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The pre-market economic data last night stank like a prawn trawler on a hot day. Of particular interest - given the Bush Administration's penchant for Soviet-style manipulation of economic numbers - was the Durable Goods report. The overall tone of the numbers was moderately downbeat (New Homes sales better than expected, Mortgage Applications worse than expected), but the Durable Goods report was an utter disaster.
The headline number showed a mind-boggling 4.9% fall (consensus was for a 1.2% fall), but within the report were additional disasters - capital goods down 8.3%, non-defense capital goods down 7.3%.
Everybody who has read a Rant from the date of a Durable Goods report knows that there is only one number that is actually meaningful in the report: repeat after me...
Non-defence CapEx ex-Aircraft
This important measure - basically, a proxy for capital spending outside the airline industry - was awful; at -3.7% it was the worst reading for the year. It looks slightly better than the overall capital goods and non-def capital goods numbers, but that's because spending on civilian aircraft dropped 25%... but it's always highly volatile since airplanes are a 'lumpy' capital-investment stream.
Actually, I shouldn't use the terms 'capital investment' and 'aircraft' in the same sentence (oops... I did it again). I've said this before: civilian aircraft are a vehicle for capital destruction (as anyone holding US airline stocks will attest). Airlines - every single one on the planet - rely on accounting practices that would get the average person jailed: running leases through multiple jurisdictions, booking hedge short-option premium collected as revenue but long-option premium paid as assets... you name it, pal, it's the grubbiest accounting in the world.
But who cares? the price of a ticket to Europe has fallen from over 100% of annual after tax income in 1965, to less than a week's after tax income this year. Hurrah for the fact that airline stockholders are prepared to subsidise everyone's travel, I say.
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 1 repurchase operation - a $7billion, overnight repurchase with $6.905billion in T-backed collateral undertaken at a 1.2 basis point discount to the Fed Funds Rate (FFR).
Major US Indices
The Flying Spaghetti Monster (all praise be to his Noodle-y wisdom) was on the side of the valiant this session. The technical indications were a bit mixed - the S&P and Nasdaq gave textbook indications, while the Dow teased and taunted. To get a flavour for the 'signals', check out this chart of the Nasdaq100:
The opening 'pop' downward took the NDX - and only the NDX - below yesterday's low. At the same time, it generated a buying divergence on the NDX's CCI.
A savvy trader would have been in two minds for a while: neither the Dow nor the S&P 'confirmed' the divergence - which mitigates against taking the trade. However the things supporting having a crack on the long side were:
- the existence of a decent slug of repurchase dough at a miniscule discount to Fed Funds; and
- the fact that the reaction to the abysmal Durable Goods numbers had already happened - and therefore it was time to slaughter anyone who shorted the news.
But since the S&P and Dow didn't make a new lower low with a divergence, let's assume for the moment that you sat out the Nasdaq100's bounce. the CCI divergences at/near the intraday top were confirmed on both major indices (although you needed a microscope to see that the Dow's intraday high was a point higher than yesterday's high).
The only time all three indices lined up, was the bar of the intraday highs in all indices - the most beautiful lineup you could imagine this side of "Blokesworld".
Note the microdivergence near the close of the NDX - which is also present in the S&P (but not the Dow). Likely outcome: higher prices tomorrow.
But back to today:
The Dow Jones Industrial Average declined 84.71 points (0.81%), closing out the day at 10434.87 points. The index hit an intraday high of 10559 just before 12:55, then swooned in the rest of the afternoon, reversing over 125 points to its low of 10432.08 in the final minutes of trade.
Within the blue-chip index, 4 stocks rose, the biggest gainers being General Motors (GM, +2.24% to $34.27) and Merck (MRK, +0.91% to $27.83), which accounted for 8 Dow points between them. Losers in the Dow numbered 26 and were led by Caterpillar (CAT, -2.71% to $53.21) and Home Depot (HD, -1.82% to $39.90), with these two stocks contributing -18 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 320.8m shares to 42.8m.
The broader S&P500 declined 8 points (0.66%), ending the day at 1209.59. Within the index, gainers numbered 135, while 346 S&P500 stocks fell for the day. Volume was tilted 2.0:1 in favour of the losers with 1117.54 million units traded in the losers as compared with 572.65 million traded in the winners .
Over at Times Square, the Nasdaq Composite shed 8.34 points (0.39%), to close at 2128.91, while larger-cap technology issues fared worse with the Nasdaq100 losing 9.59 points (0.61%), to end at 1561.71 points. Within the tech benchmark, gainers numbered 26, while 69 Nasdaq100 stocks fell for the day. Volume was tilted 3.6:1 in favour of the losers with 475.36 million traded in the losers compared to 131.58 million in the winners .
