Market Reflections 9/24/2009

Jobless claims showed solid improvement but were overshadowed by disappointment in existing home sales which ended a streak of gains. The dip in existing home sales played into defensiveness ahead of the G20 meeting. Calls from Italian Prime Minister Berlusconi to limit market speculation made for big declines across commodities including oil which lost $2-1/2 to $66.00 and gold which lost nearly $20 to $995. The move to safety was a big plus for the dollar index which rose 0.6 percent to 76.90. The S&P fell 1 percent to 1,050. Treasury yields edged lower with demand at the 7-year auction especially strong. The 7-year yield ended at 2.99 percent, 1-1/2 basis points lower than the auction's stop-out rate.

Market Reflections 9/23/2009

The only surprise in the FOMC announcement was the extension of mortgage-backed and agency repurchases to the end of the first quarter, a move aimed at easing the risk of a yield spike when the Fed finally exits the market. The programs are still capped at $1.25 trillion for mortgage-backed securities and $200 billion for agencies. The $300 billion Treasury purchase program will wind down by the end of next month as previously announced. Demand for Treasuries picked up following the statement which included a favorable outlook for inflation. Yields edged back with the 7-year note ending at 3.04 percent. The Treasury will auction $29 billion of 7-year notes tomorrow, ending a record week of supply.

The FOMC statement did not include an exit strategy for quantitative easing. But commodities showed very little reaction in a clear indication that inflation expectations remain stable. Gold did pop up more than $5 in immediate reaction to the statement but hit resistance at $1,020, a level it's hit several times over the past week. The dollar index showed little reaction, rising off session lows to end fractionally higher at 76.21. Stocks edged higher with the S&P once again making a new 2009 high before slipping at the close to end 1 percent lower at 1,060.

Market Reflections 9/22/2009

Upbeat company news filled Tuesday's session, helping the S&P to rise 0.7 percent to 1071. Intel, which raised guidance in July and August, said global PC demand is proving stronger than expected and that PC shipments may actually rise this year. Cash-for-clunkers may have come to an end but General Motors is adding shifts and recalling 2,400 factory workers. The nation's largest used-car dealer, CarMax, got a huge lift from cash-for-clunkers even though used cars were not included in the program. But the program did drive traffic into its dealerships. Lowe's was also in the news, predicting sales growth next year on strong do-it-yourself demand. Lowe's is counting on improving home prices to give it a lift. The Federal Housing Finance Agency's home price index rose 0.5 percent in June. Other data included very weak chain-store reports that point to trouble for September retail sales.

The biggest story in the session was the dollar which is hitting new 12-month lows, at 76.07 for the dollar index, down 0.9 percent on the day. Risk appetite is behind the drop which is driving up demand for commodities, especially in China which many say is stockpiling commodities as a hedge against its enormous dollar holdings and holdings of U.S. Treasuries. Oil rose, gold rose, copper rose. Treasuries got a lift from a very strong 2-year auction, raising talk that Chinese demand for Treasuries, at least for now, remains strong. The 2-year yield fell to 0.96 percent, more than 4 basis points below the auction's high yield.

Market Reflections 9/21/2009

Strength in the dollar was the highlight of a quiet Monday session. Talk in the stock market is centering on how rare this year's rally is, showing no correction despite the 60 percent run-up. The S&P 500, where more than 90 percent of the stocks are trading above their 200-day moving average, slipped 0.3 percent to end at 1,064.

Economic data were limited to the index of leading economic indicators which continues to point to strength ahead and where the coincident index is pointing to July as the economic pivot. Risk that the G20 may talk up the dollar later this week tripped short covering, pushing the dollar index up 0.4 percent to 76.78. The rise in the dollar hurt oil which lost more than $2 to end at $69.43. Gold and silver appear to have hit resistance, ending at $1,004 and $16.85.