Investors responded positively to a 1.4% gain in May retail sales and positive news from the Federal Reserve's Beige Book, which witnessed moderate growth in the economy and reported inflationary pressures as minimal in many areas of the country.
The Dow posted its best one-day gian since July 2006, and other indices showed similar impressive advances.
Dow 13,482.35 +87.34; NASDAQ 2,582.31 +32.54; S&P 500 1,515.67 +22.67; NYSE Composite 9,863.50 +139.01
Some easing in the bond market also fueled the rally in stocks as the 10-year note fell back to a 5.21% yield, though oil prices continued to charge ahead.
Light crude on the NYMEX priced out at $66.26 per barrel, an increase of 91 cents. Gold and silver were marginally lower, and remain moribund.
Internal indicators revealed that the rally was widespread, with advancing issues trouncing decliners by a 7-2 ratio. There were 242 new highs and 191 new lows - a positive development that we've been hoping for - equilibrium and stability.
With some important economic numbers due out tomorrow (PPI) and Friday (CPI, Capacity Utilization), get ready for a stunning close to the trading week, especially if those numbers follow today's lead set by the Beige Book reading.
Wednesday, June 13, 2007
Tuesday, June 12, 2007
Inflation, Anyone?
Stocks on US indices closed lower again on Tuesday following a lackluster performance to open the week's trading. While investors hunt for bargains, search for insight and generally take whatever profits are available, many were glued to the bond bourses, which pushed yields to recently-unprecedented levels. The 10-year note closed with a yield of 5.248%, up more than 100 basis points from yesterday.
Dow 13,295.01 -129.95; NASDAQ 2,549.77 -22.38; S&P 500 1,493.00 -16.12; NYSE Composite 9,724.49 -117.24
As interest rates rise, so do inflation fears, or vice versa, depending upon which side of the fence you're so inclined. Consumers have watched energy - and to some extent, food - prices climb without pause for the past six months, and the pain at the pump is finally spreading to stocks and bonds.
It's little wonder that bond yields are rising. They've been at or below the level of inflation for years. The current upticking indicates a number of thorny issues are about to slap the US economy in the face: a slumping housing market, stagnant wages, China's floating of the Yuan and the twin deficits produced by the government in trade and budget, to name just a few.
The price increases in just about everything, juxtaposed against a weak dollar, are making investments in US stocks somewhat difficult to swallow for foreigners who must fund US excess or watch as the entire global economy dissipates into the ether. They don't have much of a choice, but there are moments - like the past few weeks - in which they take stock, pause, and sell. It isn't perfect science, but it does make as much sense as any other explanation for recent market ups-and-downs.
Today's dip certainly cannot be laid at the feet of the oil barons. The price of their filthy, slimy lucre actually declined by 62 cents, though it's still a pricey $65.35. The mini-rally in metals was cut short as both gold and silver gave back much of yesterday's gains.
Tracking the internals, today's market losses were indeed as bad as they looked. Declining issues overwhelmed advancers at nearly a 5-1 rate. New lows were over the top at 236 as compared to the paltry number of new highs: 124. Not to worry. We've been down this particular road before and won't become concerned until the new lows reach and remain above 320.
Relax, we're in an adjustment/consolidation phase.
Dow 13,295.01 -129.95; NASDAQ 2,549.77 -22.38; S&P 500 1,493.00 -16.12; NYSE Composite 9,724.49 -117.24
As interest rates rise, so do inflation fears, or vice versa, depending upon which side of the fence you're so inclined. Consumers have watched energy - and to some extent, food - prices climb without pause for the past six months, and the pain at the pump is finally spreading to stocks and bonds.
It's little wonder that bond yields are rising. They've been at or below the level of inflation for years. The current upticking indicates a number of thorny issues are about to slap the US economy in the face: a slumping housing market, stagnant wages, China's floating of the Yuan and the twin deficits produced by the government in trade and budget, to name just a few.
