Tuesday, August 4, 2009

Market Reflections 8/3/2009

A big jump in the ISM manufacturing index, together with a surprise rise in construction spending and big gains for vehicle sales, fed a 1.5 percent rise in the S&P which ended over 1,000 at 1,002.63. Gains in the ISM exceeded expectations with new orders and production showing special strength, strength that points to slowing layoffs and an easing need to draw down inventories. Construction spending got a big boost from single-family homes, a gain adding to building evidence that the housing sector has hit bottom and may now be on the rise. And it was cash for clunkers that gave a big boost to auto sales, pointing to strength in next week's retail sales report.
Some of the biggest gains were in commodities where copper was a standout, jumping 8 percent. Grains also showed big gains with corn up 6 percent. Oil rose nearly 4 percent to just under $71.50. Demand for commodities reflects expectations of improved economic demand together with the need to hedge against inflation including dollar-related imported inflation. The dollar index fell 0.7 percent to 77.58. The appetite for risk made for weakness in the Treasury market where the 10-year yield jumped 15 basis points to 3.63 percent.

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