DIA +.95%, SPY +.93%, QQQQ +.67%
10-Year Treasury -1/16 to yield 4.13%
Stocks had a strong rally today. Although the Empire index was low (see bonds below), traders interpreted this number as a sign the Fed would at least slow its rate increases. Oil's close below $49/bbl also added to the rally. High oil prices eats into corporate earnings, essentially acting as a tax. In addition, stock valuation levels were simply at an attractive level for traders. In addition, Friday's tech rally continued, a good sign. When a rally continues over several days - and especially over a weekend - it signals strong buying interest. Because energy issues are slowly moving lower, another market sector will have to take the lead for the next rally. Various market reports also indicated the strong economic numbers from the last few weeks are also feeding the bullish fever on the street. Advancing issues led decliners by greater than 2-1 on the NYSE and 3-2 on the NASDAQ.
The 10-year Treasury fell 1/16 to yield 4.13%. The bond market rallied when the Federal Reserve reported "The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated in May. The general business conditions index dropped fairly sharply for the second month in a row, to a level of -11.1-its lowest reading since April 2003." A slowdown in manufacturing would allow the Fed to slow its pace of rate increases. However, the market could not break the technically important level of 4.10%, leading to a meandering trade between 4.10 and 4.12 for the rest of the day. Market participants are still trading on fears of a hedge fund problem, although there is no firm news confirming this rumor. This fear has trumped strong economic numbers for the past few weeks (274,000 jobs and a 1.4% increase in retail sales).
Oil fell 6 cents to close at $48.61/bbl. The combination of a strong increase in US stockpiles and OPEC production increases have finally hit the oil market. The general feeling seems to be that OPEC has addresses the possible supply shortfall and oil companies have sufficiently added to their stockpiles to meet summer demand.
The dollar fell .2% versus the Euro and .4% versus the Yen. The drop in international purchases of Treasury securities from 84 billion in February to 47.5 billion in March was not enough to cover the US March trade deficit of 55 billion. As a result, traders sold the dollar. However, forex traders have recently purchased the dollar based on the strong economic numbers from the US. While the NY manufacturing number was weak, it was 1 number compared to the employment report and retail sails number from the previous few weeks. Additionally, the US economy is growing at a faster rate that the EU, which is putting downward pressure on the Euro.