crash that melted a steel skyscraper (causing the first fire-induced sky-scraper collapse in history), left a passport unscathed. Or when a bomb on a London train didn't damage the perpetrator's birth certificate (how far was he from this non-paper-cutting bomb?).

Perhaps the bomber ought to have used scissors - scissors cut paper in "Rock-Paper-Scissors", but obviously bombs don't get the same job done. And who doesn't carry their Birth Certificate with them at all times? I'm forever dropping mine when I get out my ATM card (where is your Birth Certificate, Dear Reader? Can you think where it is at this moment, off the top of your head?).

Frankly, I'm so cynical that I no longer even believe that George the Turd PUS or Tony B.Liar are even real people - otherwise they would blush when they were caught red-handed, lying the planet towards Doomsday. Howard the Chimp and Pudgy Downer are real people though - they're just sycophantic idiots who drop to their knees in the presence of power like $20 crack-whores (or like Jeff Gannon, the "he-whore" who gets to stay at the White House... not that there's anything wrong with that...).

Anyhow - back to the "Hmmmm..." hypothesis. The "Hmmmm..." comes as a result of watching the market's muted response to

  • a 5% fall in Mortgage Purchase Applications (and a 6% fall in refinancing);
  • a slight narrowing of the Trade Balance (to $55.3 billion compared to expectations of $57.5 billion); and
  • a 3.9 million barrel drawdown in Crude Inventories.

Crude actually fell on that news - which goes to what I was saying last week about expecting a perverse reaction to the news (clearly, relief over the lack of carnage from Hurricane Dennis helped clamp down on Crude).

You always expect a muted market  response when the Fed doesn't dole out much repurchase dough though - and last night they left da Boyz wanting more. Still, that 10750 number is losing its time window.

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.25billion, overnight repurchase entirely in T-backed collateral, but it was struck just 5 basis points below Fed Funds. With that little repo (the notional cutoff is $5 billion for a good jamjob), and that little 'guaranteed carry', da Boys had Sisyphus' job to do... but they managed to get it done.

Major US Indices

The Dow Jones Industrial Average gained 43.5 points (0.41%), closing out the day at 10557.39 points. The index hit an intraday high of 10564.91 at 12:30 p.m., after falling as low as 10512.36 during the first few minutes of the session. The 10600s (and low 10700s) had better happen real soon, or I am going to change my bias to selling intraday overbought/divergent/TICK extremes. Frankly, this thing looks like it's on its last legs, despite the apparent strength in the Dow.

Within the blue-chip index, 24 stocks rose, the biggest gainers being International Business Machines (IBM, +1.76% to $81.45) and Mcdonalds (MCD, +1.47% to $29.59), which accounted for 14 Dow points between them. Losers in the Dow numbered 6 and were led by Alcoa (AA, -0.87% to $27.42) and Home Depot (HD, -0.77% to $40.98), with these two stocks contributing -4 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 218.5m shares to 92.6m.

The broader S&P500 posted a rise of just 1.08 points (0.09%), to end the session at 1223.29. Within the index, gainers numbered 254, while 236 S&P500 stocks fell for the day. Volume was tilted 1.7:1 in favour of the winners with 1019.78 million units traded in the winners as compared with 588.37 million traded in the losers .

Over at Times Square, the Nasdaq Composite rose 0.96 points (0.04%), to close at 2144.11, while larger-cap technology issues fared better with the Nasdaq100 adding 2.03 points (0.13%), to end at 1557.62 points. Within the tech benchmark, gainers numbered 53, while 45 Nasdaq100 stocks fell for the day. Volume was tilted 2.1:1 in favour of the winners with 402.44 million traded in the winners compared to 187.97 million in the losers .

NYSE Volume was super-chunky, with 1.81 billion shares changing hands, while Nasdaq Volume was about average, with 1.54 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10557.3943.50.41%
Nasdaq Composite2144.110.960.04%
NYSE Volume1.81bn--
Nasdaq Volume1.54bn--


My 9-stock "bellwethers" group rose by an average of 0.08%... keep your eyes on Citigroup (as I have been saying for two weeks). It's non-participation recently is a very good (subtle) sign that da Boyz aren't ready to roll from here.