The price increases in just about everything, juxtaposed against a weak dollar, are making investments in US stocks somewhat difficult to swallow for foreigners who must fund US excess or watch as the entire global economy dissipates into the ether. They don't have much of a choice, but there are moments - like the past few weeks - in which they take stock, pause, and sell. It isn't perfect science, but it does make as much sense as any other explanation for recent market ups-and-downs.
Today's dip certainly cannot be laid at the feet of the oil barons. The price of their filthy, slimy lucre actually declined by 62 cents, though it's still a pricey $65.35. The mini-rally in metals was cut short as both gold and silver gave back much of yesterday's gains.
Tracking the internals, today's market losses were indeed as bad as they looked. Declining issues overwhelmed advancers at nearly a 5-1 rate. New lows were over the top at 236 as compared to the paltry number of new highs: 124. Not to worry. We've been down this particular road before and won't become concerned until the new lows reach and remain above 320.
Relax, we're in an adjustment/consolidation phase.
Monday, June 11, 2007
Half A Loaf
US markets witnessed both sides of the ledger on Monday as the Dow and NASDAQ closed marginally lower while the S&P 500 hung on to a measly 1-point-and-change gain. Following last week's roller coaster, indecision was the rule of the day, amid low volume, though typical for a summer session.
Dow 13,423.01 -1.38; NASDAQ 2,572.15 -1.39; S&P 500 1,508.97 +1.30; NYSE Composite 9,941.73 +15.66
Advancing issues lagged decliners 11-10, though some relative strength was shown in the 166 new highs as compared to 126 new lows.
Interest rates and inflation are still weighing on investment decisions. The benchmark 10-year note is yielding 5.137%, a tempting rate for conservative investors. Unfortunately, with inflation galloping along at a 3% or better rate, the 2% spread is only a hedge or a way to preserve money rather than making some.
On the heels of the bond momentum comes a healthy gain in gold and silver. Both were up on the day - gold by 8.70, to finish at $659.00; silver gained 24 cents to $13.28. The metals have been stuck in a range for 14 months and are closer to the low end of their respective ranges than the high end and have not moved ahead since the spectacular bull stage of 2002-2006.
However, with bonds rising, the metals should follow, though they were likely overbought at the high ends of the 2006 rally. Thus, they also serve only as hedges, not investments unless one is willing to actively trade them through their troughs and peaks.
Oil was back up again by $1.21, closing at $65.97. This price is still close to catastrophic for the US and world economy and not enough is being done by either the financial world, environmentalists or governments to force the high prices back down to more comfortable levels, say, $45-50 per barrel. The protracted expensive nature of crude and distillates has become a significant drag on growth as the most recent GDP illustrates.
The longer the oil companies and sheiks are allowed to maintain near-predatory pricing, the greater the threat to standards of living worldwide. Without relief, costs for almost everything will continue to spiral higher.
A few thoughts for tomorrow and the next day.
Dow 13,423.01 -1.38; NASDAQ 2,572.15 -1.39; S&P 500 1,508.97 +1.30; NYSE Composite 9,941.73 +15.66
Advancing issues lagged decliners 11-10, though some relative strength was shown in the 166 new highs as compared to 126 new lows.
Interest rates and inflation are still weighing on investment decisions. The benchmark 10-year note is yielding 5.137%, a tempting rate for conservative investors. Unfortunately, with inflation galloping along at a 3% or better rate, the 2% spread is only a hedge or a way to preserve money rather than making some.
On the heels of the bond momentum comes a healthy gain in gold and silver. Both were up on the day - gold by 8.70, to finish at $659.00; silver gained 24 cents to $13.28. The metals have been stuck in a range for 14 months and are closer to the low end of their respective ranges than the high end and have not moved ahead since the spectacular bull stage of 2002-2006.
However, with bonds rising, the metals should follow, though they were likely overbought at the high ends of the 2006 rally. Thus, they also serve only as hedges, not investments unless one is willing to actively trade them through their troughs and peaks.
