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I've been sayin' for the last week and a half that these mad moonshots that the Dow has been having are not a sign of a well-functioning marekt; today's session simply adds more evidence to my case.
Here's the deal: if the thing doesn't start to bounce in the first hour of Friday's session, then the likelihood of a genuine meltdown - a good 500-1000 point decline in the Dow - is really quite high. There have already been five or six 'Hindenburg Omens' recently, and although I am skeptical about any 'omen' that is found retrospectively, it remains that the market internals of the US markets are decaying faster than week-old fish.
And if Fitzgerald indicts Rove, game over. It is already clear that Rove is trying to cut a deal - do not think for one second that that sweaty porcine sack of shit has any loyalty to anyone except his own self: that's not the way parasitic vermin like Rove work. You don't get loyalty from creeps like him just because you've played the macho cowboy in two decade's worth of gay orgies... if a situation arises where Rove's ass is being hauled off to jail, and he can reduce that risk by handing over your head, you're done for. (Got that, Georgie-boy?).
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 2 repurchase operations.
- a $4billion, 14-day repurchase entirely in T-backed collateral undertaken at a 15 basis point premium to the Fed Funds Rate (FFR); and
- a $12.5billion, overnight repurchase with $7.07billion in T-backed collateral undertaken at a 4.4 basis point premium to the Fed Funds Rate (FFR).
Taken together, these two repurchases reveal that the Fed will raise rates again (by another 25 basis points) next Tuesday - like, DUH.
For today the repurchases, while large, provided no discount to Fed funds and so did not result in any grease for the market's wheels. By the end of the session, the aforementioned wheels were suffering from a dose of metal-on-metal grindage.
Note also, that a huge wodge of repo dough was thrown at the Toxic Twins, which are threatening to break down completely as the bond market screws up their hedging and the housing market continues to emit a horrible grating sound...
Major US Indices
Early last week I mused on the possibility that the Dow would finish below 10,000 either last week (which I recanted after the big decline last Thursday) or this week. And yet, despite another close below 10250, the likelihood that 10k is intact at the end of this week (i.e., tonight ,Australian time) is obviously very high... markets simply don't fall 200+ points on a Friday. It seems that someone has a cvested interest in postponing the inevitable test of 10k.
Today saw a string of intraday CCI buying divergences, and yet not a single one of them worked to any meaningsul effect. In terms of 'information content', the good old 'quarter by quarter' mechanism was more powerful - in other words, if you simply bought S&P futures every single time the Dow futures touched a multiple of 25 (from above), the 'trampolining' alone would have made you a happy little trader.
I don't recommend that as a methodology - it only works when da Boyz are desperate to prevent a decline from taking hold in earnest. (As an aside, it is my firm belief that if they had not done so, the Dow would have finished somewhere in the low-to-mid-10100's).
Financial journlists will be thrashing about looking for a one-line explanation for the decline... oil prices, a hurricane somewhere, the decline in durable goods orders... you know the drill.
Sure, durable goods orders declined sharply. You will remember though, that we only watch one single line-item in the Durable Goods report... namely ...
Non-Defence CapEx excluding AircraftAnd that number wasn't all that bad: Non-Defence Capex ex Aircraft fell by 1.2% - a lot less than the headline 2.9% overall fall in Durables. The main culprit for the broader decline was a 20-odd percent fall in orders of commercial aircraft - always a 'lumpy' item.
And yes, General Motors weighted on the Dow thanks to the SEC investigation into its behaviour when shuffling off Delphi. I hope that the 'clawback' provisions in bankruptcy are applied to the Delphi spinoff - it is absolutely clear that GM was trying to offload some pensions responsibilities when it spun off that business.
You know what I mean by 'clawback': it's when some transactions that are deemed "not arm's length" can be unwound retroactively in order to bring corporate assets back into the pot for distribution to creditors. Think of the instances when a bankrupt gives his $20 million art collection to his wife a month before declaring bankruptcy... that sort of thing is often "unwound".
