Interdum stultus opportuna loquitur...

Tuesday, November 29, 2005

USRant: 34 Minutes of Hope...

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Economic data came thick and fast this session, and all things considered it was better than expected. First the Durable Goods numbers, which showed a headline gain of 3.4% compared with a consensus estimate of 1.8%. However much of that 3.4% was due to 'lumpy' items like aircraft sales thanks to a resolution of a strike at Boeing. As I have said countless times, the most important number in the Durables report is (repeat after me)

Non-Defence Capital Goods ex-Aircraft...

And that wasn't too bad, actually; a gain of 1.3%, partially reversing the 1.7% decline in the prior month.

Apart from that, there was the hugely-unreliable Consumer Confidence (ConCon) number, which at 98.9 was significantly above the consensus estimate of 90; frankly I wouldn't give you spit in exchange for that number - it doesn't bear any relationship to actual economic variables. 

And finally, New Home Sales showed a jump of 13% and blew the consensus estimate out of the water. median new home prices are up only 0.9% year-on-year (however median existing home prices rose 16% over the same period).

Federal Reserve Open Market Operations

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.75billion, 6-day repurchase with $2.75billion in T-backed collateral undertaken at a 4.6 basis point discount to the Fed Funds Rate (FFR). The general level of repurchase activity has been low, and the discounts to Fed Funds relatively small, for three months now - however the Fed has been required to monetise a load of debt due to relatively slack 'genuine' demand; the weak bid-to-cover ratio on the latest 4-week bill auction shows that demanders of US government debt are starting to feel a bit like Mr Creosote.

Steven Roach - easily the best of the Street economists - wrote a terrific piece last week about how the US has not experienced a surge in petrodollar recycling from the latest oil shock. The reason: higher-yielding investment destinations within the OPEC area itself (especially the Middle East).

Major US Indices

The Dow Jones Industrial Average shed just 2.56 points (0.02%), closing out the day at 10888.16 points, which was as close to the low of the day as makes no odds. The actual low - 10888.07 - was set about thirty seconds before the close. The index hit an intraday high of 10959.79 after 34 minutes of trade; every nuffie on the planet got twitterpated about the Durable Goods headline number and no bugger bothered to check the number that mattered.

Once the ConCon number came out at 10 a.m., the market had already shot its bolt, and although the ConCon index showed a significantly higher-than-consensus reading, the market was unable to develop any further traction. the session high occurred literally three minutes after the release of the Consumer Confidence data.

Within the blue-chip index, 13 stocks rose, the biggest gainers being Merck (MRK, +1.56% to $30.02) and Coca Cola (KO, +1.29% to $43.05), which accounted for 8 Dow points between them. Losers in the Dow numbered 16 and were led by Wal Mart (WMT, -1.98% to $49.01) and American Express (AXP, -1.34% to $52.13), with these two stocks contributing -14 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 291.9m shares to 84.3m.

The broader S&P500 rose 0.02 points (0%), to end the session at 1257.48. Within the index, gainers numbered 296, while 180 S&P500 stocks fell for the day. Volume was tilted 1.5:1 in favour of the losers with 1208.40 million units traded in the winners as compared with 798.61 million traded in the losers .

Over at Times Square, the Nasdaq Composite slid 6.66 points (0.3%), to close at 2232.71, while larger-cap technology issues fared worse with the Nasdaq100 losing 7.55 points (0.45%), to end at 1676.84 points. Within the tech benchmark, gainers numbered 49, while 48 Nasdaq100 stocks fell for the day. Volume was tilted 1.6:1 in favour of the losers with 475.43 million traded in the winners compared to 301.84 million in the losers .

NYSE Volume was super-chunky, with 2.23 billion shares changing hands, while Nasdaq Volume was chunky, with 1.75 billion shares traded.

