DIA +.65%, SPY +.25%, QQQQ +.99%
10-year Treasury -1/8 to 4.18%
Oil -$2.21 to $57.80
Dollar +.4%/Yen, near unchanged versus euro
The markets rallied on a string of solid news. First, retail sales rose 1.7% last month. This eased concerns that consumers were backing away from the market. Some of this increase was due to GMs recent sales promotion as auto and auto parts comprise 20% of retail sales. Secondly, the CPI came in at 0 which eased inflation fears. The combination of these two items led traders to look for a goldilocks scenario, where the economy grows without inflation. Finally, corporate earnings have been solid.
The 10-year fell 1/8 to yield 4.18%. The primary news today was the Treasury’s auction of 9 billion in inflation indexed bonds. The auction was less than a success, partly as a result of the benign inflation report. Although there were no numbers for indirect bidders, the ratio of bids to number of bonds was 1.68 which is weak.
Oil fell $2.21 to $57.80. Traders were pleased by the recent gulf storms movement away from drilling rigs in the gulf. Gulf capacity is back to full operating potential after last week’s evacuation from the two earlier storms. Yesterday’s news of an increase in distillate stocks bled over to today’s trading, easing trader’s fears of a heating oil shortage later this year. Finally, the markets were technically overbought, indicating traders may have used storm Emily’s path change as an excuse to sell.
The dollar rose .4% versus the yen and was near unchanged versus the euro. The US’ retail sales increase was the primary reason for the dollar’s upward move versus the yen as traders have made the growth differentials between the two economies the primary focus of trading philosophies. The dollar/euro trade appears to be looking for some direction right now. The dollar is again approaching technically important levels, but needs a news catalyst to help it break through.