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The Bond market was very helpful to yesterday's exhortation to short the 30-year. I was pretty emphatic (including "Short Bonds" in the title of yesterday's USRant just to properly nail the colours to the mast); the bond market obliged by providing a lovely uptick at the start of the session (to just above 113). By the time I sent out the e-mail for the exit (at 1:27 a.m., with the Mar06 ZB at 112-20/32) the trade was up 57% in a little over 2 hours.
And Natural Gas - whose price I declared to be ridculously shortable just two session ago - was down another 5.8% for the session.
You will recall that Tuesday's USRant declared a top in Energy - and even declared there would be a pop after the open the following session, which there was. Natural Gas was emphasised, along with Heating Oil.
If you had shorted NG at the open of the Wednesday session, you entered at $15.1600 and as of today's session you were up - I kid you not - $12890 per contract (each contract has a margin requirement of $4000). If you shorted HO you entered at 1.83 and as of today's session you were 'only' up $1793 on margin of $3375. Crude Oil shorts entered at $61.30 and are currently up $1310 on margin of $4050 - that's the worst Energy sector outcome you could've got by taking action based on Monday's declaration.
That's not bad eatin', whichever way you look at it.
OK - enough 'Toot toot' on the RantHorn.
Today's session ignored some pretty bleh Economic data - the CPI fell (at the hedonicised, massaged, bullshit headline level) by 0.6% thanks to declines in Energy prices; consensus called for a decline of 0.4%. At the 'core' level, prices rose 0.2% (which was in line with expectations). Expect the talking heads to concentrate on the headline number this time around, because it's much lower than the core.
Now why would the bond market soften after a weaker-than-expected inflation reading? Simple, silly... because the bond market is pricing in supply considerations. With the tab for the Iraq War now approaching half a trillion dollars (and that's only the stuff that's in the budget - there's plenty that isn't), the bond market knows that the world is soon going to be awash in US Treasuries. The Fed can't monetise all of them (not even with every helicopter in the entire US Air Cavalry working 24 hours a day). 'Carribean Financial Centres' (shorthand for the US government's offshore price-manipulation machinery) can't keep up either. With Iran's euro-denoinated oil bourse coming on line next March threatening US dollar hegemony in Energy markets, and with petrodollar recycling being diverted to domestic projects within OPEC countries anyhow, the outlook for offshore demand or T-bonds is bleak.
Anyhow...
The data on Industrial Production was stronger than expected, with output growing at 0.7% (consensus was for 0.2%) and capacity utilisation at 80.2% (consensus was for 79.8%). Most of this was the post-hurricane return of 'Mining' sector infrastructure (that sector includes oil refineries).
New Jobless Claims were a bit weaker than expected, at 329,000 new claimants (expectations were for 315,000).
And finally, the Phialdelphia Fed Survey said everythign was just tickety-boo... what eles would you expect a bunch of bureaucrats to say?
Federal Reserve Open Market Operations
The Fed's Open Market Operations desk performed 2 repurchase operations.
- a $12.25billion, overnight repurchase with $12.04billion in T-backed collateral undertaken at a 0.9 basis point discount to the Fed Funds Rate (FFR); and
- a $10billion, 14-day repurchase entirely in T-backed collateral, undertaken at a 12 basis point discount to the Fed Funds Rate (FFR).
Major US Indices
The Dow Jones Industrial Average dipped a miniscule 1.84 points (0.02%), closing out the day at 10881.67 points. The index hit an intraday high of 10938.74 about 15 minutes after the open, plunged to the 10880s less than an hour later before going sideways for three hours - setting its low at 10865.42 at about 2:45 p.m. NY time.
Within the blue-chip index, 11 stocks rose, the biggest gainers being Altria Group (MO, +3.92% to $76.62) afterthe $10 billion damages award against it was thrown out on appeal, and Merck (MRK, +1.95% to $29.77). These two accounted for 28 Dow points between them. Losers in the Dow numbered 19 and were led by Mcdonalds (MCD, -1.46% to $34.98) and Hewlett Packard (HPQ, -1.38% to $29.20), with these two stocks contributing -7 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the losers by 308.2m shares to 145.9m.
The broader S&P500 slid 1.8 points (0.14%), to 1270.94. Within the index, gainers numbered 171, while 305 S&P500 stocks fell for the day. Volume was tilted 1.0:1 in favour of the losers with 921.71 million units traded in the losers as compared with 903.36 million traded in the winners .
Over at Times Square, the Nasdaq Composite shed 1.96 points (0.09%), to close at 2260.63, while larger-cap technology issues fared better with the Nasdaq100 adding 2.72 points (0.16%), to end at 1701.7 points. Within the tech benchmark, gainers numbered 42, while 53 Nasdaq100 stocks fell for the day. Volume was tilted 1.4:1 in favour of the winners with 416.24 million traded in the losers compared to 300.54 million in the winners .