Major Market Statistics
Dow Jones Industrial Average10888.16-2.56-0.02%
Nasdaq Composite2232.71-6.66-0.3%
NYSE Volume2.23bn--
Nasdaq Volume1.75bn--


My 9-stock "bellwethers" group fell by an average of 0.53%

  • General Electric (GE) -$0.05 (0.14%) to $35.93;
  • Citigroup (C) -$0.21 (0.43%) to $49.09;
  • Wal Mart (WMT) -$0.99 (1.98%) to $49.01;
  • I.B.M. (IBM) -$0.01 (0.01%) to $89.10;
  • Intel (INTC) -$0.08 (0.3%) to $26.78;
  • Cisco Systems (CSCO) +$0.03 (0.17%) to $17.51;
  • eBay (EBAY) -$0.87 (1.92%) to $44.50;
  • Fannie Mae (FNM) +$0.23 (0.47%) to $49.43; and
  • Freddie Mac (FRE) -$0.43 (0.67%) to $63.57.

Market Breadth & Internals

NYSE advancing Issues exceeded decliners by 1956 to 1347 for a single-day A/D reading of 609; Nasdaq gainers trumped losers by 1559 to 1490. The 10-day moving average of the A/D line rose to 207.4 on the NYSE, while the 10dma of the Nasdaq A/D rose to -43.0.

On the NYSE declining volume was greater than volume in advancing issues by 1115.2 to 1035 million shares; On the Nasdaq declining volume exceeded volume in advancing issues by 990.5 to 749.9 million shares.

123 NYSE-listed stocks rose to new 52-week highs, and 98 posted fresh 52-week lows, while on the Nasdaq there were 102 stocks that hit new 52-week highs, and 55 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)1034.97749.86
Declining Volume (m)1115.24990.54
New Highs123102
New Lows9855

Market Sentiment Statistics
CBOE Volatility Index11.870.030.25%
CBOE Nasdaq Volatility Index15.390.614.13%
Equity Put-Call Ratio0.7300%
10-day PCR0.6100%
SPX-VIX Ratio105.9-0.27-0.25%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 6.3 bps to 4.69%. The 30-year has flirted with 4.75% yield a couple of times recently, but has always backed off before breaching that yield by any significant amount. The yield curve is flatter than Paris Hilton's EEG - that is never a good sign.

The middle of the yield curve was broadly lower: five year yields rose to 4.402%, and ten-year yields rose to 4.482%.

Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 6.0 bps wider at 17.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 61.0 bps for 10-year AAA, and 87.0 bps for 20-years.

Credit spreads (spreads between corporate bonds of the same maturity profile but different creditworthiness) were broadly tighter with the AAA-A spread on 20-years 5.0 bps looser at 35.0 basis points and the 10-year AAA-A spread 3.0 bps looser at7.0 bps.

Treasury Yields
UST 13wk (yld)3.8870.0571.49%
UST 2Y (yld)4.380.081.86%
UST 5Y (yld)4.4020.0811.87%
UST 10Y (yld)4.4820.0761.72%
UST 30Y (yld)4.690.0631.36%

The Banks Index slid 0.14 points (0.13%), to 105.32; within the index,

  • Golden West Financial (GDW) -$1.50 (2.23%) to $65.81;
  • Fifth Third Bancorp (FITB) -$0.86 (2.04%) to $41.29;
  • Washington Mutual (WM) -$0.73 (1.7%) to $42.14;
  • Regions Financial (RF) -$0.20 (0.58%) to $34.13; and
  • PNC Financial Services (PNC) -$0.33 (0.51%) to $64.67.

The Broker-dealer Index added 0.95 points (0.49%), closing at 194.25; the ticket clippers lined up as follows -

  • Legg Mason (LM) +$3.46 (2.86%) to $124.38;
  • Jeffries Group (JEF) +$1.02 (2.37%) to $44.04;
  • Ameritrade (AMTD) +$0.38 (1.62%) to $23.78;
  • E*Trade (ET) +$0.11 (0.57%) to $19.27; and
  • Morgan Stanley (MWD) +$0.14 (0.25%) to $56.80.

