DIA +.68%, SPY +.62%, QQQQ +.35%
10-Year Treasury -3/32 to yield 4.11%
Oil -71 cents to $58.92
Dollar -.8% versus euro, -.3% versus yen
The markets continued their rally from last week. There were several reasons for the continuation. First, there is speculation that third quarter earnings season will be stronger than expected. Secondly, oil dropped from recent highs, removing the “energy tax” from the economy for now. Third, there were several large mergers announced.
The 10-Year Treasury fell 3/32 to yield 4.11%. A Fed governor statement indicating it is too early to call for a halt in interest rate hikes was partly responsible for the decline. In addition, some money flowed out of bonds and into stocks. However, the lack of a major drop was caused by anticipation for this week’s economic numbers. CPI, PPI and trade deficit data come out later this week, so traders are waiting to see the results of these date releases before they make major commitments in the bond market.
Oil dropped 71 cents to close at $58.92. The primary reason was hurricane Dennis’s lack of impact on gulf oil production. Although the oil companies had to evacuate personnel, there was little physical damage to the Gulf regions oil production capacity.
The dollar fell .8% versus the euro and .3% versus the yen. There is growing speculation the European Central Bank will lower interest rates soon. In addition, Luxemburg approved the EU constitution which stopped the recent slide in EU sentiment. The drop in oil was the primary reason for the dollar’s drop versus the yen. In addition, the dollar has rallied versus both currencies recently, indicating some profit taking is in order. Finally, there is speculation the US trade deficit numbers will be over 60 billion. This would place the twin deficits on the front burner again.
