DIA -1.02%, QQQQ -1.32%, SPY -.80%
10-Year Treasury +10/32 to yield 4.19
Late day drop-off in the markets today. Starting about 2:30, the markers tanked big-time. Oil prices and the employment unemployment numbers were contributing factors, but the market is also worried about earnings season, which begins in earnest next week. From a technical level, the market is not in good shape right now.
The 10-year bond rose 10/32 to yield 4.19%.
The Treasury reacted to the drop in import prices and increase in unemployment claims as a signal the Fed may have to hold off on raising rates for a few months.
Oil rose 3% today, closing above $48/bbl. A combination of factors contributed to the rise in prices. Traders think the end of the month OPEC meeting will result in another production cut. A cold-blast went through the Mid-West and is bound for the East Coast. There is also concern about continued violence in Iraq effecting oil output.
The dollar dropped about .57% verses the Euro and was close to unchanged verses the Yen today. The drop verses the euro was caused by the European Central Bank keeping interst rates at their current level and some short covering by traders. In addition, the dollar lost a fair amount of ground yesterday. Today's reaction can just as easily be a technical reaction to yesterday's move.
"The Census Bureau of the Department of Commerce announced today that advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $349.4 billion, an increase of 1.2 percent (±0.8%) from the previous month and up 8.7 percent (±1.0%) from December 2003. Total sales for the 12 months of 2004 were up 8.0 percent (±0.2%) from 2003. Total sales for the October through December 2004 period were up 8.2 percent (±0.7%) from the same period a year ago. The October to November 2004 percent change was unrevised from +0.1 percent (±0.2%).
Retail trade sales were up 1.3 percent (±0.8%) from November 2004 and were 8.8 percent (±1.0%) above last year. Gasoline station sales were up 21.8 percent (±2.5%) from December 2003 and sales of nonstore retailers were up 14.3 percent (±3.6%) from last year."
Comment: This number came in as expected. The only cause for concern was when the auto numbers are taken out, the number drops to .3%. However, this is still the best year over year jump since 1999, making the market happy.
The Labor Department reported "In the week ending Jan. 8, the advance figure for seasonally adjusted initial claims was 367,000, an increase of 10,000 from the previous week's revised figure of 357,000. The 4-week moving average was 344,000, an increase of 12,750 from the previous week's revised average of 331,250."
Comment:This was a very negative number. First, the concensus prediction was for a net decrease in claims of 19,000, so the increase took the market by surprise. Secondly, the 4-week moving average jumped 12,750 claims. Many economists consider this number more reliable because of the 1-week number's volatility. Third, last weeks numbers were revised upward by 37,000. Fourth, this is the highest number in 3 months. However, the early weeks of the year typically see an upward spike in unemployment claims as seasonal labor is let go.
The U.S. Import Price Index declined 1.3 percent in December, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. The decrease followed a 0.2 percent decline in November and was led by lower petroleum prices. Export prices were up 0.2 percent in December after rising 0.3 percent the previous month.
Comment: While the monthly drop is good news, import prices still increased 30% for the year, indicating inflationary pressures may start to pressure the economy. Additionally, a majority of the drop was due to a decrease in oil prices which dropped 11.5% last month. These prices are very volatile. OPEC meets at the end of the month and it is rumored they will raise their output price target.