Anyhow - I said ages ago that GM was going to have to file Chapter 11 - probably before the end of the year.
What fun that would be! A component of the most famous stock index in the world, the index that is the hallmark of what Americans like to pretend is Capitalism... a component of the mighty Dow, trading in bankruptcy protection. I don't think it's happened before (I'm not sure though).
Oh, but that would be priceless... it shows that the Flying Spaghetti Monster has a sense of humour. (All that would happen, I think, is that Dow Jones & Co would kick GM out of the index.)
But I digress slightly. In my view, the intraday action does not support the contention that Durables or GM were the primary driver. The markets held up well early, and showed absolutely no reaction to the data when it was released.
No, I think that the big houses are getting very nervous about the rumours swirling around the Fitzerald inquiry into the Plame affair. If White House senior staff (like Rove and Libby) are indicted, the reputation of the U.S. will take yet another knock, at a time when markets are already fragile and any widening of risk premia would adversely affect markets.
And if - as my little bird tells me - Rove is trying to cut a deal, it means that he is going to offer up someone big-oh-big in exchange for not having to suffer the sphincter-widening penal consequences of his treasonous activities (Bush could not pardon these chumps without risking impeachment, because the Republicans are screwed in next year's mid-term elections) .
So anyhow - if you need a 'one line' reason, that's it as far as I am concerned.
The Dow Jones Industrial Average shed 115.03 points (1.11%), closing out the day at 10229.95 points. The index hit an intraday high of 10349.22 (10350-ish) just after the end of the first 3 minutes; from there it was largely one-way traffic (a sort of slow-motion waterfall) for the rest of the session, with the indices all closing right on their respective lows.
Within the blue-chip index, 5 stocks rose, the biggest gainers being Verizon Communications (VZ, +0.56% to $30.76) and SBC Communications (SBC, +0.21% to $23.70), which accounted for 2 Dow points between them. Losers in the Dow numbered 25 and were led by General Motors (GM, -6.79% to $27.19) and American Express (AXP, -2.47% to $48.90), with these two stocks contributing -26 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 286.7m shares to 68.8m.
The broader S&P500 declined 12.48 points (1.05%), to end the session at 1178.9. Within the index, gainers numbered 74, while 408 S&P500 stocks fell for the day. Volume was tilted 5.3:1 in favour of the losers with 1595.38 million units traded in the losers as compared with 298.30 million traded in the winners .
Over at Times Square, the Nasdaq Composite dipped 36.24 points (1.73%), to close at 2063.81, while larger-cap technology issues fared worse with the Nasdaq100 losing 31.76 points (2.02%), to end at 1543.38 points. Within the tech benchmark, gainers numbered 7, while 89 Nasdaq100 stocks fell for the day. Volume was tilted 11.1:1 in favour of the losers with 614.78 million traded in the losers compared to 55.34 million in the winners .
NYSE Volume was super-chunky, with 2.4 billion shares changing hands, while Nasdaq Volume was chunky, with 1.72 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10229.95 | -115.03 | -1.11% |
| S&P500 | 1178.9 | -12.48 | -1.05% |
| Nasdaq Composite | 2063.81 | -36.24 | -1.73% |
| Nasdaq100 | 1543.38 | -31.76 | -2.02% |
| NYSE Volume | 2.4bn | - | - |
| Nasdaq Volume | 1.72bn | - | - |
Bellwethers
My 9-stock "bellwethers" group fell by an average of 0.47% (and didn't I tell you yesterday that Citigroup was not pointing to a higher marekt, but rather to the hopes of da Boyz to offload a bunch of calls at the open today? Ta-DAAAA!!!)
