STOCK MARKET WATCH, Wednesday 14 April

[ozymandius]

Wednesday April 14, 2004

COUNTING THE DAYS
DAYS REMAINING IN THE * REGIME 284
DAYS SINCE DEMOCRACY DIED (12/12/00) 3 YEARS, 124 DAYS
WHERE'S OSAMA BIN-LADEN? 2 YEARS, 177 DAYS
WHERE ARE SADDAM'S WMD? - DAY 391
DAYS SINCE ENRON COLLAPSE = 873
Number of Enron Execs in handcuffs = 18
Recent Acquisitions: Skilling
ENRON EXECS CONVICTED = 2
Other Arrests of Execs = 54

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES




AT THE CLOSING BELL ON April 13, 2004

Dow... 10,381.28 -134.28 (-1.28%)
Nasdaq... 2,030.08 -35.40 (-1.71%)
S&P 500... 1,129.44 -15.76 (-1.38%)
10-Yr Bond... 4.34% +0.11 (+2.60%)
Gold future... 407.70 -13.20 (-3.14%)

DOW..........................NASDAQ.......................S&P

||


GOLD, EURO, YEN and Dollars


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [email protected]

For information on protests and other actions Citizens For Legitimate Government

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

[ozymandius]

1. WrapUp by Ike Iossif

Ratio Analysis

One of my favorite types of analysis is ratio analysis, because it tends to reveal when the historical numerical ratio between correlated markets/sectors is at extreme points, and thus, ripe for reversal.

For the past ten years, major bottoms in the Dow have occurred
when the Dow/Oil Ratio dips below 200.

The SPX/XLE ratio is telling us that the oil sector is near a short-term top.

Summary

The ratio analysis is telling us that more than likely we ought to expect for the intermediate term: higher oil prices, higher interest rates, lower equity prices and a secular top in the financial sector. In the short-term, we ought to expect a higher dollar and lower gold prices.

lots of charts

[ozymandius]

2. Good morning Marketeers!

:donut: :donut: :donut: :donut: :donut: :donut: :donut:

It's a busy day and we (son and I) must get out the door. So this is farewell. Have a wonderful day at the Casino!

Ozy :hi:

[54anickel]

3. Futures still a bit down today, perhaps they will pop up on some more

great economic news. Yesterday they were pricing in a rate hike, today the blather points overseas. :crazy:

8:00AM: S&P futures vs fair value: -1.1. Nasdaq futures vs fair value: -5.0. The futures market is lower this morning in an extension of yesterday's losing session that saw the major averages slide 1.3-1.7%. The negative bias is being supported by lackluster trade in the overseas markets, where the European DAX, CAC, and FTSE are down 1.8%, 1.6%, and 1.1%, respectively. Contributing to the weakness is the market's disappointment over INTC's earnings and HCA's lowered outlook.

[Frodo]

4. Doesn't look like it.

Higher than expected CPI numbers (.4% on expected .2% increase to Core CPI) is bound to continue speculation of rate increases.

[54anickel]

6. Heh, so they are not done pricing that in yet? That seemed to be what

yesterday's closing blather was trying to claim. :silly:

edit to add the latest blather - Yep, they heading further down on that great news.

8:32AM: S&P futures vs fair value: -3.7. Nasdaq futures vs fair value: -7.5. Futures indications slip on the heels of the higher than expected CPI report. Nasdaq futures are down 2.5 points at 7.5 below fair value; S&P futures slip 2.7 points at 3.7 points below fair value. The bond market also took a hit, with the 10-year note down 14/32, bringing its yield up to 4.41%. The stage remains set for a lower open in the cash market.

[54anickel]

5. Dollar jumps as retail sales point to recovery

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1079420307546

snip>

Some analysts pointed to the effect of one-off tax cuts, but with the money market now pricing in a two-thirds chance of a US rate hike by August this was enough to push the dollar higher.

snip>

Strong US domestic growth runs the risk of widening the already vast US current account deficit, the funding of which has been one of the key reasons for the dollar’s decline. Such concerns are increasingly viewed as passe, however. :silly:

“That appears, for now, to be a secondary issue while the markets focus on the increased potential for Fed policy action during the months ahead,” said Robert Sinche, head of currency strategy at Citigroup. “The twin deficits story is becoming less of a focus for foreign investors,” added Paul Mackel, his ABN Amro peer.

So why this move by Russia? :shrug:

The dollar’s surge against the euro came despite the Russian Central Bank unveiling a shift from the exclusive use of the dollar to manage the value of the rouble to a mixed euro/dollar basket. Such a move would see Russia buying $42bn worth of euros, said Monica Fan, senior currency strategist at Royal Bank of Canada. “This could provide some long-term support for the euro and stop it gapping down to $1.15,” she added.

more...