NYSE Volume was solid, with 2.13 billion shares changing hands, while Nasdaq Volume was likewise pretty good at 1.8 billion shares.
| Major Market Statistics | |||
| Index | Close | Gain(Loss) | % |
| Dow Jones Industrial Average | 10881.67 | -1.84 | -0.02% |
| S&P500 | 1270.94 | -1.8 | -0.14% |
| Nasdaq Composite | 2260.63 | -1.96 | -0.09% |
| Nasdaq100 | 1701.7 | 2.72 | 0.16% |
| NYSE Volume | 2.13bn | - | - |
| Nasdaq Volume | 1.8bn | - | - |
Bellwethers
My 9-stock "bellwethers" group rose by an average of 0.19%
- General Electric (GE) +$0.23 (0.64%) to $36.00;
- Citigroup (C) -$0.54 (1.09%) to $49.10;
- Wal Mart (WMT) -$0.25 (0.5%) to $49.26;
- I.B.M. (IBM) +$0.40 (0.48%) to $83.53;
- Intel (INTC) -$0.05 (0.19%) to $26.58;
- Cisco Systems (CSCO) +$0.07 (0.4%) to $17.76;
- eBay (EBAY) +$0.73 (1.61%) to $46.02;
- Fannie Mae (FNM) -$0.07 (0.15%) to $47.86; and
- Freddie Mac (FRE) +$0.35 (0.54%) to $65.51.
Market Breadth & Internals
NYSE declining Issues beat out advancers by 2084 to 1230, for a single-day A/D reading of -854; and Nasdaq losers exceeded gainers by 1841 to 1182. The 10-day moving average of the A/D line fell to 72.3 on the NYSE, while the 10dma of the Nasdaq A/D fell to -131.3.
On the NYSE declining volume was greater than volume in advancing issues by 1192.9 to 893.1 million shares; Nasdaq advancing volume was greater than volume in decliners by 900.4 to 840 million shares.
93 NYSE-listed stocks rose to new 52-week highs, and 95 posted fresh 52-week lows, while on the Nasdaq there were 86 stocks that hit new 52-week highs, and 54 which fell to fresh 52-week lows.
| Market Breadth Statistics | ||
| NYSE | Nasdaq | |
| Advancers | 1230 | 1182 |
| Decliners | 2084 | 1841 |
| Advancing Volume (m) | 893.08 | 900.41 |
| Declining Volume (m) | 1192.85 | 839.99 |
| New Highs | 93 | 86 |
| New Lows | 95 | 54 |
| Market Sentiment Statistics | |||
| Index | Close | Gain(Loss) | % |
| CBOE Volatility Index | 10.73 | 0.25 | 2.39% |
| CBOE Nasdaq Volatility Index | 13.96 | 0.17 | 1.23% |
| Equity Put-Call Ratio | 0.44 | -0.17 | -27.87% |
| 10-day PCR | 0.58 | 0 | 0% |
| SPX-VIX Ratio | 118.4 | -3 | -2.47% |
Bond Market Analysis
Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 1.8 bps to 4.675%.
The middle of the yield curve was broadly lower: five year yields rose to 4.377%, and ten-year yields rose to 4.468%.
Spreads between short-dated (2-yr) Treasuries and high-grade corporate bonds of similar maturity profiles were 0.0 bps tighter at 13.0 basis points; spreads between longer dated Treasuries and their corporate AAA counterparts fell to 71.0 bps for 10-year AAA, and 98.5 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 7.0 bps wider at 21.0 basis points and the 10-year AAA-A spread 2.0 bps wider at -3.0 bps.
| Treasury Yields | |||
| Index | Close | Gain(Loss) | % |
| UST 13wk (yld) | 3.84 | 0.038 | 1% |
| UST 2Y (yld) | 4.34 | 0 | 0% |
| UST 5Y (yld) | 4.377 | 0.014 | 0.32% |
| UST 10Y (yld) | 4.468 | 0.018 | 0.4% |
| UST 30Y (yld) | 4.675 | 0.018 | 0.39% |
The Banks Index shed 0.46 points (0.43%), at 105.32; within the index,
- BB&T Corp (BBT) -$0.12 (0.28%) to $43.05;
- North Fork Bancorp (NFB) -$0.35 (1.25%) to $27.63;
- Golden West Financial (GDW) -$0.16 (0.24%) to $67.26;
- MBNA Corp (KRB) -$0.05 (0.18%) to $27.28; and
- Zions Bancorp (ZION) +$0.39 (0.52%) to $74.98.
