MARKET WRAP
Markets were strong on the day as the sellers prepare for the holidays and markets melt higher. The weak dollar hit a 15 month low and forced investors into risky assets again. Overall, stocks finished higher by 0.4%.
U.S. Economy – Jobless Claims Surprisingly Low, Dollar Drops Again
The U.S. Labor Department said that jobless claims were down 35,000 last week to 466,000, less than expected and the lowest in 14 months. The December 2010 eurodollars were down .035 at 98.83.
The U.S. Commerce Department said that personal incomes were up .2% in October and consumer spending was up .7%, both more than expected. Also, durable goods orders were down .6% in October, but were revised higher in September, from +1.4% to +2.0%.
The U.S. Census Bureau said that new home sales were at an annual rate of 430,000 in October, up 6.2% from September and much stronger than expected. From a year ago, new home sales were up 5.1%. January lumber ended up .20 at $235.00.
The University of Michigan’s consumer sentiment index fell from 70.6 to 67.4 in November, a little better than expected.
The U.S. Treasury Department sold $32 billion of 7-year T-notes at a median yield of 2.75% with a bid-to-cover ratio of 2.76. The March U.S. T-bonds ended up 20/32nds at 121.18/32nds, the highest close in six weeks.
The December U.S. dollar index fell .80 to a new contract low at 74.32 with no visible signs of support from the Fed.
Grains and Cotton
There were several wheat purchases reported today: Egypt bought 240,000 tons from Russia and 60,000 tons from France. Japan’s Ag Ministry bought 85,000 tons of wheat from the U.S. and 21,000 tons from Canada. And the USDA said that Iraq bought 100,000 tons of U.S. hard red winter wheat. December wheat closed up 17.25 cents at $5.502.
Livestock
February hogs closed up 1.65 cents at 67.65, the highest close in five months, helped by profitable packer margins and what appears to be a rebound in pork demand.
Coffee
March coffee closed up 2.75 cents at $1.3890 with support from today’s weaker dollar.
Orange juice
January orange juice was up 2.20 cents at $1.1425 while Florida got some helpful rain today.
Energies
The U.S. Energy Department (DOE) said that crude oil supplies were up 1.0 million barrels last week to 337.8 million barrels, helped by increased imports. Supplies of gasoline were up 1.0 million barrels and heating oil supplies were down 100,000 barrels. January crude oil closed up $1.94 at $77.96.
The DOE also said that refinery use increased from 79.4% to 80.3% of capacity last week. Over the past four weeks, gasoline demand was up .5% from a year ago and distillate demand was down 9.5% from a year ago.
The DOE also said that underground supplies of natural gas were up 2 billion cubic feet last week to 3.835 trillion cubic feet. Supplies are now up 12% from a year ago and may have peaked with colder weather coming.
Yesterday’s 6 to 10 day forecast from the National Weather Service is expecting below average temperatures for most of the U.S. and especially for the southeastern U.S. January natural gas shot up 39.7 cents to $5.163, the highest close in two weeks.
Metals
December gold closed up $21.20 at another new record high of $1,187.00 while the Fed remains committed to keeping the federal funds rate near zero. Also, there has been talk that India’s central bank may be interested in buying more gold from the International Monetary Fund.
March silver finished up 30.6 cents at $18.80, its highest close in 16 months.
Currencies – New 2009 Highs for Euro and Yen
The U.K.’s Office for National Statistics said that real GDP was down .3% in the third quarter and down 5.1% from a year ago, a slight improvement from last month’s estimate. Also, an index of services was up .4% in September. The December British pound ended up .0078 at $1.6667.
Statistics Canada said that their corporations earned $54.1 billion in the third quarter, up 7.9% from the previous quarter, but down 30% from the previous quarter. The December Canadian dollar closed up .77 at 95.32, the highest close in a week.
Japan’s Ministry of Finance said that exports in October were down 23.2% from a year ago, the smallest annual decline in a year. The December Japanese yen finished up .0148 at 1.1442, the highest close this year.