[UpInArms]

17. dollar numbers

(still living on PST and not moving very fast)

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 90.39 Change +0.56 (+0.62%)

http://www.reuters.com/financeNewsArticle.jhtml?type=economicNews&storyID=4813666

GLOBAL MARKETS-U.S. sales data boosts stocks, dollar, hits bonds

LONDON, April 13 (Reuters) - A surprising leap in U.S. retail sales and widespread expectations of robust U.S. corporate earnings drove stocks sharply higher on Tuesday and sent the dollar steaming past four- month highs against the euro.

Yields on government bonds jumped as investors dumped debt after the U.S. Commerce Department said retail sales rose an unexpectedly sharp 1.8 percent in March to a seasonally adjusted $333.01 billion, the biggest gain since March 2003.

<snip>

"These (sales) numbers are extremely good news for the economic recovery. They confirm that the tax cuts are being "consumed" and should contribute to very strong consumption and GDP numbers for the first quarter," said Olivier Gasnier, economist at SG Securities.

Earlier, Japanese shares hit a 32-month month closing high. The Nikkei average gained 0.71 percent to close at 12,127.82, its highest finish since August 8, 2001.

...more...

wonder if the Cheney visit to Japan and China is yielding to the arm twisting that is going on?

[UpInArms]

18. some of Cheney's visit to China

http://www.washingtonpost.com/wp-dyn/articles/A10601-2004Apr14.html

In addition to tackling the tough Taiwan and North Korea portfolios, Cheney's discussions covered economic disputes with China -- the third largest trading partner of the United States. China said Vice Premier Huang Ju would travel to Washington later this year to meet with Treasury Secretary John Snow for further discussions on having China adopt a more flexible currency exchange rate. Cheney also made a pitch for U.S. companies to be tapped to sell China nuclear reactors as it seeks to substantially boost its use of nuclear power. China put out international contract bids earlier this year to build four plants, and Westinghouse is competing with Japanese and French firms for the multi-billion dollar contracts.

Wen told Cheney the Bush administration should ease restrictions against exports of high-technology products to China and grant it full market status "as soon as possible" as part of a "five-point agreement" to develop bilateral trade, the official New China News Agency said. Full market-economy status would insulate China against charges it is dumping its goods by selling them abroad at below production prices.

[54anickel]

20. There you are! Hi UIA.

[54anickel]

7. Consumer Prices Rise More Than Expected

This sort of stuff could cause another heart episode for Mr Greenspin.

http://biz.yahoo.com/rb/040414/economy_prices_1.html

snip>
The consumer price index, the most widely used gauge of U.S. inflation, rose 0.5 percent in March after a 0.3 percent increase in February, the Labor Department said. Meanwhile, the closely watched core CPI, which strips out often-volatile food and energy costs, surged 0.4 percent, the biggest increase in nearly 2-1/2 years.

Economists on Wall Street had looked for a 0.3 percent rise in the CPI, with core prices up just 0.2 percent.

The report appeared likely to foster concerns that have been growing of late that a long period of historically low interest rates would soon be drawing to a close.

Mounting signs of economic strength, including a 308,000 gain in payroll jobs and a sharp rise in retail sales in March, had already fueled expectations the Federal Reserve could move to bump up rates as early as this summer.

snip>

A separate report from the Labor Department showed worker wages were not keeping up with the quickened pace of inflation. Real average weekly earnings fell 0.7 percent in March and were essentially unchanged over the past 12 months.

That will make Greenspin happy, at least there is no wage inflation showing up yet.

[54anickel]

8. An interesting tidbit on currency markets I stumbled across last night

Lots of interesting stuff in this one, I'll just pluck out the Foreign Exchange & "Helicopter drop sections. Were the BoJ and the Fed "In Cahoots"?

http://www.dallasfed.org/research/swe/2003/swe0304a.html

Monetary Policy in a Zero-Interest-Rate Economy

snip>

The Foreign Exchange Escape Route. Foreign exchange intervention has been suggested by more than one prominent economist as a surefire strategy for getting an economy out of a zero-interest-rate trap.<2> How would such a strategy work? In this approach, the Fed would pursue a targeted, substantial depreciation of the U.S. dollar by purchasing foreign currency using newly minted dollars. The dollar depreciation would increase current demand by stimulating net exports—that is, by increasing sales of U.S. goods abroad and reducing purchases of foreign goods in the United States. If the Fed committed to maintain the depreciated dollar for some length of time, inflationary expectations could also increase. Higher expected inflation, in turn, would result in a lower prospective real interest rate, even if nominal rates do not change.

