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ozymandius Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Nov-09-06 07:33 AM
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1. WrapUp by Mike Hartman

The Democratic Party pulled-off some big victories yesterday to gain control of the House of Representatives, and the Senate majority awaits the results from Virginia and Montana. In pre-market trading, stock index futures were under pressure to the downside with the power split in Washington, but overall stock prices stabilized by the second hour of trading. Generally speaking, there is very little volatility in todays trading across all asset classes including stocks, bonds, currencies, and commodities. As I write, we are now two hours into todays session, and the Dow Industrials are lower by 0.1%, Ten-year Treasuries are higher by 0.01%, the U.S. Dollar Index is higher by 0.14%, and commodities are mixed with energy prices moving higher. The big focus for investors is to figure out which sectors will be most affected by the outcome of yesterdays vote.

So far the biggest gainers this morning are the oil and oil services companies with the oil index higher by 1.0% and oil services higher by 1.6%. Energy companies got a boost today with the release of the weekly inventory data showing a smaller than expected build in crude inventories (expected +750,000 barrels, actual +400,000 barrels) and a bigger than expected drawdown of distillate inventories (expected -800,000 barrels, actual -2.7 million barrels). This is the fifth consecutive week of declining distillate inventories. Crude is higher by nearly a dollar to $59.90, heating oil is 2.2% higher at $1.717/gal. and unleaded gasoline is 2.4% higher at $1.56 a gallon. The only other sector flashing noticeable green at the moment is the Utility Sector with a gain of 0.5%. (Watch out for Halliburton in the energy sector as commentators expect the new Congress to subpoena Halliburton to question their no-bid contracts in Iraq.)

By far the biggest sectors getting hit lower today are drugs and healthcare, both down by 1.7%. It is widely assumed the changing of the guard will bring changes to Medicare coverage making future profits more difficult for big-pharma and healthcare companies. The airline sector is also moving lower by 2.4%, in part due to the rising fuel costs, but Im not sure how much of the decline could be due to less government support expected to bail-out the struggling airlines. The Semiconductor and Computer Indexes are fractionally lower, but fighting to get into positive territory. In terms of volatility, I expect very little change through the balance of todays trading as the U.S. Treasury is scheduled to auction $19 billion in three-year notes at 1:00pm today. Tomorrow they will borrow another $13 billion with the sale of ten-year notes.
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