DIA +.23%, QQQQ, -.5%, SPY +.5%
10-year +3/32 yielding 4.26%
This was another give and take day in the market, as traders waited for the jobs report tomorrow. In addition, earnings season starts soon, so the street is taking a wait and see attitude to trading. The market sold off after oil spiked (see below) then rallied on a comment by a Fed banker that rates were fine and inflation was under control.
The 10-year treasury was little changed today, dropping two basis points to 4.27% on a gain of 3/32.
The market move up until about 1 pm, when traders quietly sold some positions, but the trading was lackluster. The market is in stasis until the employment report tomorrow.
After trending lower for the last two sessions, oil spiked more than $2.00/bbl today, closing just below $45/bbl. Although the Energy Department reported an increase in inventories yesterday, there is still concern in the market about the Middle East, supply issues in Europe and the possibility of colder winter weather in the next few months. Remember that although it has been unseasonably warm so far, there are still a few months of possible sold weather left.
The dollar rallied verses the Yen today, increasing about .65%. There was once again talk of the Bank of Japan intervening in the currency markers to stave off the Yen's decline verses the dollar. In addition, the Fed report several days ago indicated the Fed may increase the pace of rate hike increases. Large currency traders sometimes "park" dollar assets in short-term debt instruments of the currency they are trading in. Therefore, an increase in US rates would increase dollar demand. The dollar lost .5% verses tech Euro, largely for the same reasons. In addition, recent economic numbers from Europe indicate the region's economy may be slowing. This would lead to a lowering of European rates, making Euro investments less attractive.
I posted on the unemployment numbers earlier today, but with all the excitement in Congress I pasted the post below. Just in case you missed all the other excitement.
From the Department of Labor
In the week ending Jan. 1, the advance figure for seasonally adjusted initial claims was 364,000, an increase of 43,000 from the previous week's revised figure of 321,000. The 4-week moving average was 333,000, an increase of 750 from the previous week's revised average of 332,250.
The advance seasonally adjusted insured unemployment rate was 2.2 percent for the week ending Dec. 25, unchanged from the prior week's unrevised rate of 2.2 percent.
The highest insured unemployment rates in the week ending Dec. 18 were in Alaska (5.1 percent), Puerto Rico (3.3), Pennsylvania (3.2), Idaho (3.1), Michigan (3.1), Oregon (3.1), New Jersey (2.9), Washington (2.9), Wisconsin (2.9), Massachusetts (2.8), and New York (2.8).
The largest increases in initial claims for the week ending Dec. 25 were in Indiana (+9,025), Pennsylvania (+8,631), Wisconsin (+8,610), Kentucky (+7,875), and Michigan (+4,452), while the largest decreases were in Georgia (-2,710), North Carolina (-1,730), South Carolina (-1,526), Tennessee (-1,093), and Florida(-1,080).
First, the average consensus forecast was for 330,000, or an increase of 9000. There have been numerous problems with economic forecasting in the employment sector for the last half of 2004. I haven't seen anyone explain why this has happened, but it has.
Secondly, This is a 1 week jump in a number that can be very volatile. The 4-week moving average only increased 750. Most economists use the moving average because it smooths out the bumps in the road.
Third, employers like to dismiss people are the end of the year. I have no idea why. So this number could be a result of that happy tradition.
But, the jobs picture, to me, is deeply troubling. Last year the economy grew at a 4% rate, and we are still barely creating enough jobs to make-up for lost jobs. And these numbers don't help.
Still, it looks like we have turned the corner again...no really, we've turned the corner....just last week....I can feel it in my bones...(sarcasm off)