The big problem with this strategy is that, in a roundabout way, it amounts to conducting a monetary contraction in our trading partners’ economies. In buying up another country’s currency—and assuming the Fed simply holds, rather than spends, that foreign currency—the Fed would, in effect, be reducing the foreign economy’s supply of money and, likely, raising interest rates there as well. If the foreign central bank was attempting to pursue a neutral or expansionary policy, the Fed’s action might generate some consternation or even a policy response. If the Fed purchased euros, for example, the European Central Bank might respond by simply printing more of them, thus neutralizing the Fed’s action.<3>

To be successful, this strategy requires cooperation, or at least acquiescence, on the part of our trading partners. Given current growth prospects elsewhere around the globe, such acquiescence, while not impossible, seems unlikely.

snip>

The Goods and Services Solution. (Helicopter drop)

snip to try and stay within the 4 paragraph limit - OK I'm over by one>>>

The strategy can be implemented, however, by coordination with fiscal policymakers. The federal government, for example, could purchase goods and services and finance the purchases with new debt, which the Fed in turn would buy—in technical terminology, the Fed would “monetize” the resulting debt. By coordinating with fiscal policy, the Fed could even implement what is essentially the classic textbook policy of dropping freshly printed money from a helicopter. In this case, the Fed would monetize government debt that had been issued to finance a tax cut.

The scale of operations entailed by this approach would be large. To monetize government spending equal to 1 percent of gross domestic product, for example, could mean increasing the monetary base (the sum of currency and bank reserves) by as much as 15 to 20 percent. Though trite to say, it is nonetheless true that extreme circumstances could require policymakers to take extreme measures.

[jamesinca]

9. Don't people spend at tax time

It seems that when the refund checks went out during the summer, spending went up. Now it is 4/15 and people will be out spending again. With that extra $1.1k AVERAGE in hand people will spend it on durable goods helping the economy. That should fizzle in the next month after all checks have been mailed. Am I correct in this observation?

If the interest rates go up because spending has gone up I think that will cool the economy going into the summer. With no rebate/ tax advance checks going out, won't that make the late summer early fall doldrums worse?

[Frodo]

10. Yes, but - the numbers are in comparrison to last year.

So that effect should balance out.

With no rebate/ tax advance checks going out, won't that make the late summer early fall doldrums worse?

You're assuming he won't send out more this summer??? Don't give the guy any ideas.

Besides, the lower tax-withholding tables mean "extra" income every month.

[jamesinca]

12. His '05 budget has a tax cut in it

Unless that idea was scrapped, which I doubt. If it passes, well it must be good enough to give early instead of later. That is the reasoning that has gone over in the past. I think it is already in place, it is just a matter of when he will try this again.

[Frodo]

16. Yeah - I'm actually pretty sure that one will pass.

I think it was all "extending existing tax cuts" that had been set to expire. So NOT passing it would be interpreted as a tax increase.

A repeat of last year would require some new giveaway (not that I turned it down last year).

[54anickel]

14. I tend to agree with that assumption - time will tell. Yesterday's news

showed the similar relative increase in retail sales in March of last year and attributed it to refunds.

I think Shrub was pushing to make his tax cuts permanent in the 2005 budget. As far as tax cuts keeping the economy growing, I tend to have my doubts. The tax cuts gave me an extra 23 bucks in my bi-weekly paycheck last year. I think the rising costs of food, gas, energy, etc. will pretty much chew up any increase people see in their take home pay due to the tax cuts. A hike in the interest rates will reduce the net pay for quite a few folks as well.

So far, wages are not increasing, so we can expect lower standards of living and less descretionary spending.

[54anickel]

11. The latest ranting of Mogambo - remember, I'm the easily entertained

one.

http://205.232.90.194/editorials/daughty/daughty041404.html

Theater of the Absurd
weirder and weirder

snip>

...I take the $21 billion weekly issuance of debt, multiply it times fifty-two weeks, and compare that annual debt issuance to, oh, let's say, income..... I'm talking about the national Personal Income, which is listed as $9,364 billion, a figure that includes the pathetic contribution of us ugly little trolls out here slaving away at our pathetic little low-paying, dead-end jobs, and then coming home at night to listen to someone else whine about THEIR pathetic little low-paying dead-end job, ......

Anyway, so when I calculate all that out that, I find that the federal government, our lackluster elected officials, are putting us in more debt, to the tune of 11.5% of our income. Just this year alone!

snip>

In an article in Business Week entitled "Why Housing Is About to Go 'Pop!'" Mark Weisbrot referenced a guy named Dean Baker at the Center for Economic Policy & Research who has looked at national housing prices going back to 1951. Mr. Baker says "Prices pretty much track the rate of inflation up until 1995. But since then, average prices on new and existing homes have soared more than 35 percentage points beyond the overall rate of inflation. Is that unusual? You bet it is."

And although Mr. Weisbrot did not follow that up with a quote from the Mogambo, I will include it for you now. "When something is unusual, meaning that this meteoric rise in prices has never happened before in the whole history of economics, does it usually mean that something bad will happen? You bet it does!"

Robert Folsom's Market Watch writes "And while cycle patterns may not be rocket science, they can be powerful indeed. They capture when to expect a turn in the trend -- which is to say, cycles present a timing opportunity."

I'm a big believer in cycles, as things that have been going up can't keep going up. And so they have to turn down. And they can't keep on going down, either, so they have to turn back up. And when they do, you have a cycle.

