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Wednesday, July 15, 2009

Morning Market Report

Earnings are now the order of the day. With Intel beating their estimates, the major indices look to be up about a full percent at the open. The Dow is trading up about 80 points, the NASDAQ is up 11 while the S&P is up 10. News just broke that Abbott Labs reported earnings in line with estimates. Mortgage applications were up for the second week in a row last week though rates have gone up since then. Consumer Price Index numbers were just released and they were in line with a growth of .2% in June. The core PPI excludes food and gas prices which tend to swing wildly.

U.S. Treasury Bonds have inexplicably been rising since the news. The ten year looked to open unchanged and now the rate has gone up nearly four basis points. The last two days have been bad days in bonds with the ten year gaining nearly twenty basis points and this would extend those losses. The yield spread is also widening. The difference between the 2 year and the 10 year is currently 2.55% after tightening to 2.40% last week.

Crude oil is back above $60 per barrel and currently trading at $60.46. Almost all world markets finished up. The Hang Seng in China finished up 2.09%, the NIKKEI in Japan finished up .09%, and the Straits Time Index finished up in 3.41%. Meanwhile, in Europe, in London the FTSE finished up 1.62%, the DAX in Germany finished up 1.73%, and the Spanish index finished up 1.53%.

The dollar looks weaker against all currencies but the Yen. It's losing .91% against the Euro, .85% against the British Pound, while the dollar is up .03% against the Yen.

My Analysis:

While the market looks to continue to have another good day, I am still bearish. Earnings may in fact wind up being positive for the second quarter but the outlook continues to be very difficult, in my opinion. It is, however, good to see the market respond purely to economic factors. For months, the market was driven by political decisions. That was just purely corrosive. Besides stocks, I still believe the U.S. Treasury bonds are the securities to watch besides stocks themselves. We've lost between an eighth and a quarter of a percent in mortgage bonds in the last two days and all moves up in rate stunt economic growth. The Ten Year bonds, along with mortgage rates, are near a critical point. Any further move up and the rest of the market will start to take notice.


Everything in this space should be taken as information only. All opinions are my own only and should NOT be taken as an endorsement or investment strategy. I am not a licensed investment advisor and nothing here should be taken as investment advice.

1 comment:

Anonymous said...

At this point can you really say that Goldman Sachs' earnings, which started this whole rally this week, aren't political?