Interdum stultus opportuna loquitur...

Wednesday, August 03, 2005

USRant: Another Big Repo Saves the Day...

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

Today's missive will be mercifully brief - thanks to one of those periodic winter ills that fills a bloke's chesticles full of the most godawful green grot, rendering him unfit for interaction with man or beast. It's one of those things that you have to get on top of immediately, or you're totalled for days. Thankfully I have the constitution of Os du Rant (one of my favourite rugby players), although a design flaw in my bronchioles means that chest infections can get a hold if not caught early - not in a threatening way, just in a way that involves kilos of gluggy snot.

Mmmmm.... snot.

Well, now that the tone has been set, on to the markets...

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $9.5billion, overnight repurchase entirely in T-backed collateral undertaken at a 9.7 basis point discount to the Fed Funds Rate (FFR).

I've been lamenting recently that the Fed has not been giving out enough discounted cash to its bestest buddies (the major banks, who own the Fed), but the last couple of days has seen the discount widen dramatically. today's repo was big, ti was all in T-backed, and it had a big discount to FFR. So what happened after 10 a.m.? Well, the Dow went from 10638.48 (its low for the session, set at precisely 10 a.m.), to 10691 - but it took 2½ hours to do so. Still, patience is its own reward, and the Repo Rules say that you buy at 10 a.m. if the repo is big and at a discount, and you set a stop and hold the thing... usually 4 S&P points is the minimum you would expect to get out of a Repo Pump with a repo the size of today's, and the S&P traversed 5.4 points from 10 a.m. to the swing high at 12:30.

Major US Indices

The Dow Jones Industrial Average gained 13.85 points (0.13%), closing out the day at 10697.59 points. The index hit an intraday high of 10697.99 (set 2 minutes before the close), after falling to 10638.48 in the first half-hour of trade. it's worth noting that neither the S&P nor the Nasdaq indices  were able to pass their respective 12:30 intraday peaks - only the Dow did so.

Within the blue-chip index, 18 stocks rose, the biggest gainers being Microsoft (MSFT, +1.64% to $27.25) and SBC Communications (SBC, +1.26% to $24.97), which accounted for 6 Dow points between them. Losers in the Dow numbered 12 and were led by Exxon Mobil (XOM, -1.35% to $59.00) and 3M (MMM, -0.92% to $74.19), with these two stocks contributing -12 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 266.7m shares to 117.9m.

The broader S&P500 advanced a meagre 0.92 points (0.07%), to 1245.04. Within the index, gainers numbered 232, while 254 S&P500 stocks fell for the day. Volume was almost evenly split, with the final decision in favour of the losers (935.33 million units traded in the losers as compared with 902.85 million traded in the winners).

Over at Times Square, the Nasdaq Composite slid a weensy 1.34 points (0.06%), to close at 2216.81, while larger-cap technology issues fared better with the Nasdaq100 adding a miniscule 0.18 points (0.01%), to end at 1627.19 points. Within the tech benchmark, gainers numbered 42, while 57 Nasdaq100 stocks fell for the day. Volume was tilted 1.2:1 in favour of the losers with 417.02 million shares traded in the losers compared to 353.62 million in the winners .

NYSE Volume was super-chunky, with 2 billion shares changing hands, while Nasdaq Volume was moderately chunky, with 1.81 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10697.5913.850.13%
Nasdaq Composite2216.81-1.34-0.06%
NYSE Volume2bn--
Nasdaq Volume1.81bn--


My 9-stock "bellwethers" group was unchanged (on average), with declines in Fannie and Freddie offsetting decent rises in Big Tech.