Noting with satisfaction that I have a rough, tenuous grasp of what is meant by "cycle," Mr. Folsom says "Our analysis shows that such a moment has arrived in the Treasury market." Uh-oh! With a debt market so huge, so pandemic, so universal in the breadth of it's toxic breath, spanning international borders, crossing whole time-zones, and at yields that are so low that it seems impossible that they could get any lower, the cycle is being renewed. This is bad news, indeed.

more.....His rants are just too hard to snip and paste while remaining within the DU 4 paragraph guidelines.

[KoKo]

22. Very entertaining! Except I forgot to take deep breaths as I read and

almost expired over my keyboard! :D You should caution: "Deep breaths needed during read" next time you post the Magnificent Mogambo!

[54anickel]

24. HA! Good advice KoKo!

[54anickel]

13. 10:04 - Look at those pointy thingies on the charts already

Dow 10,377.24 -4.04 (-0.04%)
Nasdaq 2,027.22 -2.86 (-0.14%)
S&P 500 1,127.03 -2.41 (-0.21%)
30-yr Bond 5.215% +0.067

NYSE Volume 220,757,000
Nasdaq Volume 321,990,000


10:00AM: The major averages are off their respective session lows, but maintain their stance in negative territory... Given the extent of the pullback in pre-open trade, current losses are certainly not overwhelming, with the Dow and the Nasdaq trading within a relatively short reach of the unchanged line... The bulk of the sectors are little changed and leaders to the upside are difficult to come by... Among the laggards of note are the gold, banking, utility, healthcare facilities, restaurant, homebuilding, metal mining, and coal sectors...
The losses in the banking group are likely to limit rebound efforts in the blue-chip averages, given the sector's influential role in determining market direction...NYSE Adv/Dec 451/2115, Nasdaq Adv/Dec 754/1799

9:45AM: As predicted by the futures market, the cash market is off to a lower open... Although Q1 earnings reports have started to roll in, the market's attention is fixated on the prospects of a sooner than previously anticipated Fed rate hike and prospects of inflation... To that effect, the CPI report, which checked in at 0.5% (consensus 0.3%) and excluding food and energy at 0.4% (consensus 0.2%), has spooked the stock market and the bond market, where the 10-year note is down 22/32, bringing its yield up to 4.44%...

Contributing to the negative sentiment is market's disappointment over Intel's (INTC 27.46 -0.21) Q1 earnings - see Briefing.com's Story Stocks page for more perspective, as well as downward guidance by Take Two (TTWO 29.40 -5.80) and HCA (HCA 38.70 -3.90)...

[54anickel]

15. Consumer Prices Jump, Trade Gap Narrows

http://biz.yahoo.com/rb/040414/economy_2.html

snip>
In the trade report, the Commerce Department said the February trade gap was $42.1 billion, down more than 3 percent from January and slightly below analysts' expectations.

U.S. exports leapt 4 percent -- the biggest monthly increase since October 1996 -- to a record $92.4 billion, while imports rose 1.6 percent to a record $134.5 billion.

The politically sensitive trade gap with China fell nearly 28 percent in February as imports from that country slipped to $11.3 billion, the lowest level in nearly a year, and exports to China rose 17 percent to $3.0 billion.

The lower dollar appeared to help all export categories, as shipments of industrial supplies and materials and autos and auto parts both set records. Exports of consumer goods were only slightly below the record set in November and exports of capital goods, such as aircraft and industrial machines, were the highest since May 2001.

Exports of services, including travel, also set a record.

more...

[54anickel]

19. Dollar Watch - (Where did UIA go?)

http://quotes.ino.com/chart/?s=NYBOT_DXY0&v=s

Last trade 90.48 Change +0.65 (+0.72%)

Settle 89.83 Settle Time 23:36
Open 89.95 Previous Close 89.83
High 90.66 Low 89.82

http://www.forexnews.com/NA/default.asp

snip>

The dollar added to overnight gains, rising to a new 4-month high of 1.1893 against the euro and a one-month high of 107.86 yen. Helping fuel recent gains was a bearish dollar repositioning by speculators, as reported by the Commitment of Traders reports. The most obvious example were Canadian long positions which rose to the highest since last summer, when the US dollar suffered an ignominious 24-cent plunge in a matter of 6-months. We highlighted yesterday that the sharp rise in USD/CAD shorts came as the dollar has successfully fended off renewed attacks, while also rising above its 50, 100 and 200 day moving averages. It appeas that speculators are fighting the last battle as the dollar has rallied for the past two months, shrugging off any bad news that comes its way.