The Philadelphia SOX (Semiconductor) index dipped 2.98 points (0.62%), ending the day at 475.78

  • Marvell Tech Group (MRVL) -$2.17 (3.81%) to $54.77;
  • Advanced Micro Devices (AMD) -$0.91 (3.44%) to $25.58;
  • Micron Technology (MU) -$0.46 (3.2%) to $13.92;
  • Teradyne (TER) -$0.36 (2.47%) to $14.23; and
  • Infineon Tech (IFX) -$0.14 (1.53%) to $9.03.

Gold & Silver Markets

Gold rose $0.80 (0.16%) to close at $499.10 per ounce. The December contract poked its head through $500 (the forwards - Feb06 and April 06 - are already above $500) hitting a session high of $502.30 before getting slammed pretty hard (all the way down to $494.30). 

The Gold Bugs Index lost 2.49 points (0.98%), ending the day at 251.4

  • Hecla Mining (HL) -$0.15 (3.87%) to $3.73;
  • Harmony Gold (HMY) -$0.33 (2.55%) to $12.60;
  • Agnico Eagle (AEM) -$0.23 (1.51%) to $15.01;
  • Meridian Gold (MDG) -$0.27 (1.34%) to $19.92; and
  • Gold Fields (GFI) -$0.19 (1.2%) to $15.59.

Silver fell by $0.05 (0.65%) to close at $8.30 per ounce. 

The Gold and Silver Index (XAU) lost 0.82 points (0.69%), closing at 117.46 points.

  • Harmony Gold (HMY) -$0.33 (2.55%) to $12.60;
  • Agnico Eagle (AEM) -$0.23 (1.51%) to $15.01;
  • Meridian Gold (MDG) -$0.27 (1.34%) to $19.92; and
  • Gold Fields (GFI) -$0.19 (1.2%) to $15.59.
Precious Metals and Indices
PHLX Gold and Silver Index117.46-0.82-0.69%
AMEX Gold BUGS Index251.4-2.49-0.98%

Oil Market

Oil lost ground, shedding $0.86 per barrel, closing at $56.50 per barrel. 

The Oil and Gas Index (XOI) advanced 0.29 points (0.03%), closing at 972.59

  • Marathon Oil (MRO) +$0.74 (1.28%) to $58.61;
  • Occidental Petroleum (OXY) +$0.92 (1.18%) to $79.00; and
  • Kerr Mcgee (KMG) +$0.33 (0.39%) to $86.00.

The Oil service stocks (OSX) Index advanced 0.11 points (0.06%), closing at 174.47

  • National Oilwells/Varco (NOV) +$0.42 (0.71%) to $59.24;
  • Schlumberger (SLB) +$0.64 (0.68%) to $94.45; and
  • Cooper Cameron (CAM) +$0.30 (0.39%) to $77.87.
Energy Complex
Reuters CRB330.03-0.99-0.3%
Crude Oil Light Sweet56.5-0.86-1.5%
Heating Oil1.672-0.01-0.77%
Natural Gas11.7360.10.88%
Unleaded Gas1.4556-0.02-1.44%
AMEX Oil Index972.590.290.03%
Oil Service Index174.470.110.06%

Currency Markets

The USD continues to benefit from stupidity and government intervention (anyone who thinks that the Fed is not propping up the dollar through surreptitious intervention, is an idiot). Eurozone manufacturers will be rapt - with the US trying to hold its currency up they are holding the euro-currency artificially low... thus boosting the EU's exports (did you know that Germany is the country that generates the largest volume and value of exports? It's not the country with the largest bilateral trade surplus with the US, but it's got the largest traded-goods sector.)

USD Exchange Rates
US Dollar Index91.650.510.56%
Australian Dollar0.7384-0.0034-0.46%
Swiss Franc1.31270.00660.51%
Canadian Dollar0.8557-0.0008-0.09%