DIA -.13%, SPY +.26%, QQQQ +.47%
10-year Treasury -11/32 to 4.15%
Oil +$1.78 to $60.70/bbl
Dollar -1%/euro -.8% versus yen
The markets were mixed today, with the Dow dropping while the S&P and NASDAQ rose. Oil’s close over $60/bbl contained any upward advance. On the positive side, 2nd quarter earnings rose 6.8%. P&G shareholders approved the Gillette merger. Other Merger activity is still strong and there is speculation that 2nd half tech spending will increase. There are mixed messages about investor sentiment, with some services reporting bullishness while others are reporting more caution.
The 10-year Treasury fell 11/32 to close at 4.15%. The Treasury is auctioning 9 billion in 5 year notes on Wednesday and 13 billion of 10-year notes on Thursday. Traders typically sell Treasuries before and auction to increase the yield. Addition, there are 5 billion of new corporate issues coming to market this week, so traders are selling treasuries to make room in their portfolio. The general economic consensus for 2005 GDP among Bloomberg polled economists increased, adding to the speculation the Fed is not done raising rates. Finally, there is concern about the inflation numbers due later this week and tomorrow’s trade deficit report.
Oil rose $1.78 to close at $60.70/bb. Another tropical storm is brewing in the gulf, which again raises the specter of a refinery shut-down. In addition, there is speculation that last weeks gulf shutdown will lower US oil inventories in the Department of Energy’s weekly inventory report. Finally, the Department of Energy increased it’s oil market price projection from $53 to $59/bbl.
The dollar fell 1% versus the euro and .8% versus the yen. The government releases US trade data tomorrow, and traders are again worried about the US trade deficit. Yesterday, China announced record exports. This exacerbated trader’s fears that the US trade deficit would show little improvement. Bolstering the Yen is the recent increase in the Nikkei, which is yen positive. Bolstering the euro were reports that the United Arab Eremites would diversify their currency holdings out of dollars and into euros. Although UAE only holds about 20 billion in foreign currency, the news put the dollar diversification issue back on the table. Finally,, the dollar has rallied versus both the yen and euro since the beginning of the year, so some sell-off is warranted.