The dollar index broke to new highs on Tuesday, rising above the March peak of 89.90 to a new 4-month high of 90.25. The breakout is bullish for the dollar in the near term with key resistance now seen at the 92 level. This implies that the dollar may rally another 2% against the majors before coming back under pressure.

snip>

Bearish Reversal For Gold and Stocks Shows Ebbing Reflation

The CRB index tested for the third time in three weeks key resistance at 283, which marks both the 1984 peak and the 61.8% retracement of the all time high of 335 to its double bottom at 180 two years ago. The 55% rally was the strongest since the inflationary 1970s and can be directly related to the Fed’s negative interest rate policy which has generated a sea of liquidity chasing all markets higher in 2003, which was a highly unusual occurrence. But three failed attempts at a critical resistance mark following the biggest rally in 30 years may signal a shift in commodity prices to the downside. Failure for the CRB to overcome 283 was highlighted by gold plunging $20 or nearly 5% in two days. Nevertheless, commodities are a leading indicator of inflation meaning that inflation now appears to be in the pipeline and could lead to higher interest rates even if gold (the market’s long revered inflation hedge) were to turn down and the dollar up. Higher interest rates and a rising dollar would likely take the wind from the sails of the stock market rally, and could help explain yesterday’s steep selloff following the biggest jump in retail sales in over a year.

EUR/USD

EUR/USD fell to a new 4-month low of 1.1893 as concerns over Eurozone growth collide over expectations of rising rates in the US. While our bearish stance has proved correct we still feel that support at 1.18 should provide a floor from which a significant euro bounce may occur. Therefore, dollar bulls may need to proceed with caution as this area contains a previous high, the 200-day MA, the 50% retracement of the 1.1760-1.2925 rally and two year old trendline support. Considering that traders are still net long the euro, it would take a break below this level to see an increase in selling pressure. Therefore, while we see this area as a magnet in the very near term, a strong rally from 1.18 is likely. Resistance is seen at 1.1958

more...

[54anickel]

21. 11:05 update

Dow 10,390.30 +9.02 (+0.09%)
Nasdaq 2,033.23 +3.15 (+0.16%)
S&P 500 1,129.63 +0.19 (+0.02%)
30-yr Bond 5.203% +0.055

11:00AM: The major averages are vacillating near their respective session highs, which is to say within a short reach of the flat line for the blue-chip averages and with mild gains for the Nasdaq... The extent of yesterday's losses, which totaled .3-1.7% for the major averages, is limiting today's pullback... Also supporting the market is a batch of upbeat earnings reports and estimates revisions... Industrials are having a good day after Georgia-Pacific (GP 34.75 +0.63), DuPont (DD 44.78 +1.09), and Eaton (ETN 58.70 +1.53) raised guidance...
Please see Briefing.com's Guidance Calendar for more details on the estimates revisions...NYSE Adv/Dec 844/2268, Nasdaq Adv/Dec 1305/1574

[54anickel]

23. Specter of Inflation Spooks Treasuries

http://biz.yahoo.com/rb/040414/markets_bonds_2.html

snip>

"It goes a long way toward confirming expectations that inflation has indeed been rising for a while," said Jeoff Hall, chief North American economist at Thomson IFR.

"This is not an anomaly and the Fed should go with a rate increase earlier than the previous timetable had suggested. Now we're looking at perhaps a 1-3/4 percent funds rate by the end of this year," he added. The funds rate is currently sitting at a 46-year low of 1.00 percent.

Traders reported that buying from Asian central banks overnight helped support Treasury prices, though the latest rise in the dollar would seem to lessen the need for outright currency intervention.

snip>

Still, figures from the Fed last week showed foreign central banks as a whole were still accumulating Treasuries at a brisk pace, perhaps because many of those countries continue to run large trade surpluses with the U.S. and have to put those excess dollars somewhere.

snip>

The real deficit, adjusted for inflation, is running at about the same level as in the fourth quarter suggesting trade may not be as big a drag on economic growth last quarter as first thought.

[54anickel]

25. Bond Market Implosion!

Let's hope this is just pointing out the worse case scenario and something less wicked this way come.

http://www.gold-eagle.com/editorials_04/ekervik041304.html

snip>

With rates artificially low and close to zero, the rate weapon starts to malfunction. Instead of a canon it will behave more like a clusterbomb(still powerfull but with even less precision), hitting all kinds of possible debtors. Since most of the strong debtors are already saturated with debt. The banks will offer their debt even to the weakest debtors. This category of consumers/debtors will be happy to get a loan, and start piling on all the debt they can handle and then some. This last wave of debt bonanza will primarily hit the consumer sector, the smarter business sector, has felt the beginning of deflation putting a lid on sales prices, and has steadily decreased debt levels since the last recession in 2001.