The Broker-dealer Index rose 0.75 points (0.38%), closing at 197.06; the ticket clippers lined up as follows -
- Legg Mason (LM) -$1.38 (1.15%) to $118.87;
- Jeffries Group (JEF) -$0.09 (0.2%) to $43.89;
- Merrill Lynch (MER) -$0.32 (0.47%) to $67.96;
- Raymond James (RJF) -$0.08 (0.21%) to $37.65; and
- Charles Schwab (SCH) -$0.19 (1.23%) to $15.27.
The Philadelphia SOX (Semiconductor) index declined 2.39 points (0.48%), at 498.38
- Altera (ALTR) -$0.26 (1.33%) to $19.29;
- Texas Instruments (TXN) -$0.42 (1.25%) to $33.29;
- Xilinx (XLNX) -$0.29 (1.05%) to $27.25;
- Freescale Semiconductors (FSL-B) -$0.26 (0.97%) to $26.42; and
- Marvell Tech Group (MRVL) -$0.56 (0.94%) to $58.82.
Gold & Silver Markets
Gold fell by another $2.90 (0.57%) to close at $506.60 per ounce. Oh how I wish I could claim the drop since Monday's open for the RantRecord... but I can't because the exhortation was not "Short Gold Next Week", it was "I will be Looking to Short Gold Next Week". Well, I didn't bloody look hard enough.
The Gold Bugs Index posted a rise of 2.4 points (0.95%), at 255.17
- Eldorado Gold (EGO) +$0.10 (2.5%) to $4.10;
- Hecla Mining (HL) +$0.08 (2.37%) to $3.46;
- Meridian Gold (MDG) +$0.44 (2.25%) to $19.98;
- Randgold Resources (GOLD) +$0.32 (2.14%) to $15.28; and
- Agnico Eagle (AEM) +$0.37 (2.12%) to $17.86.
Silver rose $0.17 (2.01%) to close at $8.64 per ounce. The Gold and Silver Index (XAU) gained 0.94 points (0.78%), closing at 120.84 points.
- Meridian Gold (MDG) +$0.44 (2.25%) to $19.98;
- Agnico Eagle (AEM) +$0.37 (2.12%) to $17.86;
- Anglogold Ashanti (AU) +$0.80 (1.74%) to $46.67; and
- Goldcorp (GG) +$0.22 (1.12%) to $19.95.
| Precious Metals and Indices | |||
| Index | Close | Gain(Loss) | % |
| Gold | 506.60 | -2.90 | -0.57% |
| Silver | 8.64 | 0.17 | 2.01% |
| PHLX Gold and Silver Index | 120.84 | 0.94 | 0.78% |
| AMEX Gold BUGS Index | 255.17 | 2.4 | 0.95% |
Oil Market
Oil lost ground, shedding $0.86 per barrel, closing at $59.99 per barrel.
The Oil and Gas Index (XOI) dipped 15.7 points (1.52%), closing at 1017.21
- Sunoco (SUN) -$2.14 (2.55%) to $81.68;
- Marathon Oil (MRO) -$1.36 (2.12%) to $62.88; and
- Amerada Hess (AHC) -$2.74 (2.08%) to $128.95.
The Oil service stocks (OSX) Index lost 1.77 points (0.93%), to end the session at 188.91
- Global Industries (GLBL) -$0.45 (3.54%) to $12.25;
- Tidewater (TDW) -$1.05 (2.18%) to $47.03; and
- Smith International (SII) -$0.69 (1.76%) to $38.61.
| Energy Complex | |||
| Index | Close | Gain(Loss) | % |
| Reuters CRB | 343.34 | -1.5 | -0.43% |
| Crude Oil Light Sweet | 59.99 | -0.86 | -1.41% |
| Heating Oil | 1.7873 | -0.06 | -3.13% |
| Natural Gas | 13.871 | -0.86 | -5.82% |
| Unleaded Gas | 1.6168 | -0.02 | -1.46% |
| AMEX Oil Index | 1017.21 | -15.7 | -1.52% |
| Oil Service Index | 188.91 | -1.77 | -0.93% |
Currency Markets
| USD Exchange Rates | |||
| Index | Close | Gain(Loss) | % |
| US Dollar Index | 90.01 | 0.16 | 0.18% |
| Euro | 1.1975 | -0.0027 | -0.22% |
| Yen | 116.255 | -1.14 | -0.97% |
| Sterling | 1.7649 | -0.0084 | -0.47% |
| Australian Dollar | 0.7479 | -0.0073 | -0.97% |
| Swiss Franc | 1.2894 | 0.0075 | 0.59% |
| Canadian Dollar | 0.8628 | -0.0053 | -0.61% |