Oil was back up again by $1.21, closing at $65.97. This price is still close to catastrophic for the US and world economy and not enough is being done by either the financial world, environmentalists or governments to force the high prices back down to more comfortable levels, say, $45-50 per barrel. The protracted expensive nature of crude and distillates has become a significant drag on growth as the most recent GDP illustrates.
The longer the oil companies and sheiks are allowed to maintain near-predatory pricing, the greater the threat to standards of living worldwide. Without relief, costs for almost everything will continue to spiral higher.
A few thoughts for tomorrow and the next day.
Friday, June 8, 2007
You Knew Friday Would Be Good, Didn't You?
After taking a three-day beating, US investors struck back with a vengeance, sending the Dow up more than 150 points in a broad-based rally that took all indices higher.
Dow 13,424.39 +157.66; NASDAQ 2,573.54 +32.16; S&P 500 1,507.67 +16.95; NYSE Composite 9,826.07 +105.13
Even though the volume wasn't quite as brisk as yesterday's, it's worth pointing out that money is on the move. The same stocks that were beaten down on Tuesday, Wednesday and Thursday were not bought up on Friday. Sector rotation - and migration from blue chips to techs - and repositioning is what this week was all about.
Investor confidence was buoyed this morning by news that the trade balance in April shrank to a point that we imported only $58.5 billion more than we export. Most analysts were looking for upwards of a $63 billion imbalance. While the number is still shocking, any improvement is positive for the US business and labor markets, and, to some degree, the country as a whole.
Advancing issues overwhelmed decliners by better than 2-1, and while new lows still outdid new highs (159-108), that reading is less frightening than a day ago. Understandably, stocks were moving in both directions, but there was still some leftover selling to be done on some of the dogs. What would be good to see in the high-low reading is a period of fluctuation, indicative of a market settling in, readying for another leg higher, which is undeniably in the cards.
The dollar strengthened against the Euro on the day, which was another good sign and the price of crude was drubbed back to a more realistic level, losing $2.17 to close the week at $64.76.
Once again, the metals took a beating. Gold was down a whopping $14.90 to $650.30. Silver lost 44 cents to close at $13.04. This signals defeat for the proponents of $800 gold and $20 silver. That bull has all but died a painful death.
Overall, it was a week of readjustment, albeit lower, but the markets are primed for some colossal gains in coming months.
Dow 13,424.39 +157.66; NASDAQ 2,573.54 +32.16; S&P 500 1,507.67 +16.95; NYSE Composite 9,826.07 +105.13
Even though the volume wasn't quite as brisk as yesterday's, it's worth pointing out that money is on the move. The same stocks that were beaten down on Tuesday, Wednesday and Thursday were not bought up on Friday. Sector rotation - and migration from blue chips to techs - and repositioning is what this week was all about.
Investor confidence was buoyed this morning by news that the trade balance in April shrank to a point that we imported only $58.5 billion more than we export. Most analysts were looking for upwards of a $63 billion imbalance. While the number is still shocking, any improvement is positive for the US business and labor markets, and, to some degree, the country as a whole.
Advancing issues overwhelmed decliners by better than 2-1, and while new lows still outdid new highs (159-108), that reading is less frightening than a day ago. Understandably, stocks were moving in both directions, but there was still some leftover selling to be done on some of the dogs. What would be good to see in the high-low reading is a period of fluctuation, indicative of a market settling in, readying for another leg higher, which is undeniably in the cards.
The dollar strengthened against the Euro on the day, which was another good sign and the price of crude was drubbed back to a more realistic level, losing $2.17 to close the week at $64.76.
Once again, the metals took a beating. Gold was down a whopping $14.90 to $650.30. Silver lost 44 cents to close at $13.04. This signals defeat for the proponents of $800 gold and $20 silver. That bull has all but died a painful death.
Overall, it was a week of readjustment, albeit lower, but the markets are primed for some colossal gains in coming months.
