MARKET WRAP – STOCKS PLUNGE
Stocks plunged on the day as investors continue to re-evaluate the massive rally in stocks over the last 6 months. Stocks fell 2% on the day as the banks, transports and energy stocks continue their move lower. The dollar rallied almost 0.5% and the Vix spiked almost 12%. Daily Futures has the action from all markets:
U.S. Economy – Shifting Theme?
The U.S. Commerce Department said that durable goods orders were up 1.0% in September, but down 24.1% from a year ago. The December 2010 eurodollars ended up .065 at 98.405 ahead of tomorrow morning’s third-quarter GDP report.
The U.S. Census Bureau said that new home sales were at an annual rate of 402,000 in September, down 3.6% on the month and weaker than expected. So far in 2009, new home sales are down 27% from a year ago. January lumber fell $2.00 to $192.50.
The U.S. Treasury sold $41 billion of 5-year T-notes at a median yield of 2.30% with a bid to cover ratio of 2.63, the best sign of demand in two years.
The stock market and most commodities traded lower today with concerns that the economy is too week to keep supporting their recent up-trends.
Grains and Cotton
December corn was down 1.75 cents at $3.69 with better chances for harvest activity in the next ten days.
December cotton ended down .17 at 66.88, pressured by today’s stronger U.S. dollar.
Livestock
Statistics Canada said that there were 11.82 million hogs in Canada on October 1st, down 7.3% from a year ago. Low hog prices and an expensive Canadian dollar have made it especially hard on producers this year. December hogs finished up .52 at 55.95.
Sugar
Recent strength in the U.S. dollar triggered selling in sugar, in spite of tight world supplies. March sugar closed down .72 at 21.93.
Energies
The U.S. Department of Energy (DOE) said that crude oil supplies were up 800,000 barrels last week to 339.9 million barrels. Supplies of gasoline were up 1.7 million barrels and heating oil supplies were unchanged. December crude oil dropped $2.09 to $77.46.
The DOE also said that refinery use increased from 81.1% to 81.8% last week. Over the past four weeks, gasoline demand fell to up 1.9% from a year ago while distillate demand was down 13.1% from a year ago.
ConocoPhillips said that they earned $1.5 billion in the third quarter, down from $5.2 billion a year ago.
December natural gas closed down 21.6 cents at $5.066, the lowest close in six weeks, with mild U.S. temperatures ahead of tomorrow’s weekly inventory numbers.
Metals
December copper fell 6.85 cents to $2.9305, the lowest close in a week, with concerns that the U.S. economy is too soft.
Currencies
Australia’s Bureau of Statistics said that consumer prices were up 1.3% in the third quarter from a year ago, the smallest annual gain since 1999. The December Australian dollar fell 1.81 cents to 89.47, the lowest close in two weeks, as today’s report weakened the case for raising the interest rate.
Source: DF
iShares MSCI Brazil Index (EWZ) -6.39%iShares MSCI Australia Index Fund (EWA) -4.51%iShares MSCI Emerging Markets Indx (EEM) -4.58%iShares FTSE/Xinhua China 25 Index (FXI) -3.72%Brutal session for anyone owning anything high beta.
That’s an understatement. Some people have probably had their year cut in half in the last week just by being overinvested in energy and emerging markets.
It feels like a day in early Oct of last year when hedge funds were liquidating. This year my hedgie friends tell me they’ve reduced their books by a third over the past 2 weeks, and will reduce again before long. Nobody wants to have an up year turned into a down year and eliminate their performance fees. I am guessing this will be a bad 4 week stretch, with Thanksgiving (again) a turning point for an upswing, although I would guess it won’t last until Jan 1 like last year. The feeling I got from listening to managers last weekend was everyone felt like they hit a hole in one this year, but the ball hit a tree and the rake and then somehow managed up in the hole. There’s a certain embarrassed glee, but you can see the sheer panic in having literally no where to put money right now except Treasuries, in their own bubble, in my opinion. My own approach is to keep it simple: I own SH (tight stop), LQD, tactically trade the heavy dips of oil and materials companies and just sit in cash. I also turned off all the TVs for my team. We watch prices and follow the political headlines. It’s impossible to guess where we’ll be in Q1.
That is so true. Everyone thinks the money managers will chase performance this year, but what if it’s the exact opposite? What if these money managers all race to protect their good years? They can’t have back to back bad years. That would finish many of them.
Ha Ha Ha. Wont it be something if the Galleon fund liquidated at the top !!