DIA +1.30%, SPY +1.05%, QQQQ +1.92%
10-Year Treasury -3/8 to yield 4.11%
Oil – $1.10 to %59.63/bbl
Dollar near unchanged versus euro and yen
The markets rallied hard today. Alcoa announced better-than-expected earnings, pushing the Dow higher. In addition, even though the jobs report came in lower-than-expected, it was strong enough to bring buyers into the market who saw a strong US economy. The weakness in the employment numbers relative to the consensus estimates indicated a lower inflation possibility. I would also add that I think some of today’s rally was a psychological reaction to the London bombings yesterday, as traders wanted to show solidarity and resolve in the face of terrorism.
The 10-Year Treasury dropped 3/8 to yield 4.11%. There were two reasons for today’s drop. The first was the equity rally, which pulled investors away from bonds. The second was the employment report, which was strong enough to indicate the Fed will continue raising rates. In addition, the low overall unemployment rate of 5% added fuel to the strong economy argument, further stoking the continuing rate increases fires.
Oil closed 1.10 lower to $59.63/bbl. Oil hit an intra-day high above $61/bbl, but traders backed-off as news that storms in the gulf of Mexico might turn east spread through the trading floor. Weather news has dominated trading this week. The gulf area accounts for 50% of US Refinery capacity, so any disruption in that area could cause problems for the US.
The dollar was near unchanged again versus the euro and yen. There was speculation the employment report would come in better-than-expected. However, it came in lower-than-expected which caused traders to back-off of their bullish dollar run at least for today. However, forex traders are still focused on the growth differences between the US and Europe, indicating the dollar still has some upward room versus the euro. As for the yen, high oil prices are still hampering expectations, indicating the dollar/yen trade will probably stay neutral or dollar bullish for the foreseeable future.