Friday, July 31, 2009

Market Reflections 7/30/2009

Investors looked past a jump in initial jobless claims, reacting instead to company news including strong earnings from handset maker Motorola and Goodyear. The S&P 500, which is approaching 1,000, rose 1.2 percent to end just over 985. The week's big push to curb speculation now includes proposed legislation that would regulate over-the-counter derivatives including credit default swaps, which many have blamed for adding to volatility during the post-Lehman meltdown. Financial reform efforts have also been aimed at separating credit units from industrial conglomerates, but the efforts don't appear to threaten GE Capital. Key lawmaker Barney Frank said it would be a mistake for GE to spin off the unit, comments that improved confidence in the unit and in GE itself which jumped nearly 10 percent on the news and which helped to feed the day's rally.
Clarification from Chinese officials that the government is not seeking to limit loans fed a big rally in commodities including copper which rose 3 percent to end at $2.54/lb. Volatility in oil continues with WTI jumping 6 percent to $66.50. Gold ended slightly firmer at $936. Treasuries rallied on the day following a very strong 7-year auction that capped a giant week of new supply and followed weak auctions earlier in the week. The 7-year yield fell 5 basis points on the day to end at 3.24 percent.

Thursday, July 30, 2009

Market Reflections 7/29/2009

Big losses in China's stock market, triggered by government plans to limit lending, sent commodity prices down overnight and made for a rough U.S. opening. A steep 2.5 percent headline drop in durable goods didn't help either, even though the results were skewed, as they often are, by month-to-month swings in aircraft orders. Outside of aircraft, the report points to diminishing rates of decline echoed later in the day in a wider view by the Fed's Beige Book which points to very modest growth in the second half. The S&P 500 fell 0.5 percent to just over 975.
The Treasury's 5-year auction proved a major flop as non-dealers stayed away. Treasuries had been rallying on equity losses but gains were trimmed and turned to minor losses with the yield on the 5-year note ending 4 basis points higher on the day at 2.64 percent.
The dollar index held onto its gains through the day, ending 0.8 percent higher at 79.51. Commodities were hurt by the dollar while oil was specifically hurt by a big build in weekly crude stocks. Oil sank through the day to end at $63 for a $4 loss. Gold lost nearly $10 to end at $931

Wednesday, July 29, 2009

Market Reflections 7/28/2009

HighlightsEconomic data was upstaged Tuesday by a rush of efforts to regulate the financial markets. The Commodity Futures Trading Commission said a prior report, one that did not blame speculators for last year's oil spike, is in error and that it will be looking into limiting positions in the market. Later in the day Senator Schumer said he will push for a bill to limit flash trading in which orders, often at the moment that economic data are released, are executed instantaneously through advanced trading systems.
Headlining the day's economic news was a second month of disappointment for consumer confidence. The Conference Board's report showed a new wave of deterioration in the assessment of the jobs market and on future income, results that point to very slow economic recovery at best. But the news didn't hurt the stock market much which is benefiting from a strong earnings season, underscored in Tuesday's session by very strong results at Amgen which helped the NASDAQ to outperform other indexes with a 0.4 percent gain to just over 1,975.
Treasuries were hurt but only slightly by a surprisingly sloppy 2-year auction, one that raises questions over 5-year and 7-year auctions that are still ahead this week. The yield on the 2-year ended at 1.08 percent, right at the high yield on the auction and vs. 1.04 percent at yesterday's close. The dollar index firmed 0.3 percent to 78.88 which pushed down commodities including oil that ended just above $67. Oil traders say the CFTC news is making customers reluctant to take on large positions in the risk that limits will be imposed. Gold ended about $15 lower at $940

Tuesday, July 28, 2009

Market Reflections 7/27/2009

It's been a very long wait but the worst for the housing sector really does appear to be over. New home sales rose strongly in June with supply down markedly, complementing a run of solid reports on housing starts and sales of existing homes. But the news did little for the stock market which appears to be weighed down by prior gains. And in contrast to last week, stocks were not helped by earnings as insurer Aetna and glass maker Corning both posted disappointments. The S&P 500 inched higher to end just over 980. Oil firmed to $68.50 with base metals the best performer of all, extending a run of strong gains. Treasury yields, pressured by a massive week of coming supply, rose slightly with the 10-year ending at 3.72 percent. Gold ended firmly at $955.
In special notes related to the bust, the SEC has made permanent the ban on naked short selling while Congress will consider curbing the credit default market. In a final note, a Gallop poll shows Americans think the least of the Federal Reserve, ranking it at the very bottom of nine U.S. agencies. There's a rising debate whether Ben Bernanke, whose chairmanship expires in January, should be reappointed to another term. Bernanke appears to be on the offensive, defending the "too big to fail" dictum at a town hall meeting on Sunday.