When the consumer has taken on all the debt he can handle (a lot of them take on more than they can handle) the rate weapon siezes to function. With no one left to borrow, in combination with the bond market revulsion in July 2003 (increasing rates on house mortgages). The monetary growth rate starts decling and then reverses. This decline could be seen in the M3 money stock during the last two quarters of 2003. Declines in M3 are rare, the size of this decline have not been seen in at least 50 years. Something ugly is approaching!

snip>

When the March job figures showed a strong 308,000 jobs were created, the large bondmarket players once again sensed the awful smell of inflation approaching and started selling at a rapid pace. With the fading intrest from Asian central banks to buy new debt, the Treasury Dept. have had increasing problems getting all the new debt sold to finance the budget deficit. With recent signs of inflation creating a sell off in bonds and Asian central banks losing intrest in buying, there is no longer anything propping up the bond market bubble. Adding to the problem is the levereged carry trade by major banks and hedge funds. The approaching inflation will keep preassure on bonds in the coming months, thus forcing levereged players to sell at increasing pace, driving prices lower and pushing interest rates to painful heights.

The coming bond market implosion and rising interest rates is expected to almost completly stop the refinancing of home mortgages. With minimal wage increases and no more access to cheap money the consumer will have to cut back on spending. With rapidly increasing bankruptcys in both the consumer and business sector, with todays record low rates. The sharp increase in interest rates will force a large group of weak debtors that has borrowed on the margin, to default on their loans. The banks will act as they usually do and halt their credit lending to all but the strongest debtors, fearing more defaults. This action will kill consumer demand and force businesses to lower prices. The consumer now noticing the lower prices will figure, if he waits he can get even lower prices. US businesses struggling to survive in the competition from Asian manufacturers will lower prices even more. The consumer being right in his conclusion waits some more and the bad cycle of deflation is born. This will once again be seen in the declining M3, this time however one would expect more like a collapse.

This is the first time in 70 years that the US has reached debt saturation at one percent overnight interest rate....

more...

[54anickel]

26. Lunchtime check-in

Dow 10,408.40 +27.12 (+0.26%)
Nasdaq 2,036.43 +6.35 (+0.31%)
S&P 500 1,131.97 +2.53 (+0.22%)
30-yr Bond 5.192% +0.044

NYSE Volume 689,844,000
Nasdaq Volume 877,810,000

12:00PM: The Q1 earnings season is well underway, yet one wouldn't know it as earnings news are overshadowed by marcroeconomic developments... To that effect, yesterday's stronger than expected Retail Sales report led to higher interest rates, which spooked the stock market... Today, the CPI report at 0.5% (consensus 0.3%) and ex-food and energy at 0.4% (consensus 0.2%) suggested inflation is picking up, leading to another spike in bond yields, with the 10-year note down 13/32, bringing its yield up to 4.41%...
The sharp increase in interest rates over that past two weeks has suggested that the Fed may increase the Federal Reserve rate sooner than previously anticipated... As a result, the stock market opened lower and spent much of the morning in negative territory... Yet, it's undeniable that the earnings reports and guidance have been coming in strong... Accordingly, particularly in view of yesterday's sell-off ranging 1.3-1.7% for the major averages, the market has spent the bulk of the session paring its earlier losses and making headway into positive territory... Aiding in the advance are the biotech, internet, drug, chemical, and transportation groups...

Among the laggards of note are the metal mining, restaurant, healthcare facilities, iron & steel, as well as the interest rate sensitive financial, homebuilding, and utility groups...

[54anickel]

27. U.S. stocks climb on mixed signals from inflation data

http://biz.yahoo.com/cbsm-top/040414/19a5df3b5072c745f74463a84ee6c163_1.html

NEW YORK (CBS.MW) - U.S. stocks were trading higher Wednesday as the latest consumer price report offered further evidence of the current strength of the economy, tempering some of the concern over the likelihood of higher interest rates by the end of the year.

snip>

But the muted sell-off this morning, said Kugel, shows that investors are also sensitive to the fact that the latest data shows the U.S. economy is in robust health.

"But all of these are signs of a very strong economy and there are signs that earnings are going to be quite good in the second quarter as well as the first."

"So when people step back from the day-to-day news, people are going to see that the situation for stocks at least is very good. That's why we're not doing as badly today as I thought we might."

more...

[54anickel]

28. Funds See Yen Rising, Dollar to Fall -Merrill

http://www.reuters.com/newsArticle.jhtml?type=reutersEdge&storyID=4825744

snip>

DOLLAR STILL SEEN FALLING

Forty percent of fund managers surveyed expected the U.S dollar to depreciate most out of the three major currencies, although the figure dipped from 43 percent a month ago.

A net 32 percent saw the euro as overvalued, a decline of 10 percentage points from a month ago.

The survey also showed that going short, or selling, the euro was an increasingly popular trade. It said the most common trade in the survey period was buying yen for dollars while buying euros for dollars attracted the least interest.

The euro has fallen three percent against the dollar since the March survey was taken, trading at a four-month low of $1.1877 on Wednesday, and many analysts have scaled back their predictions for euro strength over the coming months

more...