NYSE Volume was super-chunky, with 1.93 billion shares changing hands, while Nasdaq Volume was chunky, with 1.72 billion shares traded.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10434.87 | -84.71 | -0.81% |
| S&P500 | 1209.59 | -8 | -0.66% |
| Nasdaq Composite | 2128.91 | -8.34 | -0.39% |
| Nasdaq100 | 1561.71 | -9.59 | -0.61% |
| NYSE Volume | 1.93bn | - | - |
| Nasdaq Volume | 1.72bn | - | - |
Bellwethers
My 9-stock "bellwethers" group fell by an average of 1.02%. Look at bastard arse-ing eBay: XBATH died lonely and broken and worthless (after being up 92% at one stage), but the directional call was an absolute darling. Let us never mention that option again.
Citigroup - yet another piece of evidence as to why it's the most important stock to watch on the entire NYSE (or the Nasdaq, or any other US exchange).
- General Electric (GE) -$0.43 (1.27%) to $33.54;
- Citigroup (C) -$0.51 (1.17%) to $43.05;
- Wal Mart (WMT) -$0.79 (1.7%) to $45.55;
- I.B.M. (IBM) -$0.71 (0.87%) to $81.32;
- Intel (INTC) -$0.19 (0.74%) to $25.53;
- Cisco Systems (CSCO) -$0.24 (1.35%) to $17.52;
- eBay (EBAY) -$0.02 (0.05%) to $38.96;
- Fannie Mae (FNM) -$0.15 (0.29%) to $50.70; and
- Freddie Mac (FRE) -$1.08 (1.76%) to $60.43.
Market Breadth & Internals
NYSE declining Issues beat out advancers by 1835 to 1482, for a single-day A/D reading of -353; and Nasdaq losers exceeded gainers by 1647 to 1370. The 10-day moving average of the A/D line fell to -109.2 on the NYSE, while the 10dma of the Nasdaq A/D fell to -177.1.
On the NYSE declining volume was greater than volume in advancing issues by 1142.6 to 747.3 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 981.5 to 683.6 million shares.
90 NYSE-listed stocks rose to new 52-week highs, and 28 posted fresh 52-week lows, while on the Nasdaq there were 95 stocks that hit new 52-week highs, and 43 which fell to fresh 52-week lows. the VIX is now up over 40% since my declaration that a test of 10 would provide a tradable VIX bottom (and that folks should thenceforth be buyers of volatility). The new front-month VIX futures is the October contract - the rollover was actually almnost 2 weeks ago and I had forgotten to mention it. I will put up a chart of that (and the rollover consequences) tomorrow.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 1482 | 1370 |
| Decliners | 1835 | 1647 |
| Advancing Volume (m) | 747.31 | 683.6 |
| Declining Volume (m) | 1142.55 | 981.49 |
| New Highs | 90 | 95 |
| New Lows | 28 | 43 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 14.14 | 0.76 | 5.68% |
| CBOE Nasdaq Volatility Index | 15.46 | -0.16 | -1.02% |
| Equity Put-Call Ratio | 0.78 | -0.03 | -3.7% |
| 10-day PCR | 0.63 | 0 | 0% |
| SPX-VIX Ratio | 85.5 | -5.46 | -6% |
Bond Market Analysis
Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 0.7 bps to 4.398%. In the wake of the Durable Goods report, every nuffie on the planet jumped long the 30-years, sending them to one tick below 117 at 116-31/32. That meant it was time to rip their guts out, and the 30-year plummeted 23/32 over the following hour. Lemmings - gotta love 'em. Sure, it bounced back (to close at 116-9/32) but everybody who bought the 30-year after the report got smacked. (Same as everyone who sold oil after the oil inventories report)
The middle of the yield curve was broadly higher in price: five year yields fell to 4.045%, and ten-year yields fell to 4.179%.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 3.0 bps wider at -4.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 50.0 bps for 10-year AAA, and 89.0 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 3.0 bps looser at 39.0 basis points and the 10-year AAA-A spread 1.0 bps tighter at 6.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 3.43 | 0 | 0% |
| UST 2Y (yld) | 3.97 | 0.01 | 0.25% |
| UST 5Y (yld) | 4.045 | -0.004 | -0.1% |
| UST 10Y (yld) | 4.179 | -0.008 | -0.19% |
| UST 30Y (yld) | 4.398 | -0.007 | -0.16% |
The Banks Index shed 0.97 points (0.98%), to end the session at 98.09; within the index,
- Suntrust Banks (STI) -$1.24 (1.74%) to $70.01;
- JPMorganChase (JPM) -$0.50 (1.46%) to $33.85;
- PNC Financial Services (PNC) -$0.76 (1.35%) to $55.57;
- US Bancorp (USB) -$0.39 (1.31%) to $29.34; and
- Citigroup (C) -$0.51 (1.17%) to $43.05.
