DIA -.93%, SPY -.84%, QQQQ -.49%
10-Year Treasury +9/32 closing at 4.07%
Oil +1.69 to $61.35/bbl
Dollar +.4 versus yen, down slightly versus euro
A better-than-expected Institute of Supply Management number of 62.4 (versus a 58.4% consensus estimate) started the day. However, the markets were not impressed, instead trading in a lackluster fashion. Traders may have taken a cue from the Challenger and Gray employment survey, which stated last month’s layoffs were the highest in 17 months. As the trading day continued, stocks moved inversely to oil. Stocks traded near their daily lows at closing.
The 10-Year Treasury gained 9/32 to yield 4.07%. Bond traders bid-up prices, believing oil’s record highs would dampen consumer spending and slow the economy. In addition, traders are waiting for Friday’s employment numbers. This means a all market participants are not actively buying and selling in the market, instead waiting for the report to plan future trading moves.
Oil rose $1.69 to close at $61.35/bbl. Oil traders were concerned about tropical storm Dennis, the 4th of the season. The Louisiana area contains 50% of the US refinery capacity, so any slowdown could have strong negative implications for the oil market. Oil companies have already shut-in 13% of their gulf capacity as they evacuate workers from the region. Technically, the oil market is overbought, indicating the recent rally may be hit be profit taking over the next few sessions.
The dollar gained .4% versus the Yen but was down slightly versus the euro. High oil prices continue to worry yen traders. Japan’s recent recovery could be in jeopardy if oil continues to increase. The economic growth differences between Europe and the US still dominate the euro/dollar trade, as traders continue to predict the US will continue to grow faster than European economies.