U.S. markets are closed Thursday for Thanksgiving. Several markets will close early on Friday. Have an enjoyable holiday!
Source: DF
TPC,
Are you still waiting like a “lion in the grass” on the sidelines? (Maybe you should rename your site “The Patient Capitalist”.) How much further do you think the slide in the dollar can go before we see a (short-term) reversal? My patience is wearing thin. My guess is that there will be no pullback in the equity markets without a strengthening of the dollar.
I foolishly reduced my position from 42% to 37% equities by selling some of my foreign equities (on Monday morning) assuming completely incorrectly that the dollar would temporarily bottom against the Euro at just over 1.50. I was suprised to see it pass 1.51 today and the dollar index well below 75. I also figured incorrectly that since everyone expected the equity markets to go up on Thankgiving week that we might get an unexpected pullback. Seems to me that no one is talking of corrections or pullbacks anymore. Only the year-end rally which everyone (bulls and bears alike) now expects. When everyone expects the same thing does it become a self-fulfilling prophecy or might we get exactly the opposite?
TPC Reply:
November 25th, 2009 at 3:04 PM
I have not been doing much in my macro strategy since I sold at 1,100. I see the risk as fairly high, but my gut tells me there is no selling catalyst here and that we could quietly move higher.
The rest of this year is likely a wash in my opinion. The best possibilities are setting up for January at the earliest.
Rob Reply:
November 25th, 2009 at 4:06 PM
Do you see January as a time to go long or potential set up to go short? It seems to me that much depends on the dollar in the near term. I have a hard time imagining a major decline until late 2010 or sometime in 2011.
I continue to find it strange that Treasury rates move lower (10 year moves down from 3.31 to 3.27% on an up market down and sharply down dollar day, 3 month at practically zero and 30 day negative at times) while the dollar falls and stocks grind slowly higher.
One would think that Treasuries rates would increase on a falling dollar or a rising stock market unless there is anticipation of a reversal. PIMCO apparently has its largest % of treasury holdings in its Total Return Fund in years. Short term rates are as low or lower than during the Lehman/AIG crisis.
Something doesn’t smell right.
James Reply:
November 25th, 2009 at 10:45 PM
Everything is all fuc*ed up and cloudy ROB. If everyone is so scared of inflation which is why oil is so high, the dollar is being shorted and gold is flying…why the hell are short term treasury rates at 0%? This week has been one of the strangest weeks of all, and it isn’t because it is Thanksgiving. I’m just wondering when we are going to have a break out? Either on the downside or upside…the trading has been horribly boring. We have been around 1090-1110 area on the Snp for about a month now and the VIX is at a 14 month low. Just a few days ago the charts were screaming overbought, now they’re basically screaming flat/slightly up. It’s weird.
Octopus Reply:
November 26th, 2009 at 4:30 AM
Oil and Gold are not up because of inflation -otherwise you wouldn’t have 10Y T-N yielding less than 3.30%. I still feel that mkt could surprise us on the downside sooner than later. Catalyst? There are so many crowded trades out there, may be you don’t need one…
Rob Reply:
November 26th, 2009 at 5:36 AM
The first surprise just came from Dubai after the US markets closed on Wednesday. Almost all markets are giving up a quick 2% or so. The second surprise is that the dollar is not strengthening but the Yen sure is.
Rob Reply:
November 26th, 2009 at 7:38 AM
Might it be that the market will simply be maintained at the current level until year-end so that Wall Street bonuses are high but that the market doesn’t end the year too high. If the market ends the year at S&P 500 near 1,200 then the possibility for high returns in 2010 will be much lower unless it comes through playing the market both up and down. If the market ends the year at 1,050 then general market returns can be double digit in BOTH 2009 and 2010.
Might fund managers and big banks have it in their interest to keep the market from advancing too much yet this year? Maybe even letting it pull back a bit? Just a thought.