Friday, January 30, 2009

Market Reflections 1/30/2009

Fourth-quarter GDP, at -3.8 percent. proved weak but far from "staggeringly" weak like the White House warned just yesterday. The Chicago purchasers' report and the Reuters/University of Michigan consumer sentiment report point to continued but non-accelerating contraction so far in the first quarter. Optimism that the government will create a "bad bank" to absorb troubled bank assets, optimism that has helped the stock market over the past week, was deflated by a CNBC report that warns the plan, to be unveiled next week, lacks both details and means of funding.

Company news was headed by strong profits from oil giants Chevron and Exxon Mobil, the latter posting a record $45.2 billion profit in 2008. Oil companies are yet to show the effects of the collapse in oil prices. Despite the collapse in oil prices, refinery workers are threatening to go on strike over the weekend, news that added support, but only moderate support, to oil and gasoline prices. Oil ended little changed at $41.60.

Money moved out of risk and into safety during the session. The Dow industrials fell 1.8 percent while the dollar gained nearly 2 cents against the euro to end at $1.2794. Yields in the Treasury market moved slightly higher.

A big gainer on the day was gold which rose 2.2 percent to $929.90. But more important than the gain was a jump in open interest indicating that hot money, that is hedge funds, are back in gold.

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