  • General Electric (GE) +$0.08 (0.23%) to $35.18;
  • Citigroup (C) -$0.26 (0.57%) to $45.74;
  • Wal Mart (WMT) +$0.05 (0.1%) to $50.14;
  • I.B.M. (IBM) +$1.41 (1.76%) to $81.45;
  • Intel (INTC) -$0.16 (0.58%) to $27.59;
  • Cisco Systems (CSCO) +$0.19 (0.96%) to $19.97;
  • eBay (EBAY) -$0.57 (1.61%) to $34.93;
  • Fannie Mae (FNM) +$0.40 (0.68%) to $59.30; and
  • Freddie Mac (FRE) -$0.20 (0.3%) to $66.35.

Market Breadth & Internals

Despite the impressive Dow number, NYSE declining issues beat out advancers by 1790 to 1458, for a single-day A/D reading of -332; and Nasdaq losers exceeded gainers by 1683 to 1374. The 10-day moving average of the A/D line fell to 479.6 on the NYSE, while the 10dma of the Nasdaq A/D fell to 281.8.

Despite the decliners outnumbering advancers, NYSE advancing volume exceeded volume in decliners by 920.7 to 833 million shares; Nasdaq advancing volume was greater than volume in decliners by 932.7 to 548.8 million shares.

251 NYSE-listed stocks rose to new 52-week highs, and 22 posted fresh 52-week lows, while on the Nasdaq there were 132 stocks that hit new 52-week highs, and 26 which fell to fresh 52-week lows. We're getting to the tail end of a run when so few stocks are making new lows; this weekend's Sentiment Analysis for the Dow will include some exchange-wide Bullish Percent Indices, which also show cause for concern.

Market Breadth Statistics

Advancing Volume (m)920.7932.65
Declining Volume (m)833548.83
New Highs251132
New Lows2226

Market Sentiment Statistics
CBOE Volatility Index10.82-0.15-1.37%
CBOE Nasdaq Volatility Index14.950.171.15%
Equity Put-Call Ratio0.670.2145.65%
10-day PCR0.530.011.92%
SPX-VIX Ratio113.11.641.48%

Bond Market Analysis

Bonds fell a little at the long end, with the yield on the benchmark 30-year Treasury bond rising 1.5 bps to 4.398%. the 30-year bond future dipped as low as 116-08/32, before settling at 116-13/32. I try to comfort myself that the London bomb (which could rip people to shreds, but couldn't harm a Birth Certificate) was the primary cause for being stopped out (with a nice 22% profit) on the second half of the short from 119-03/32, and that 'but for...' - but that's sissy talk. Simply put, the thing should've been re-entered.

The middle of the yield curve was broadly lower in price: five year yields rose to 3.959%, and ten-year yields rose to 4.163%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at -4.0 basis points (crazy); spreads between longer dated Treasuries and their corporate AAA counterparts rose to 42.0 bps for 10-year AAA, and 82.0 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 5.0 bps wider at 43.0 basis points and the 10-year AAA-A spread 3.0 bps tighter at 14.0 bps.

Treasury Yields
UST 13wk (yld)3.14500%
UST 2Y (yld)3.820.010.26%
UST 5Y (yld)3.9590.0220.56%
UST 10Y (yld)4.1630.0220.53%
UST 30Y (yld)4.3980.0150.34%

The Banks Index rose 0.56 points (0.56%), ending the day at 101.06; within the index,

  • Golden West Financial (GDW) +$1.88 (2.86%) to $67.57;
  • BB&T Corp (BBT) +$0.74 (1.8%) to $41.95;
  • Zions Bancorp (ZION) +$1.16 (1.68%) to $70.39;
  • Northern Trust (NTRS) +$0.70 (1.45%) to $48.82; and
  • Comerica (CMA) +$0.62 (1.05%) to $59.86.

