DIA +.09, SPY +.14, QQQQ -.46
10-Year Treasury, +5/32 yielding 3.90%
Oil + 56 cents to $60.48/bbl
Dollar -.5% versus Euro, up slightly versus Yen
This was largely a “catch your breath day”, where traders looked for direction but couldn’t find any. The sell-off at the end of last week took out the bears for the short-term, but there is little compelling reason to bid up stocks. Oil is definitely a huge factor keeping the bulls on the sidelines, as is the Fed’s meeting this week. Traders are waiting for the release of the Fed’s statement on Thursday to get an idea for where they see the US economy.
The 10-Year Treasury gained 5/32 to yield 3.90%. While the 10-year is still fairly unattractive at its current yield, oil’s record price concerns investors who are worried about an overall “energy tax” on the economy. As a result, traders are bidding up treasuries and their guaranteed rate of return relative to stocks.
Oil increased 56 cents to close at $60.48/bbl. After flirting with the $60/bbl level last week, oil finally closed about this psychologically important level. The fundamentals of the oil market are still very tight. In addition, traders are concerned about the new Iranian government, which stated they will favor local producers and domestic needs over international concerns.
The dollar fell .5% versus the Euro and was up slightly versus the Yen. The dollar once again retreated from the psychologically important 1.20 level relative to the Euro. The dollar is technically overbought at these levels, indicating further declines are possible. In addition, several German indicators came in better than expected adding to the Euro’s increase. The dollar/yen trade is still on hold, awaiting further firm developments in the Chinese Yuan situation.