Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.
You bloody wouldn't credit it (as Bryan Brown might be heard to say). I get all enthusiastic about gradually rebuilding the USRant in PHP, and the bloody webserver goes Phut as a result of DreamHost's billing system doing something really interesting. As such, tonight's USRant is going to concentrate on the major stuff only. There will also be more spelling errors than usual because this thing has been crafted lovingly by hand and my eyes have just about had it with checking numbers.
Gold, Silver, Oil and other Stuff
Well, the 30-year bond spiked like blazes as a result of the assumption that the Fed will have to cut rates to forestall a weakening US economy (i.e it must try and do microsurgery with a chainsaw); it got above 119, which puts it in a very odd technical position - I cannot bring myself to change my bias on it, but if it holds above 119 for the rest of the week, change it I must.
Gold had a good old fashioned nuffie=slaughter - the dumb money piles in at new highs, gets all twitterpated when Gold breaks $900 and buys again, and then da Boyz tear the rug out. Front-month Gold today dropped $12.50 to $890.90 an ounce, and fresh from the foreseeable carnage in dumb oil longs last week, the smell of scorched nuffnuff pervades the pits once again.
Speaking of Oil, front-month Crude tanked hard - dropping $2.20 to $92 a barrel - and dropped as low as $90.98 (call it 91... that's where the stops would have been!).
Federal Reserve Open Market Operations
The Federal Reserve conducted one temporary Open Market Operation - a $6.75 billion repurchase; ordinarily that would have been enough to move the market upwards, but ...
but...
come on - you know the reason it didn't result in a goosing of the stock indices... either there wasn't enough in T-backed collateral, or the amount in T-backed was at too small a discount to Fed Funds.
Well, it's the former - NONE of the repo was in T-backed. it was all in Agency-backed, because the Mortgage Agencies (Fannie Mae and Freddie Mac) are dead on the vine, dead in the water, dead like a million Iraqi children, dead like Dick Cheney's loins unless someone gives him some Death Porn.
Economic News
Producer prices fell 0.1%, according to the Labor Department - but what would they know. Expectations were for a drop of 0.2%. The index of most important to non-eating, non driving people - the PPI excluding food and energy - gained 0.2%, which was in line with the educated guessers.
The New York Fed's Empire State Survey of Regional Manufacturing showed a drop to 9.03 this month from 9.80 in December, well below consensus expectations for a reading of 9.75; it's not clear to me that anybody knows what the 9.xx actually means - 9.xx bottles of beer on the wall, perhaps. There were declines in important components of the index such as employment and new orders.
The Retail Sales report was a stinker, registering a 0.4% drop (expectations were for unchanged) and a fall of 0.4% excluding vehicle sales (consensus was for -0.1% ex autos). November's number was also revised lower. This jibes with the Redbook surveyout today which showed 0.9% year over year growth in major chain store sales, and the ICSC-UBS same store sales numbers which showed a 0.9% fall for the week, and a very sluggish 1.1% growth over the prior year.
In the face of all that horrible news, you would expect bonds to - what? If you said "rise, as a result of expectations that the Fed might be forced to cut rates another 50bps", you would have been right in terms of what actually happened. The longer term reality is a world where the Chinese and Middle Easterners amass huge slugs of US dollars, and they are sik of getting a meagre return in US government bonds which is being further eroded by adverse exchange rate movements: Prince Faisal doesn't want to have to bring a jumbo full of dollars every time he comes to Paris.
If the Arabs and the Chinese simply slow their rate of purchases of T-bonds, the T-bond market will dislocate. I have no doubt that sometime in the next two years this will be the subject of a TootRant. Further monetary easing will not help the US economy, and the US dollar is being seen as a liability... so long rates must rise.
Major US Indices
The Dow Jones Industrial Average ended the session at 12,501.11 points, dropping 277.04 (2.17%). The close of the day was also the low. The sole intraday stocks rally of any importance was quite a doozy, but in the context of the session it was hardly anything to write home about. In fact the Dow shot up over 100 points between 3:20 and 3:35 p.m. NY time; once the thing tested 12500 for twenty minutes and failed to frop below it meaningfully, up she shot. However in the ensuing 25 minutes it was all given back, plus a few points for good measure... the index closed at the low of the session.
Of the 30 Dow components, only one rose for the session (Honeywell HON, +0.02 (0.08%) to $25.41 on volume of 17.6m shares.
Among the Dow losers, the worst affected (in percentage terms) were
- Citigroup, down $2.08 (7.16%) to $26.98 on volume of 186 million units;
- JPMorgan Chase, down $2.28 (5.51%) to $39.08 on volume of 40.3 million units;
- Alcoa, down $1.67 (5.08%) to $31.23 on volume of 14,1million units;
- General Motors, down $1.14 (4.81%) to $22.55 on volume of 14.4 million units; and
- Boeing, down $3.26 (3.99%) to $78.41 on volume of 14.8 million units.
The S&P500 Index closed with a loss of 35.3 points (2.49%) at 1,380.95 points; only 24 index members managed a gain for the session, and 474 declined. The worst of the decliners were
- E*Trade Financial, down $0.32 (9.88%) to $2.92 on volume of 34 million shares;
- Circuit City, down $0.39 (9.77%) to $3.6 on volume of 12 million shares;
- CIT Group, down $2.17 (9.19%) to $21.43 on volume of 5 million shares;
- MEMC, down $6.67 (8.81%) to $69.07 on volume of 8 million shares;
- Valero Energy, down $4.97 (8.3%) to $54.9 on volume of 20 million shares;
On the NYSE, 819 stocks advanced, with volume in gainers totalling a rather pitiful 337.3 million shares out of 4.5 billion shares traded in total; by contrast there were 4.1 billion shares traded in the 2513 losers. Just 38 NYSE stocks made new 52-week highs, while 385 made new 52-week lows.
Nasdaq volume was 2.4 billion shares (give or take a few million) and a paltry 253.7 million shares was traded in the 733 advancing stocks; 2.1 billion changed hands in the 2287 decliners. 41 Nasdaq stocks rose to new 52-week highs, and 411 lumbed a new low.
