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Wednesday, July 22, 2009

Morning Market Report

All major indices were up for a seventh straight day yesterday. That may all end today. Futures looked down slightly and then both Morgan Stanley and Well Fargo announced their quarterly earnings. Morgan's losses were worse than expected. Wells appears to have beaten estimates but markets are concerned about its "sustainability". In other earnings news, Caterpillar's earnings were weaker than expected while Boeing beat estimates. All three indices look to be down about a half a percent at the open. Also, GE Capital is in final stages of negotiations with the Treasury to exit TALF.

The markets in the Far East were mixed. The Hang Seng in China was down 1.3%, the NIKKEI in Japan was up .74%, and the Straits Time Index in Singapore was down .14%. The markets in Europe, however, were all down. The FTSE in London was .35%, the Dax in Germany was down .52%, and the Spanish index was down .61%.

Meanwhile, oil is giving back most of its gains from yesterday. It's currently trading at $64.18 per barrel which is about where it was trading prior to the opening yesterday. The Dollar looks to be mixed. It's up against the the Euro just slightly, .0044%, up against the British pound by .43%, but down against the Yen by .48%.

Meanwhile, bond rates are slightly up today but that follows huge drops in rates yesterday. Currently, the 10 year U.S. Treasury is up just less than two basis points but it's also currently traded at 3.49%. The Ten Year has dropped 20 basis points in less than a week. The yield spread is down just slightly to 2.58% (it was 2.6% two days ago) The yield spread measures the potential of future inflation.

My analysis:

I think this party will end sometime in August. First, we still have employment numbers on August 7th. Second, the administration has delayed release of its quarterly budget. That's supposed to come out sometime in August. The overwhelming speculation is that the government's budget is worse, possibly much worse, than earlier estimates. Until then, earnings will still drive the market.


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.

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