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Wednesday, July 29, 2009

Morning Market Report

There's two pieces of breaking news. First, Yahoo and Microsoft have reached a deal for an Internet search partnership.

Microsoft has reached a deal with Yahoo for an Internet search partnership, ending years of back and forth negotiations.

The agreement announced Wednesday gives Microsoft access to the Internet's second-largest search engine audience.

It adds a potentially potent weapon to Microsoft's Internet arsenal as the software maker girds for an online assault against Google.

The partnership was quite as sweeping and expansive as analysts expected, however, an Yahoo's shares are currently trading down about 7% on the news.

Meanwhile, durable good orders were down 2.5%, the most in five months.

New orders for long-lasting U.S. manufactured goods fell more sharply than expected in June, notching their biggest decline in five months as demand for communications and transportation equipment slumped, a government report showed on Wednesday.

The Commerce Department said durable goods orders fell 2.5 percent, the largest drop since

January, after rising by a revised 1.3 percent in May, previously reported as a 1.8 percent surge. This was worse than market expectations for a 0.6 percent decline. Orders had advanced for two straight months.

New orders excluding transportation unexpectedly rose 1.1 percent in June, after climbing by 0.8 percent in May

There was about a $40 billion auction in 2 year Treasury bonds yesterday that was lukewarm. Treasury yields rose to 1.08% before settling at 1.10%. They are trading this morning at 1.10%. The rates on longer term yields are trading better this morning however. The Ten year is at 3.64% and so the yield curve between the two year and ten year is down to 2.54%.

Indices were mixed, marginally, yesterday. The Dow and S&P were down slightly while the NASDAQ was up slightly, .4%. This morning, all three are trading down this morning following the durable goods numbers. All three look like they will start down between a half and a full percentage point.

Meanwhile, in China, investors are worried things are going too well. A very strong Initial Public Offering for China State Construction Engineering Corp sparked worries that the market is headed toward a bubble. The Chinese index, up about 90% year to date, was down about 5% yesterday. The Hang Seng, another Chinese index, was down 2.37%. Not everything was bad yesterday in the Far East. The NIKKEI in Japan was up .26%, however that was the only index that was up. The Straits Time Index in Singapore was down .76%. In Europe, it was the reverse. The Spanish index was down .31% but that was the only index down. The FTSE in London was up .93% and the Dax in Germany was up 1.8%.

Oil is giving a lot back today. It's trading at $65.60 down $1.60 a barrel. The Dollar is mostly better today. It's up .33% against the Euro, .04% against the British Pound, and up .26% against the Japanese Yen.

My Analysis:

There's so much competing data that the market will humble most prognosticators. I still believe that the market will shave 10-15% in the intermediate term, through the end of the Summer, but right now the only thing that appears safe is volatility in the markets.

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