Reply #77: 12:32 EST numbers and blather

[UpInArms]

Dow 11,156.14 +5.44 (+0.05%)
Nasdaq 2,342.46 +1.64 (+0.07%)
S&P 500 1,299.24 -1.01 (-0.08%)
10-Yr Bond 4.851 -0.04 (-0.08%)

NYSE Volume 969,298,000
Nasdaq Volume 871,438,000

12:00 pm : As had been the case yesterday, attention to interest rates has helped squelch the stock market's advance. Conditions within the Treasury market somewhat improved this morning, but that market has since moved back towards the unchanged mark. With bond action back in the stock market's spotlight, the move has prompted the indices' returns to the flat line.

Bond yields are not, at this point, worsening. Nonetheless, the 10-year is yielding 4.85% and remains near a 21-month high. Treasury traders are eyeing next week's relatively heavy economic calendar, which features the employment report. Meanwhile, today's economic calendar has not provided much of a positive catalyst. The core PCE was relatively in-line with expectations and did not change the current trend, Personal Income and Spending reports brough no surprise, and the Chicago PMI reflected continued strength in regional manufacturing.

With Treasuries' earlier improvement, rate-sensitive areas of the stock market had breathed a sigh of relief. Gains have not been sustained, though. The Financial sector has more than halved its gain, and that erasure leaves the market without leadership. The other particularly rate-sensitive pockets are also declining. The Utilities sector has slipped 0.4%, and the homebuilding industry is putting pressure on the Discretionary sector (-0.1%). Lately, the stock market has been impressively resilient to rising interest rates. That does not change the fact that current rates are a bearish factor for stocks, and they are a premise for our neutral view on the market. With respect to the Discretionary sector, General Motors (GM 20.72 -0.34) is, again, weighing on it. Delphi is expected to ask a federal judge to void it union contracts and impose steep wage and benefit cuts today, and a strike that may result could potentially cripple the struggling auto maker.

The other factor that has returned to stock traders' radars are energy prices. Yesterday, their surges contributed to the market's weakness. Today, crude is about 2% lower and back below $66 per barrel. Natural gas, gasoline, and heating oil futures are also sharply lower. The equity market, however, hasn't gotten much spark from the development as interest rate trends remain its driving force at this time. Additionally, the continued concerns over Iran is an overhang, and the potential for disruptions over the weekend is keeping enthusiasm in check.

Just as declining energy prices prompting some profit taking across the Energy sector (-1.5%), so are declining metal prices. Various commodities have hit or approached historical highs this week, and pullbacks are sparking some consolidation across the Materials sector (-0.8%). Those two areas are currently the market's weakest, and they are countering the modest advances in a few others. DJ30 +7.28 NASDAQ -1.10 SP500 +1.23 NASDAQ Dec/Adv/Vol 1471/1391/789.2 mln NYSE Dec/Adv/Vol 1762/1290/572.1 mln