The Broker-dealer Index slid 2.4 points (1.4%), at 168.57; the ticket clippers lined up as follows -
- Lehman Brothers (LEH) -$2.34 (2.21%) to $103.76;
- Charles Schwab (SCH) -$0.27 (1.94%) to $13.67;
- Merrill Lynch (MER) -$1.06 (1.82%) to $57.14;
- Morgan Stanley (MWD) -$0.87 (1.66%) to $51.53; and
- Goldman Sachs (GS) -$1.81 (1.62%) to $109.99.
The Philadelphia SOX (Semiconductor) index slid 3.55 points (0.76%), ending the day at 463.97
- Applied Materials (AMAT) -$0.37 (2.01%) to $18.02;
- Taiwan Semiconductors (TSM) -$0.16 (1.91%) to $8.21;
- Broadcom (BRCM) -$0.75 (1.75%) to $42.08;
- KLA-Tencor (KLAC) -$0.60 (1.22%) to $48.51; and
- Linear Technology (LLTC) -$0.44 (1.16%) to $37.59.
Gold & Silver Markets
Gold fell by $2.10 (0.48%) to close at $439.1 per ounce. It's rangebound until the USD does something interesting.
The Gold Bugs Index slid 5.12 points (2.49%), closing at 200.16
- Hecla Mining (HL) -$0.20 (5.24%) to $3.62;
- Harmony Gold (HMY) -$0.38 (4.66%) to $7.78;
- Randgold Resources (GOLD) -$0.50 (3.66%) to $13.16;
- Coeur d'Alene (CDE) -$0.12 (3.33%) to $3.48; and
- Eldorado Gold (EGO) -$0.09 (3.07%) to $2.84.
Silver fell by $0.05 (0.66%) to close at $6.92 per ounce. The Gold and Silver Index (XAU) lost 2.02 points (2.11%), ending the day at 93.61 points.
- Harmony Gold (HMY) -$0.38 (4.66%) to $7.78;
- Meridian Gold (MDG) -$0.49 (2.59%) to $18.42;
- Barrick Gold (ABX) -$0.67 (2.56%) to $25.55; and
- Newmont Mining (NEM) -$0.95 (2.38%) to $39.05.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 439.10 | -2.10 | -0.48% |
| Silver | 6.92 | -0.05 | -0.66% |
| PHLX Gold and Silver Index | 93.61 | -2.02 | -2.11% |
| AMEX Gold BUGS Index | 200.16 | -5.12 | -2.49% |
Oil Market
Oil was firmer, rising by $1.61 per barrel despite relatively good Oil Inventories data (a 1.8 million barrel increase in inventories). After the inventories report, the smart money waited for the nuffies to short the living shit out of Crude (driving it down to below $65.50) before kicking the living shit out of the new shorts. Crude rose over $2.50 from the $65.30 low to its high at $68 even, before relaxing to close at $67.32 per barrel (it's up at $67.81 in the after-market... get ready for a flood of nuffies on the long side over the next day or so, then another massacre).
The Oil and Gas Index (XOI) gained 6.77 points (0.7%), at 969.27
- Sunoco (SUN) +$1.47 (2.36%) to $63.85;
- Kerr Mcgee (KMG) +$1.48 (1.73%) to $87.15; and
- Marathon Oil (MRO) +$0.52 (0.87%) to $60.14.
The Oil service stocks (OSX) Index added 2.45 points (1.52%), to end the session at 163.78
- Halliburton (HAL) +$1.57 (2.75%) to $58.56;
- Nabors Industries (NBR) +$1.57 (2.49%) to $64.55; and
- Global Industries (GLBL) +$0.22 (2.05%) to $10.94.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 313.72 | 0.8 | 0.26% |
| Crude Oil Light Sweet | 67.32 | 1.61 | 2.45% |
| Heating Oil | 1.9034 | 0.05 | 2.85% |
| Natural Gas | 9.984 | 0.3 | 3.11% |
| Unleaded Gas | 1.8603 | 0.07 | 3.71% |
| AMEX Oil Index | 969.27 | 6.77 | 0.7% |
| Oil Service Index | 163.78 | 2.45 | 1.52% |
Currency Markets
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 87.89 | -0.19 | -0.22% |
| Euro | 1.2277 | 0.0042 | 0.34% |
| Yen | 110.205 | 0.33 | 0.3% |
| Sterling | 1.8009 | -0.001 | -0.06% |
| Australian Dollar | 0.7563 | 0.0007 | 0.09% |
| Swiss Franc | 1.2646 | -0.0058 | -0.46% |
| Canadian Dollar | 0.8405 | 0.0057 | 0.68% |