[54anickel]

29. Mortgages seem to be making the news

Mortgage demand falls to 3-month low
Refinancing applications fall 31%, largest drop in 8-months, as interest rates rise.
http://money.cnn.com/2004/04/14/news/economy/mortgage_apps.reut/

NEW YORK (Reuters) - New U.S. mortgage applications fell last week to their lowest level in three months as mortgage rates rose to their highest levels since early January, an industry trade group said Wednesday.

The Mortgage Bankers Association said its seasonally adjusted market index, a measure of weekly mortgage activity, fell for the week ended April 9 by 22.1 percent to 788.6 from the previous week's 1,012.9.

The Washington trade group's refinancing index tumbled 30.7 percent, its biggest one week drop since late July, to 2,861.6 from the previous week's 4,126.7.

The group's purchase index, a gauge of new loan requests for home purchases, slipped by 9.5 percent to 432.2 from 477.5 in the prior week.

more...


U.S. MBA Mortgage Applications Index Fell 22.1% Last Week
http://quote.bloomberg.com/apps/news?pid=10000103&sid=aUzPxuXaHLbk&refer=news_index

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Payments Rise

At the current 30-year fixed mortgage rate, the monthly payment on $100,000, including principal and interest, would be $584.84. The payment was $583.57 at the previous week's rate and $536.21 when costs reached a record low of 4.99 percent last June in the association's tabulations.

Overall applications reached an eight-month high of 1117.1 in the week ended March 12 as the average 30-year fixed mortgage rate fell within 0.4 percentage point of last year's record low. The refinancing index that week surged 39.7 percent to 4983.7, the highest since mid-July.

Sales at U.S. retailers rose 1.8 percent in March, the biggest increase in a year, the Commerce Department said yesterday. Excluding automobiles, sales jumped 1.7 percent, the most in four years.

``The economy is getting a little bit of a boost from refinancing, something of a boost from tax refunds coming in a little larger than a year ago,'' said Ken Mayland, chief economist of Clear View Economics LLC in Pepper Pike, Ohio, in an interview yesterday.



US mortgage supply to fall to $1.85 trln by '06-MBA
http://www.reuters.com/financeNewsArticle.jhtml?type=economicNews&storyID=4827375

NEW YORK, April 14 (Reuters) - Annual new U.S. mortgage origination is expected to fall to $1.85 trillion by 2006, as lenders should make fewer loans because of declining demand to refinance, a U.S. mortgage industry group said on Wednesday.
But the drop in refinancing, which hit a record high last year in connection with historically low mortgage rates, will be offset by healthy, albeit slowing, housing sales over the next several years, The Mortgage Bankers Association said.

Mortgage originations will total $2.57 trillion in 2004, down from the all-time peak of $3.8 trillion set in 2003. New mortgage supply will fall to $1.96 trillion in 2005 and $1.85 trillion in 2006, according to the Washington-based group.

Sales of existing homes are forecast to slip by 1.7 percent in 2004 from the record high in 2003 and fall by an additional 6.8 percent in 2005, the group said.

more...

[54anickel]

30. 2:08 and I gotta run - Check back tonight

Dow 10,362.05 -19.23 (-0.19%)
Nasdaq 2,025.37 -4.71 (-0.23%)
S&P 500 1,127.02 -2.42 (-0.21%)
30-yr Bond 5.197% +0.049

NYSE Volume 974,392,000
Nasdaq Volume 1,226,616,000

2:00PM: Within a short reach of the unchanged line, the major averages are little changed since the last update... The small- and mid-cap averages are underperforming their large-cap counterparts on a relative basis in today's session, but are little changed overall... Specifically, the mid-cap S&P 400 is down 0.13%, while the small-cap Russell 2000 is down 0.09%...
On a year-to-date basis, the small- and mid-cap averages are outperforming their large-cap counterparts with gains of 4.4% for the S&P 400 and 5.1% for the Russell 2000 versus gains of 1.2% for the Nasdaq and 1.4% for the S&P 500 and losses of 0.8% for the Dow...NYSE Adv/Dec 923/2370, Nasdaq Adv/Dec 1417/1706

1:30PM: The major averages are slipping out of their earlier trading ranges and are trading in negative territory, although with only fractional losses... The rise in interest rates, which followed this morning's higher than expected CPI report pressured the stock market in the early going... Nevertheless, the bond market has been recovering through the session... Accordingly, after being down by as much as 24/32, with its yield as high as 4.45%, the 10-year note is currently down only 6/32, with its yield at 4.38%...

Judging by the Fed funds futures, on the heels of the CPI report, the likelihood of a 25 basis point increase in the Fed Fund rate by the end of July jumped to 44% from 32% as of yesterday...NYSE Adv/Dec 1015/2272, Nasdaq Adv/Dec 1467/1650

[UpInArms]

31. Treasury's Snow reaffirms strong dollar policy

http://www.forbes.com/personalfinance/funds/newswire/2004/04/14/rtr1331890.html

WASHINGTON, April 14 (Reuters) - Treasury Secretary John Snow on Wednesday repeated his support for a strong U.S. dollar and noted inflation pressures in China appeared to be building.

