The DIA's (Dow) were up 1.45%, the SPY's (S&P 500) were up 1.11% and the QQQQ's (NASDAQ) were up 1.26%. However, these numbers are a bit misleading. First, overall volume was weak. Secondly, aside from a late afternoon rally on Thursday and a slight upward bias on the Dow and S and P halfway through Friday, the markets were more or less trading in a sideways direction. Third, the primary reason reported for Thursdays rally was a strong Treasury auction. That is the first time I have
ever seen that reported as the primary reason for the stock markets advancing. (To the bull's credit, traders were concerned about the poor participation of the week's two earlier auctions.)
The 10-year Treasury lost 6 basis points to close the week at 5.56%. The market was closed on Friday for Veteran's Day. Three treasury auctions were the primary news for the bond market this week. The first two saw poor foreign central bank participation. Indirect bidders purchased 29% of Tuesday's 18 billion auction and 20.7% of Wednesday's 13 billion 5-year auction. However, Thursday's 13 billion 10-year auction saw a record foreign central bank purchasing of 54.8% of the deal. This lead to a rally on Thursday. In addition, the market is technically oversold; yields have risen consistently since Early September. In addition, US long yields are some of the highest in the first world making them very attractive.
Oil dropped 4.4% for the week. Above-average temperatures were the primary reason for this week's sell-off. For the last several weeks, concern about increased winter heating costs has provided a floor for trading. Higher-than average temperatures in the Northeastern US and Northern Japan have eased traders minds about a supply squeeze in the near-term. In addition, a 4.5 million barrel increase in oil inventories eased concerns about a supply crunch. Finally, oil traded below its 200-day moving average, which could influence firms to increase their selling of oil in the near-term.
The dollar gained .85% versus the euro and lost .25% versus the yen. The currency markets are still focused on interest rate and growth differentials between different currency markets. US interest rates are still 200 basis points over European levels and 400 over Japanese levels. As a result, the dollar rose again this week. The unrest in France and technical market conditions added to the euro's weakness. The record trade deficit had no negative impact on the market.
Thursday: Trade Deficit
The Nation's international deficit in goods and services increased to $66.1 billion in September from $59.3 billion (revised) in August, as imports increased and exports decreased.
Exports decreased to $105.2 billion in September from $108.0 billion in August. Goods were $73.4 billion in September, down from $76.7 billion in August, and services were $31.8 billion in September, up from $31.3 billion in August.
Imports increased to $171.3 billion in September from $167.3 billion in August. Goods were $144.5 billion in September, up from $140.8 billion in August, and services were $26.8 billion in September, up from $26.6 billion in August.
As of this month, the cumulative 2005 trade deficit total is 530 billion, or 86% of last years total. The chances of another year of a record trade deficit are pretty high.
Some of this is caused by September's hurricanes, which closed a major port and increased US oil imports. That means next month's number will probably decrease. But, don't expect a miracle. Next month's number will not magically drop to an acceptable level.
Thursday: Import Prices
Import prices declined 0.3 percent in October, the Bureau of Labor Statistics of the U.S. Department of Labor reported today, after increasing 2.3 percent in September. A downturn in petroleum prices more than offset higher nonpetroleum prices. The U.S. Export price index rose 0.6 percent in October following a 0.8 percent advance the previous month.
The 0.3 percent decline in the price index of U.S. imports marked the first decrease for the index since May and only the second monthly drop recorded in 2005. Prior to the October decline, import prices rose 6.3 percent between May and September, driven by a 36.2 percent jump in petroleum prices over that period. In October, petroleum prices decreased 4.4 percent, but still rose 30.9 percent over the past 12 months.
Oil is the biggest "mover" in this index. Therefore, oil's price movements heavily influence the index's movement.
Friday: Consumer Sentiment
The consumer sentiment index rose to 79.9 from 74.2 in October, reports said. The October sentiment level was the lowest in 13-years.
The increase in sentiment in November was well above the consensus forecast of Wall Street economists who had expected sentiment to inch higher to 76.2.
According to the report, current conditions improved sharply, while expectations only inched higher.
Economists said the consumers are happier now that gasoline prices have retreated from their post-hurricane highs.
The current conditions index rose to 103.0 in November from 91.2 in October.
The expectations index rose to 66.9 from a 12 year-low of 63.2 in October.
This number cratered after the September hurricanes. It has fluctuated in the 60's and 70's for the last three months, indicating a new trend/level is likely in place. However, should there be a winter cold snap that heavily influences heating prices, this number could drop again.