DIA +.04%, SPY +.06%, QQQQ -.05%
10-Year Treasury +5/8, yielding 4.04%
Oil -47 cents to $58.90/bbl
Dollar -1% versus yen and -.4% versus euro
The markets traded sideways for most of the day. This is a very slow news week, so traders are looking for other news to influence their trading. Oil’s price spike is concerning traders, but not enough to induce a large sell-off. There is growing concern of an oil-induced slowdown should oil’s price continue to increase. On the corporate news front, Ford lowered its projected earnings for the second time this year and Loews and AMC announced they will merge their movie theater businesses.
Technically, the markets are meandering, they are looking for a strong enough signal to move in either direction, but are not finding it in current economic numbers.
The 10-year treasury rose 5/8 to yield 4.04%. A 50 basis point rate cut by Sweden’s central bank signaled to bond investors the world economy may be slowing. This in turn indicates inflation will slow, which increases a bonds rate of return. Additionally, the increase in US Treasury prices could be viewed as a flight to quality, as investors become more concerned about future economic prospects.
Oil retreated from an intraday all-time high, closing down 47 cents to $58.90. Today’s sell-off was a bit of profit-taking from the recent run-up. In addition, traders are awaiting tomorrow’s weekly oil report. There is still some concern about the Nigerian situation and a possible Norwegian strike. However, traders continually point to the underlying fundamentals as the primary reason for the recent run-up. Refinery capacity is still near 100% and there is concern production will not be able to shift to winter fuels early enough to stave-off supply concerns. Technically, the market has spent the last two trading sessions consolidating, as traders prepare for tomorrow’s report.
The dollar fell 1% versus the yen and .4% versus the Euro. A rumor of possible Chinese revaluation hit the yen market, sending it higher versus most currencies. Traders view the yen as a proxy for the yuan. The euro rose on speculation the European Central Bank would lower interest rates soon, a move many traders would welcome as a sign the ECB was acting to stimulate the slowing EU economies. Today’s move could also signal a reversal of the dollar’s recent bull run. The dollar has tried to move through the 110 yen and 120 euro levels several times over the last few weeks and has not been able to breach either mark.
