DIA +.69%, SPY +.56%, QQQQ +.40%
10-Year Treasury +3/32, yielding 4.20%
Oil was again a driving force in the equity markets. Stocks rallied after oil dropped below $50/bbb. When oil rallied, stocks maintained their upward momentum. AIG group — which has been under selling pressure from an accounting issue — announced its restatement of earnings would not be as severe as previously thought. A strong construction report outweighed a weak manufacturing report. Finally, the market was simply oversold, encouraging “bargain hunters” to step into the market.
The 10-year Treasury gained 3/32 to yield 4.20%. Tomorrow the Fed will announce its policy decision, which many believe will be another increase of 25 basis points. The Treasury market is usually inactive before a Fed meeting, and today was no different.
Oil closed up 2.4% at $50.92/bbl. Reports give conflicting reasons for the upswing. Some analysts felt technical buying was the primary reason for the increase. Others commented that weekend violence in Iraq once again reminded traders of the “terror premium” in the market. Finally, the ALgerian oil minister commented that demand remains strong and OPEC is already producing at capacity.
The dollar was essentially flat versus the Euro and the Yen. Forex traders, like bond traders, are waiting for the Fed’s interest rate decision to make further moves in the market.