"I've articulated it many, many times. We favor a strong dollar, a strong dollar policy," Snow told reporters during a photo opportunity and brief question-and-answer session with newly named Treasury envoy to China, Ambassador Paul Speltz.

...more...

[Maeve]

32. 3 o'clock and all's not well

Not terrible, but....

Dow 10,354.46 -26.82 (-0.26%)
Nasdaq 2,021.92 -8.16 (-0.40%)
S&P 500 1,125.65 -3.79 (-0.34%)
10-Yr Bond 4.389% +0.049
NYSE Volume 1,166,647,000
Nasdaq Volume 1,436,362,000

[UpInArms]

34. Nasdaq below its test of 2017

Dow 10,326.36 -54.92 (-0.53%)
Nasdaq 2,014.48 -15.60 (-0.77%)
S&P 500 1,122.83 -6.61 (-0.59%)
10-Yr Bond 4.382% +0.042

3:00PM: The Nasdaq's successful test of its 50-day simple moving average at 2017 incited a rebound off its session lows for the tech composite, as well as the broader market... Accordingly, although still in the red, the major averages are off their respective worst level of the day... The rising interest rates remain a major concern for the market and interest rate sensitive groups, including real estate operations, financial, and homebuilding groups are among the laggards...

Adding insult to injury for the homebuilders is this morning's Mortgage Bankers Association report showing that the applications index fell by 22.1%, for the 4th consecutive decline...NYSE Adv/Dec 636/2708, Nasdaq Adv/Dec 1043/2114

[UpInArms]

35. bouncing upward in last half hour

Dow 10,361.62 -19.66 (-0.19%)
Nasdaq 2,019.18 -10.90 (-0.54%)
S&P 500 1,126.01 -3.43 (-0.30%)
10-Yr Bond 4.382% +0.042

[KoKo]

36. Determined not to let it go below 2,000. How long can they keep this

going? Well, as long as they have to. Still..that NASDAQ really, really wants to go down bad...

[UpInArms]

33. China faces pressure to revalue currency

http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1079420345552

China faces growing pressure from speculators to revalue the renminbi against the US dollar, as Wen Jiabao, the prime minister, on Wednesday rebuffed a call by Dick Cheney, the US vice-president, to let markets set the exchange rate.

"Hot money" moved into China by speculators circumventing Beijing's closed capital account boosted the country's foreign exchange reserves to a record $439.8bn at the end of March, up $36.5bn since the end of 2003.

The increase in foreign currency reserves, which exacerbates domestic inflation by adding to the money supply, came despite a trade deficit of $8.4bn during the first quarter.

The figures show that although the renminbi may not be undervalued from a trade perspective, China's main battle is with speculators who believe that sooner or later the country will be forced to allow an appreciation.

Mr Wen told Mr Cheney that the "current situation of the renminbi conformed to China's economic and financial development", according to Zhang Qiyue, a foreign ministry spokeswoman. The currency is in effect pegged at about Rmb8.28 to the US dollar, and although Beijing plans to widen the band, it has not said when or how.

...more...

[54anickel]

37. Heh-heh, I still get to post the closing numbers

Thanks for saving me a place at the bar :toast:

Dow 10,377.95 -3.33 (-0.03%)
Nasdaq 2,024.85 -5.23 (-0.26%)
S&P 500 1,128.17 -1.27 (-0.11%)
30-yr Bond 5.169% +0.021

NYSE Volume 1,541,043,000
Nasdaq Volume 1,854,648,000

Close: The market never quite made up its mind as to what it was going to do with today's session, as it continued this week's trend of reassessing the macroeconomic environment... Yesterday's stronger than expected Retail Sales report surprised the participants, leading to a spike in interest rates, which in turn spooked stocks... In today's session, the CPI report at 0.5% (consensus 0.3%) and ex-food and energy at 0.4% (consensus 0.2%) suggested inflation is picking up, exerting further pressure on interest rates and, in turn, the stock market...
At its worst, the 10-year note yielded as high as 4.45%... Yet, putting aside the likelihood of a sooner than previously anticipated tightening by the Fed, today's earnings and guidance were nothing to complain about... To that effect, industrial companies including DuPont (DD 44.95 +1.26) and Eaton (ETN 58.56 +1.39) guided higher...

With the major averages having declined 1.3-1.7% in yesterday's session, a sense that the sell-off has been overdone, combined with favorable corporate developments, led to stocks' intra-day rebound into positive territory, although this proved insufficient for the market to maintain its gains as it closed with slight losses... Among the laggards of note contributing to the decline were the gold, metal mining, coal, healthcare facilities, restaurant, and interest rate sensitive groups such as real estate operations, financial, and utility... Leaders to the upside included the chemicals, drug, and transportation sectors... Elsewhere, the 10-year note closed down 3/32, bringing its yield up to 4.37%...