DIA -.48%, QQQQ -1.67% SPY -.75%
10 Year Treasury, up 3/32, yielding 3.97%
The markets had two major down legs today. One after the opening, and the second starting about 2:15. There was concern after Cisco announced earning were OK, but not great. Although HP announced that Carly Fiorina was forced out, this gave little upside to the market. Although some commentators played the inventory report down, I think it had more impact then they expected. Of the ETFs I watch, only Real Estate had an up day. The big losers were business to business internet, biotech and networking.
The 10-year treasury rose today, closing at a 3.97% yield. This is near the lows the market had in late October. The primary reason was a statement by a Federal Reserve governor that implied the Federal Reserve may slow the rate of interest rate hikes. Employment growth is slower then they would like and there is little inflation on the horizon. Although other commentators have noted that traders feel interest rates should be higher (myself included), there is the possibility the bond market is not as solid as we would like to think. The equity markets have had a tough start to the year, employment growth has consistantly come in lower then expected and the trade deficit is still high.
In addition, the governor's comments spurred demand for a 15 billion dollar auction that had a foreign participation rate of 44% -- a good showing.
The dollar had a wild ride verses the Euro today, first rallying, then finally closing down about .22% verses the Euro. The primary reason was the "Fed Speak", which indicated the Fed may slow down the pace of its interest rate hikes. In addition, a writer for Bloomberg news noted that Greenspan's rosey scenario for the dollar and the US economy may have some serious flaws. Also of importance were Treasury Secretary Snow's comments to Congress that tax cuts need to be made permanent. After these statements, the dollar started to sink verses the Euro and the Yen.
The dollar gained .12% verses the Yen, again in an eventful trading day. Like the Euro trade, the yen trade was down, then up, then would up closing just a touch above unchanged. The currency markets are waiting for the trade deficit numbers tomorrow, so it is probable that some of today's extremes were caused by intra-day movements.
Oil rose slightly -- by about $.30 to close at $45.56/bbl. The primary reason for the rise was a report from the Energy Department that oil inventories decreased about 1 million barrells last week. However, the market didn't have a large upside move because OPEC has announced it will keep production levels at their current levels for the time being.
The Department of Commerce reported that "December 2004 sales of merchant wholesalers, after adjustment for seasonal variations and trading-day differences but not for price changes, were $286.8 billion, up 0.9 percent (+-0.7%) from the revised November level and were up 13.9 percent (+-1.3%) from the December 2003 level. In addition, Total inventories of merchant wholesalers, after adjustment for seasonal variations but not for price changes,
were $328.3 billion at the end of December, up 0.4 percent (+-0.5%) from last month and were up 11.2 percent (+-1.3%) from a year ago.
Inventories were expected to increase by .9%, so this number was a disappointment to the street. Inventory build-ups are a sign of increasing confidence in the upcoming few months. If you think sales will increase, then you start to stock-up of items you need to sell.