The Broker-dealer Index gained 0.08 points (0.05%), at 167.85; the ticket clippers lined up as follows -

  • Merrill Lynch (MER) +$0.62 (1.09%) to $57.45;
  • Charles Schwab (SCH) +$0.13 (1.04%) to $12.61;
  • Lehman Brothers (LEH) +$0.79 (0.76%) to $104.49;
  • Goldman Sachs (GS) +$0.76 (0.71%) to $108.00; and
  • A G Edwards (AGE) +$0.32 (0.69%) to $46.57.

The Philadelphia SOX (Semiconductor) index rose 2.05 points (0.45%), to 458.15

  • Marvell Tech Group (MRVL) +$0.86 (2.11%) to $41.55;
  • ST Microelectronic (STM) +$0.17 (0.98%) to $17.53;
  • Freescale Semiconductors (FSL-B) +$0.20 (0.83%) to $24.27;
  • Altera (ALTR) +$0.16 (0.73%) to $22.07; and
  • Xilinx (XLNX) +$0.20 (0.72%) to $27.99.

Gold & Silver Markets

Gold fell by $3.00 (0.7%) to close at $424.7 per ounce as the dip in Crude and the better than expected Trade data helped the US Dollar Index. I mentioned last week that the USD might give gold bulls as scare - just to use up the last little bit of time it had before its reversal downwards.

The Gold Bugs Index lost 1.35 points (0.66%), at 203.33

  • Randgold Resources (GOLD) -$0.25 (1.76%) to $13.96;
  • Hecla Mining (HL) -$0.07 (1.57%) to $4.38;
  • Harmony Gold (HMY) -$0.12 (1.36%) to $8.70;
  • Coeur d'Alene (CDE) -$0.05 (1.35%) to $3.65; and
  • Newmont Mining (NEM) -$0.42 (1.09%) to $38.04.

Silver fell by $0.02 (0.21%) to close at $7.05 per ounce. The Gold and Silver Index (XAU) lost 0.4 points (0.43%), ending the day at 93.57 points.

  • Durban Rooderpoert Deep (DROOY) -$0.08 (7.41%) to $1.00;
  • Harmony Gold (HMY) -$0.12 (1.36%) to $8.70;
  • Newmont Mining (NEM) -$0.42 (1.09%) to $38.04; and
  • Gold Fields (GFI) -$0.08 (0.69%) to $11.53.
Precious Metals and Indices
PHLX Gold and Silver Index93.57-0.4-0.43%
AMEX Gold BUGS Index203.33-1.35-0.66%

Oil Market

Oil lost ground despite the large drawdown in Crude Inventories. As I said in the opening remarks, the relief regarding Gulf oil platforms (one got tilted apparently, but it's alright) offset any concerns about the inventory drawdown. At the close the August crude contract had shed $0.74 per barrel, closing at $59.78 per barrel; it got up as high as $61.30 intraday (if you were brave, it made a good short signal just above $61 - I'm not claiming it though).

The Oil and Gas Index (XOI) lost 2.95 points (0.31%), at 936.66

  • Royal Dutch Shell (RD) -$0.63 (0.96%) to $64.76;
  • Occidental Petroleum (OXY) -$0.71 (0.86%) to $81.61; and
  • Sunoco (SUN) -$0.83 (0.68%) to $121.22.

The Oil service stocks (OSX) Index dipped 1.81 points (1.18%), closing at 151.83

  • Rowan Companies (RDC) -$0.78 (2.45%) to $31.11;
  • National Oilwells/Varco (NOV) -$1.18 (2.39%) to $48.28; and
  • Transocean (RIG) -$1.31 (2.27%) to $56.34.
Energy Complex
Reuters CRB314.260.720.23%
Crude Oil Light Sweet59.78-0.74-1.22%
Heating Oil1.7115-0.03-1.95%
Natural Gas8.0150.233.01%
Unleaded Gas1.747-0.03-1.47%
AMEX Oil Index936.66-2.95-0.31%
Oil Service Index151.83-1.81-1.18%

Currency Markets

USD Exchange Rates
US Dollar Index89.290.941.06%
Australian Dollar0.7498-0.0075-0.99%
Swiss Franc1.29020.01941.53%
Canadian Dollar0.8283-0.0029-0.35%