Thursday, June 7, 2007
Stocks Rocked Again
This week is turning into one big downer for investors. The Dow is down over 400 points on the week and the other indices have experienced similar losses. What's troubling is that each day has been worse than the preceding one. If this trend continues into Friday, it could be a serious melt-down.
What has changed on Wall Street is nothing more than perception. The US economy didn't suddenly implode, only the point of view from the standpoint of institutional investors. There are two drivers currently: interest rate fears and profit taking. And while the latter is likely the main cause of the three-day downturn, either is cause for serious alarm over the long term.
Dow 13,266.73 -198.94; NASDAQ 2,541.38 -45.80; S&P 500 1,490.72 -26.66; NYSE Composite 9,720.94 -174.07
Some cause for concern in the internal indicators as declining issues outdid advancing ones by nearly a 5-1 margin. That's steep. Also, the new highs / new lows indicator has flipped to the negative, with 126 new highs and 197 new lows. That's the first negative reading in over 6 weeks.
The highs/lows indicator is of particular interest if it is persistent. If this current spate of selling is going to last, we would like to see this indicator negative for at least 3 straight days and this is only the first. It may just be a short-lived summer swoon, and the overall heavy volume today would seem to be indicative of that. There's money being taken off the table. It will soon be searching for a new home and there likely location will be in US equities.
Lost amid all the stock selling and bond wrangling (the 10-year topped 5% on Wednesday and hit 5.13% on Thursday), is the recent strength in the dollar against selected foreign currencies, especially the British Pound and the Euro. It's shown some stability for a change and change, in that regard, is good.
The sore spot still remains. Oil jumped another 97 cents on the day to close at $66.93, and with that kind of pricing in place, there will be no relief at the gas pumps this summer. The wear and tear on Americans' pockets and psyches is palpable. If consumer spending takes another hit - coupled with inflationary pressures - the Big Oil companies can be singled out as villains, and rightly so.
Gold tumbled nearly $10. Silver lost 24 cents. Food prices continue to escalate.
Tomorrow will be the most interesting day of the week to see if the trend continues or buyers find bargains in the bushes.
What has changed on Wall Street is nothing more than perception. The US economy didn't suddenly implode, only the point of view from the standpoint of institutional investors. There are two drivers currently: interest rate fears and profit taking. And while the latter is likely the main cause of the three-day downturn, either is cause for serious alarm over the long term.
Dow 13,266.73 -198.94; NASDAQ 2,541.38 -45.80; S&P 500 1,490.72 -26.66; NYSE Composite 9,720.94 -174.07
Some cause for concern in the internal indicators as declining issues outdid advancing ones by nearly a 5-1 margin. That's steep. Also, the new highs / new lows indicator has flipped to the negative, with 126 new highs and 197 new lows. That's the first negative reading in over 6 weeks.
The highs/lows indicator is of particular interest if it is persistent. If this current spate of selling is going to last, we would like to see this indicator negative for at least 3 straight days and this is only the first. It may just be a short-lived summer swoon, and the overall heavy volume today would seem to be indicative of that. There's money being taken off the table. It will soon be searching for a new home and there likely location will be in US equities.
Lost amid all the stock selling and bond wrangling (the 10-year topped 5% on Wednesday and hit 5.13% on Thursday), is the recent strength in the dollar against selected foreign currencies, especially the British Pound and the Euro. It's shown some stability for a change and change, in that regard, is good.
The sore spot still remains. Oil jumped another 97 cents on the day to close at $66.93, and with that kind of pricing in place, there will be no relief at the gas pumps this summer. The wear and tear on Americans' pockets and psyches is palpable. If consumer spending takes another hit - coupled with inflationary pressures - the Big Oil companies can be singled out as villains, and rightly so.
Gold tumbled nearly $10. Silver lost 24 cents. Food prices continue to escalate.
Tomorrow will be the most interesting day of the week to see if the trend continues or buyers find bargains in the bushes.
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