- General Electric (GE) -$0.12 (0.36%) to $33.58;
- Citigroup (C) -$0.24 (0.53%) to $45.41;
- Wal Mart (WMT) -$0.84 (1.84%) to $44.74;
- I.B.M. (IBM) -$0.58 (0.7%) to $82.31;
- Intel (INTC) -$0.23 (1%) to $22.84;
- Cisco Systems (CSCO) -$0.05 (0.29%) to $17.05;
- eBay (EBAY) -$0.46 (1.2%) to $37.84;
- Fannie Mae (FNM) +$0.23 (0.49%) to $46.86; and
- Freddie Mac (FRE) +$0.71 (1.17%) to $61.46.
Market Breadth & Internals
NYSE declining Issues beat out advancers by 2406 to 871, for a single-day A/D reading of -1535; and Nasdaq losers exceeded gainers by 2316 to 702. The 10-day moving average of the A/D line fell to -471.3 on the NYSE, while the 10dma of the Nasdaq A/D fell to -387.4.
On the NYSE declining volume was greater than volume in advancing issues by 1913.4 to 419 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 1461.8 to 238.3 million shares.
40 NYSE-listed stocks rose to new 52-week highs, and 229 posted fresh 52-week lows, while on the Nasdaq there were 42 stocks that hit new 52-week highs, and 128 which fell to fresh 52-week lows. Those new lows are starting to get very big - which points to a bounce fermenting deep in the bowels of the market; one more volatility spike and it oughta do it.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 871 | 702 |
| Decliners | 2406 | 2316 |
| Advancing Volume (m) | 419.04 | 238.27 |
| Declining Volume (m) | 1913.39 | 1461.81 |
| New Highs | 40 | 42 |
| New Lows | 229 | 128 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 16.13 | 1.54 | 10.56% |
| CBOE Nasdaq Volatility Index | 17.78 | 1.91 | 12.04% |
| Equity Put-Call Ratio | 0.95 | 0.14 | 17.28% |
| 10-day PCR | 0.68 | -0.02 | -2.86% |
| SPX-VIX Ratio | 73.1 | -8.57 | -10.49% |
Bond Market Analysis
Bonds rose at the long end, with the yield on the benchmark 30-year Treasury bond shedding 2.6 bps to 4.77%.
The middle of the yield curve was broadly higher: five year yields fell to 4.43%, and ten-year yields fell to 4.558%.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 9.0 bps wider at 17.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts rose to 52.0 bps for 10-year AAA, and 73.5 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 6.0 bps wider at 47.0 basis points and the 10-year AAA-A spread unchanged at 7.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 3.792 | -0.013 | -0.34% |
| UST 2Y (yld) | 4.33 | -0.03 | -0.69% |
| UST 5Y (yld) | 4.43 | -0.03 | -0.67% |
| UST 10Y (yld) | 4.558 | -0.033 | -0.72% |
| UST 30Y (yld) | 4.77 | -0.026 | -0.54% |
The Banks Index dipped 0.27 points (0.28%), to 97.44; within the index,
- US Bancorp (USB) -$0.32 (1.1%) to $28.88;
- Bank Of NY (BK) -$0.29 (0.95%) to $30.36;
- M&T Bank Corp (MTB) -$0.67 (0.64%) to $104.13;
- Citigroup (C) -$0.24 (0.53%) to $45.41; and
- Comerica (CMA) -$0.27 (0.48%) to $55.80.
The Broker-dealer Index dipped 3.94 points (2.19%), closing at 175.92; the ticket clippers lined up as follows -
- Jeffries Group (JEF) -$2.55 (6.07%) to $39.45;
- Legg Mason (LM) -$5.52 (5.09%) to $102.96;
- Ameritrade (AMTD) -$0.90 (4.32%) to $19.93;
- E*Trade (ET) -$0.58 (3.12%) to $18.00; and
- A G Edwards (AGE) -$0.87 (2.09%) to $40.81.
