DIA +.22%, SPY +.23%, QQQQ -.40%
10-Year Treasury -1/4 yielding 4.12%
Oil – 35 cents closing at $55.42/bbl
Dollar +.65% versus Euro; unchanged versus Yen
The markets were mixed today, largely driven by event-specific news. Retail sales dropped .5% last month, while producer prices dropped .6%, although core PPI inched up .1%. a drop in energy prices was largely responsible for the PPI drop. Considering energy prices have rebounded over the last month, this number could be an aberration. GM announced it is making progress regarding its health costs. This was a primary reason for the Dow’s upward move.
The 10-Year bond lost ¼, yielding 4.12%. Today was partially a continuation of the last 5 days’ technical sell-off. The 10-year is still overbought, meaning the yields are simply unattractive to investors. The markets are also more of the opinion the Fed will continue interest rate hikes for more than a few months.
Oil dropped 35 cents to close at $55.42/bbl. Today’s drop was partly technical, considering the recent run-up in prices. In addition, traders are positioning for tomorrow’s weekly inventory report. OPEC announced it will raise its production ceiling by 500,000 barrels/day. However, this is a somewhat hollow promise as most oil producers are already producing at or above their proscribed ceilings. Technically, the oil market is neutral, indicating that an extreme report in either direction could send the markets into a major move.
The dollar rose .65% versus the Euro and was near unchanged versus the Yen. Fallout regarding the EU vote continues to hurt the Euro. While there is some speculation the Euro is nearing fair value, traders continue to sell Euros. More importantly, traders continue to liquidate long Euro positions. This indicates that bullish sentiment regarding the Euro is slipping. The dollar is heavily overbought versus the Euro. Regarding the Yen, the lower economic numbers coming from the US stalled the dollar’s recent upswing versus the Yen. However, the dollar is still benefiting from a change in perception regarding the Euro. This implies the market thinks the Euro is not as strong a competitor for reserve currency of choice among market participants. This change is benefiting the dollar.