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Wild day in the market today.  The market tanked about .5% on the trade deficit news (see below).  But, right at the end of the trading day, they quickly rose of a decent gain.  The best performing sectors were energy and semiconductors.  Intel reported record revenue of roughly 9 billion, which explains the interest in the semi sector.  However, UPS and several other large companies reported earnings warnings as well.  This news led to some of the bearish sentiment today.  The general concensus is the end of the day bounce was a technical event.

The Treasury market also bounced around today, but came in near unchanged at the end.  Later this week is a Treasury auction which is keeping the market in check for now.

The dollar lost ground today. The Euro gained 1.25% verses the dollar and the dollar lost .93% verses the Yen.  Although the currency markets have rallied since the beginning of the year, many traders feel the move was a technical bounce from all time highs.  The fundamental problems with the market -- the US twin deficits -- remain.  As a result, today's news served as a catalyst, possibly returning the market to a bearish sentiment.

Oil prices also had a whipsaw day today, rising and selling off throughout the day. The market dropped all its gains near the end of trading, but then bouced back to close up 3%.  In addition to the news below, the market continues to look at the projected cold snap in the NE forecast for the weekend and the OPEC meeting at the end of the month.

From the AP Online: The U.S. Department of Energy reported Wednesday that the nation's supply of crude oil declined by 3 million barrels last week to 288.8 million barrels, leaving inventories 7 percent higher than a year ago.

The supply of distillate fuel, which includes heating oil, diesel and jet fuel, rose by 1.9 million barrels, though inventories are 8 percent below a year ago at 123 million barrels. The supply of high-sulfur distillate used for heating oil fell by 500,000 barrels to 49.6 million barrels, or 7 percent lower than last year.

Finally, there was the trade deficit news.  I posted on this earlier, but pasted it in because it is really important news for the day.  In addition, we've had whitewash ... er I mean White House reaction which is so completely full of shit that I can't believe anyone in the economic press didn't press McClellan for a clarification of the bullshit.

The Census Bureau reported that "The Nation's international deficit in goods and services increased to $60.3 billion in November from $56.0 billion (revised) in October, as imports increased and exports decreased."

The market was expecting 54 billion, so the number is pretty negative.

Exports decreased to $95.6 billion in November from $97.8 billion in October. Goods were $66.5 billion in November, down from $69.2 billion in October, and services were $29.0 billion in November, up from $28.6 billion in October.

Imports increased to $155.8 billion in November from $153.8 billion in October. Goods were $130.7 billion in November, up from $129.3 billion in October, and services were $25.2 billion in November, up from $24.5 billion in October.

For goods, the deficit was $64.1 billion in November, up from $60.1 billion in October. For services, the surplus was $3.8 billion in November, down from $4.1 billion in October.

Comments:

Here is the scary part.  Exports of goods decreased 2.2%  At the same time the dollar lost roughly 3% verses the Yen and 4% verses the Euro. In other words, the devaluation of the dollar is not increasing exports.  

In addition, the dollar has been decreasing in value since the beginning of 2002, and we are still increasing imports over exports.  So, for 3 years the markets have been telling us that the US must clean-up its balance sheet.  But, Bush doesn't listen to market reality.

UPDATE:  Scott McClellan (grand idiot that he is) stated the trade gap is a sign the US economy is improving faster than the rest of the world.  AS a result US consumers are purchasing more goods.

I heard on Bloomberg television that Treasury Idiot (er...) I mean Snow said the same thing.

If I didn't think the Secret Service would come after me, I would send Snow my economics books, conveniently tabbed for his pleasure.

Originally posted to bonddad on Wed Jan 12, 2005 at 02:00 PM PST.

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Comment Preferences

  •  re: (none)
    "If I didn't think the Secret Service would come after me, I would send Snow my economics books, conveniently tabbed for his pleasure."

    I sure wish you would, BD.  What I wonder about is why our "efficient, rational markets" don't react to such BS with disdain and mistrust.  

    SPY puts are looking pretty good to me...

  •  great writeup (none)
    You work in the industry?  

    I just love how the facts you highlight at the end get the virtual brushoff in the media and on cnbc bubble television.

    In addition, the falling dollar and oil imports create a nice wheel of pain.  While the dollar may not influence oil movements in a strong, direct manner, its continual long term drop helps throw a floor under the price.  So, longer term, lower dollar can help keep oil higher, which will increase or help hold steady that component of the overall trade deficit, which will in turn weaken the dollar.  Great!

  •  how would you play this? (none)
    in addition to buying oil stocks?
    •  There's a lot of speculation in oil... (none)
      I'm really not sure that's a good "buy", IMO.  I'm not a professional Wall Street investor by any means, but I do some of my own personal investing and know at least a fair bit about it.  My experience and opinion has led me to the conclusion that stuff like oil is rife with speculation, and unless you seriously want to day trade, you're going to see a lot of ups and downs with your money ending up just about where it started.  

      My only investment tip is to find some good mutual funds and invest internationally.  The world economy is globalizing and so far the U.S. is looking like the big loser of the whole thing.  Long believed macro-economic theories are turning out to have very questionable standing since they do not reflect at all what is going on.  

      In Britain they admit to having royalty. In the United States we pretend we don't have any, and then we elect them president.

      by Asak on Thu Jan 13, 2005 at 12:46:26 AM PST

      [ Parent ]

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