  • General Electric (GE) -$0.04 (0.12%) to $34.21;
  • Citigroup (C) -$0.02 (0.05%) to $44.05;
  • Wal Mart (WMT) -$0.12 (0.24%) to $49.68;
  • I.B.M. (IBM) +$0.75 (0.9%) to $84.05;
  • Intel (INTC) +$0.16 (0.58%) to $27.64;
  • Cisco Systems (CSCO) +$0.05 (0.26%) to $19.54;
  • eBay (EBAY) -$0.20 (0.45%) to $44.55;
  • Fannie Mae (FNM) -$0.47 (0.84%) to $55.40; and
  • Freddie Mac (FRE) -$0.03 (0.05%) to $63.43.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1721 to 1548, for a single-day A/D reading of -173; and Nasdaq losers exceeded gainers by 1795 to 1272. The 10-day moving average of the A/D line fell to 259.0 on the NYSE, while the 10dma of the Nasdaq A/D fell to 92.1.

On the NYSE declining volume was greater than volume in advancing issues by 999.8 to 965.1 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 952.4 to 831.6 million shares.

353 NYSE-listed stocks rose to new 52-week highs, and 21 posted fresh 52-week lows, while on the Nasdaq there were 161 stocks that hit new 52-week highs, and 17 which fell to fresh 52-week lows.

The VIX spot and futures have realigned, it seems - now all that we're waiting for is a decent snap up in both. The spot VIX is up 18% since I declared that it ought to bottom just under 10, but the VIX futures are still below the level they traded at the same time as VIX spot was at 10. Maddening.

Market Breadth Statistics

Advancing Volume (m)965.06831.57
Declining Volume (m)999.81952.41
New Highs353161
New Lows2117

Market Sentiment Statistics
CBOE Volatility Index11.830.080.68%
CBOE Nasdaq Volatility Index13.72-0.23-1.65%
Equity Put-Call Ratio0.74-0.1-11.9%
10-day PCR0.5700%
SPX-VIX Ratio105.2-0.64-0.6%

Bond Market Analysis

Bonds rose consistently through the session, with the yield on the benchmark 30-year Treasury bond shedding 3.5 bps to 4.505%. the 30-year bond futures rose half a point (16/32) to sit above 115 - the high for the day was set at 10:35 Chicago time (11:35 NY time) and the rest of the day was pretty sideways.

The middle of the yield curve was broadly higher in price: five year yields fell to 4.127%, and ten-year yields fell to 4.3%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 1.0 bps tighter at -7.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 34.0 bps for 10-year AAA, and 75.0 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 increasing 7.0 bps to 39.0 basis points and the 10-year AAA-A spread 1.0 bps wider at 16.0 bps.

Treasury Yields
UST 13wk (yld)3.38500%
UST 2Y (yld)4-0.02-0.5%
UST 5Y (yld)4.127-0.036-0.86%
UST 10Y (yld)4.3-0.036-0.83%
UST 30Y (yld)4.505-0.035-0.77%

The Banks Index added 0.01 points (0.01%), to end the session at 100.67; within the index,

  • Zions Bancorp (ZION) +$0.97 (1.34%) to $73.59;
  • Comerica (CMA) +$0.62 (1.02%) to $61.27;
  • National City Corp (NCC) +$0.32 (0.85%) to $37.75;
  • PNC Financial Services (PNC) +$0.38 (0.69%) to $55.45; and
  • North Fork Bancorp (NFB) +$0.19 (0.69%) to $27.92.

The Broker-dealer Index added 0.15 points (0.09%), at 171.71; the ticket clippers lined up as follows -

  • Morgan Stanley (MWD) +$0.80 (1.49%) to $54.42;
  • Goldman Sachs (GS) +$1.35 (1.23%) to $110.87;
  • Bear Stearns (BSC) +$0.68 (0.65%) to $105.13;
  • Ameritrade (AMTD) +$0.10 (0.5%) to $20.00; and
  • Merrill Lynch (MER) +$0.10 (0.17%) to $59.05.

The Philadelphia SOX (Semiconductor) index lost 1.91 points (0.39%), at 484.29

  • National Semiconductors (NSM) -$0.81 (3.15%) to $24.90;
  • Teradyne (TER) -$0.22 (1.39%) to $15.59;
  • Novellus Systems (NVLS) -$0.33 (1.13%) to $28.76;
  • Xilinx (XLNX) -$0.29 (1%) to $28.67; and
  • Applied Materials (AMAT) -$0.17 (0.91%) to $18.41.