The Philadelphia SOX (Semiconductor) index slid 11.94 points (2.72%), to 427.64
- Marvell Tech Group (MRVL) -$2.00 (4.4%) to $43.49;
- Advanced Micro Devices (AMD) -$1.00 (4.38%) to $21.82;
- Maxim Integrated (MXIM) -$1.67 (4.11%) to $38.96;
- Broadcom (BRCM) -$1.62 (3.77%) to $41.31; and
- National Semiconductors (NSM) -$0.80 (3.54%) to $21.79.
Gold & Silver Markets
Gold rose $2.60 (0.55%) to close at $475.60 per ounce. It's clear that any loss of coinfidence in the US political leadership will adversely affect the USD, and the placement of Professor Helichopper to replace Mr Magoo is likely to raise inflationary expectations... both good for Gold in USD terms.
The Gold Bugs Index declined 1.5 points (0.67%), ending the day at 221.99
- Hecla Mining (HL) -$0.28 (7.71%) to $3.35;
- Iamgold (IAG) -$0.14 (2.07%) to $6.63;
- Eldorado Gold (EGO) -$0.06 (2.01%) to $2.93;
- Freeport McMoran (FCX) -$0.80 (1.65%) to $47.82; and
- Coeur d'Alene (CDE) -$0.05 (1.31%) to $3.77.
Silver fell by $0.02 (0.29%) to close at $7.84 per ounce.
The Gold and Silver Index (XAU) lost 0.22 points (0.21%), ending the day at 105.55 points.
- Anglogold Ashanti (AU) -$0.71 (1.72%) to $40.55;
- Freeport McMoran (FCX) -$0.80 (1.65%) to $47.82;
- Meridian Gold (MDG) -$0.15 (0.79%) to $18.82; and
- Newmont Mining (NEM) -$0.14 (0.32%) to $43.95.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 475.60 | 2.60 | 0.55% |
| Silver | 7.84 | -0.02 | -0.29% |
| PHLX Gold and Silver Index | 105.55 | -0.22 | -0.21% |
| AMEX Gold BUGS Index | 221.99 | -1.5 | -0.67% |
Oil Market
Oil was firmer, rising by $0.43 per barrel, closing at $61.09 per barrel in a rollercoaster session... first it jumped up to above $61.23, then it declined to $60.25... than it bounced again to close above $61. (Note - the day before yesterday I spoke of Oil "dipping below $80"... that was a $20 typo... if oil dips below $60 it is also below $80, but it sure as hell isn't 'dipping' below $80).
The Oil and Gas Index (XOI) declined 22.1 points (2.28%), ending the day at 945.14
- Marathon Oil (MRO) -$3.80 (6.22%) to $57.28;
- Amerada Hess (AHC) -$3.89 (3.18%) to $118.31; and
- Kerr Mcgee (KMG) -$2.61 (3.06%) to $82.64.
The Oil service stocks (OSX) Index lost 4.16 points (2.51%), to end the session at 161.44
- Halliburton (HAL) -$3.05 (5.25%) to $55.10;
- Noble Corp (NE) -$3.16 (4.78%) to $62.93; and
- Global Industries (GLBL) -$0.60 (4.64%) to $12.34.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 333.01 | -1.5 | -0.45% |
| Crude Oil Light Sweet | 61.09 | 0.43 | 0.71% |
| Heating Oil | 1.9013 | 0 | 0.14% |
| Natural Gas | 13.684 | -0.38 | -2.67% |
| Unleaded Gas | 1.6276 | 0.01 | 0.4% |
| AMEX Oil Index | 945.14 | -22.1 | -2.28% |
| Oil Service Index | 161.44 | -4.16 | -2.51% |
Currency Markets
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 89.13 | -0.36 | -0.4% |
| Euro | 1.2137 | 0.0069 | 0.57% |
| Yen | 115.495 | -0.37 | -0.32% |
| Sterling | 1.783 | 0.0082 | 0.46% |
| Australian Dollar | 0.757 | 0.0022 | 0.29% |
| Swiss Franc | 1.2739 | -0.0092 | -0.72% |
| Canadian Dollar | 0.8529 | -0.0019 | -0.22% |
