DIA +.45%, QQQQ +.66%, SPY +.37%
10-year Treasury -6/32, yielding 4.10%
The market popped early, sold-off to near opening levels around 1:30 and then rallied to close the day on a high-note. The economic news helped (see below). In addition, Circuit City received a takeover offer at a premium price and Warren Buffet increased his holdings of Comcast Cable (as did George Soros). Internet ETFs showed the biggest gainst, while Broadband and Networking were the big losers. Both the Diamonds and Spiders are near their 6-month highs. The QQQQ's still have a ways to go before they reach similar levels
The 10-year Treasury dropped 6/32 to yield 4.10%. This was a non-event in the market, as bond traders are awaiting Greenspan's testimony tomorrow and Thursday.
The dollar dropped .56% verses the Yen and the Euro gained .32% verses the dollar. The central news in the market was the drop in foreign capital flows into the US. In addition, the currency markets were not happy about the US recalling its ambassador from Syria. From a technical standpoint, the Yen/Dollar trade is still in a consolidating position. However, the Euro/Dollar trade is starting to look bullish for the Euro. There is continued commentary that the Dollar rally is over as the market starts to look more and more to the structural imbalances with the US.
Oil dropped late in the day to clase at $47.30. The oil market is looking for firm direction. Although it has risen in the last 5 sessions, commentators believe a possible OPEC production cut is priced into the market right now. In addition, the Energy Department reports weekly inventory levels tomorrow, so traders were solidifying positions ahead of the report. Finally, as with any rally, there was also a bit of profit taking.
The Census Bureau of the Department of Commerce announced today that the combined value of distributive trade sales and manufacturers' shipments for December, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $984.6 billion, up 1.0 percent (±0.3%) from November and up 10.6 percent (±0.3%) from December 2003.
Inventories. Manufacturers' and trade inventories adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,278.2 billion, up 0.2 percent (±0.2%) from November and up 7.8 percent (±2.1%) from December 2003.
Inventories are at lean levels. However, as information technology has continually improved, more and more businesses are able to keep lean inventories without a net loss in profitability. The inventory sales ratio has dropped continually since 2001, indicating leaner inventories are more commonplace than before.
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $347.7 billion, a decrease of 0.3 percent (±0.7%)* from the previous month, but up 7.2 percent (±1.0%) from January 2004. Total sales for the November 2004 through January 2005 period were up 7.6 percent (±0.7%) from the same period a year ago. The November to December 2004 percent change was revised from +1.2 percent (±0.2%) to +1.1 percent (±0.4%).
Retail trade sales were down 0.4 percent (±0.7%)* from December 2004, but were 7.1 percent (±1.0%) above last year. Gasoline station sales were up 17.3 percent (±2.8%) from January 2004 and sales of building material and garden equipment and supplies dealers were up 14.1 percent (±2.3%) from last year.
The consensus forecast was for a decline of .4%, to this number was good news for the market. The big reason for the drop was auto sales dropping 3.3%. Dealers had a huge December promotion where they cut prices and used attractive financing to lure buyers for the last annual push. A drop-off from that type of promotion is inevitable. Ex-autos, sales increased .6%. The annual figures solid.
The Treasury Department reported that "Net foreign purchases of both domestic and foreign long-term securities from U.S. residents were $61.3 billion in December compared with $89.3 billion in November. Net foreign purchases of long-term securities were $821.8 billion in 2004 as compared to $683.6 billion during 2003."
Comment: This could be potentially huge news. The US is needs foreign capital to finance its trade deficit. If this money dries up, the US will have to increase interest rates to attract foreign investors to invest in the US market. Although foreign purchasers increased their take of corporate debt last month, this does not have the same effect on the trade deficit. It is too soon to tell if this is a permanent or temportary shift in sentiment.