Gold & Silver Markets

Gold rose $5.30 (1.23%) to close at $436.90 per ounce as the USD showed signs of a break below 88 on the USDX. The USDX dropped a full points intrasession - from just over 89 before the day session started, to 87.93 at the low. Perhaps the consideration of China's unprecedented decision to engage in joint military exercises with Russia has also put the Chinese yuan revaluation into a geopolitical context more aligned with what it took me about eight seconds to decide... China's not revaluing the Yuan in order to do the US a favour. After all, the current Chinese government is not Hop Sing from Bonanza... Ah So, So Solly Missah Lound-Eye.

The Gold Bugs Index gained 10.83 points (5.43%), closing at 210.32

  • Eldorado Gold (EGO) +$0.33 (11.96%) to $3.09;
  • Golden Star (GSS) +$0.28 (9.24%) to $3.31;
  • Coeur d'Alene (CDE) +$0.28 (7.93%) to $3.81;
  • Meridian Gold (MDG) +$1.29 (6.99%) to $19.74; and
  • Glamis Gold (GLG) +$1.20 (6.8%) to $18.86.

Silver rose $0.05 (0.64%) to close at $7.28 per ounce. The Gold and Silver Index (XAU) gained 3.71 points (4.02%), ending the day at 95.93 points.

  • Meridian Gold (MDG) +$1.29 (6.99%) to $19.74;
  • Agnico Eagle (AEM) +$0.75 (6%) to $13.25;
  • Newmont Mining (NEM) +$2.03 (5.32%) to $40.17; and
  • Goldcorp (GG) +$0.87 (5.29%) to $17.33.
Precious Metals and Indices
PHLX Gold and Silver Index95.933.714.02%
AMEX Gold BUGS Index210.3210.835.43%

Oil Market

Oil lost ground, shedding $1.03 per barrel, closing at $60.86 per barrel after popping its head up to $62.50 - and thereby getting ever manner of trader-lemming to jump long... it's poignant, but a necessary part of the evolutionary process: idiots have to be impoverished so that they can't afford to breed. Anyhow - what it was, was yet another textbook %R overbought/CCI divergence in the oil market - and oil responded by falling more than a dollar in the hour between 10 a.m. and 11 a.m. NY time, which set the nuffie-stops cascading all the way down to $60.60. 

These periodic cleanouts are designed solely to permit Da Boyz to get their hands on exposure to oil at lower prices - don't let anyone tell you otherwise. Everyone knows oil's headed over $100 a barrel, but it's not going to get there by any path that will enrich those who buy breakouts.

The Oil and Gas Index (XOI) posted a rise of 0.54 points (0.06%), at 965.44

  • ChevronTexaco (CVX) +$0.79 (1.33%) to $60.35;
  • TotalFinaElf S.A. (TOT) +$1.55 (1.21%) to $129.84; and
  • Repsol YPF (REP) +$0.34 (1.2%) to $28.68.

The Oil service stocks (OSX) Index declined 0.78 points (0.47%), closing at 166.34

  • GlobalSantaFe (GSF) -$0.97 (2.08%) to $45.67;
  • Tidewater (TDW) -$0.87 (2.07%) to $41.26; and
  • Nabors Industries (NBR) -$1.39 (2.05%) to $66.50.
Energy Complex
Reuters CRB318.66-1.35-0.42%
Crude Oil Light Sweet60.86-1.03-1.66%
Heating Oil1.6889-0.04-2.1%
Natural Gas8.351-0.03-0.32%
Unleaded Gas1.7709-0.01-0.6%
AMEX Oil Index965.440.540.06%
Oil Service Index166.34-0.78-0.47%

Currency Markets

USD Exchange Rates
US Dollar Index88.03-0.73-0.82%
Australian Dollar0.77180.00680.89%
Swiss Franc1.2612-0.0161-1.26%
Canadian Dollar0.82190.00170.21%