Stocks were clobbered on the day as the China scare expanded and President Obama released preliminary details for a regulatory plan. The S&P 500 closed at the low of the day for a loss of 1.9% and has now completely erased the year to date gains. Volume was very negative and nearly twice as high as the 3 month average. Breadth also continued to deteriorate on the day. This was the third major distribution day in 4 trading days and should serve as a major warning flag of potential future losses in the coming weeks. Despite the strong earnings environment the uncertainty regarding Greece, China and U.S. regulatory reform should provide substantial headwinds for the markets.
U.S. Economy
The U.S. Labor Department said that jobless claims were up 36,000 to 482,000, much more than expected. The March 2011 eurodollars were up .045 at 98.565.
The Conference Board’s U.S. index of leading indicators was up 1.1% in December after posting a 1.0% gain in November. Ken Goldstein, economist at The Conference Board said that Òthe indicators point to an economy in early recovery.”
The Philadelphia Federal Reserve’s index of regional manufacturing fell from 22.5 to 15.2 in January, weaker than expected.
The Bank of Canada said that it expects real GDP in the U.S. to be up 2.5% in 2010 and up 3.9% in 2011.
Grains and Cotton
The USDA said that China bought 55,000 tons of U.S. soybeans for this season and 175,000 tons for 2010-2011. March soybeans were up 4 cents at $9.54.
The International Grains Council predicted that the world will produce 653 million tons of wheat in 2010-2011, down from 674 million tons this season. March wheat ended up 2 cents at $4.995.
Coffee – Problems in Brazil?
According to Bloomberg news, a meteorologist for Brazil’s Ag Ministry said that Brazil’s upcoming coffee crop may only total 39 million bags due to recent heavy rains, significantly less than the latest official forecast for 47.3 million bags (see article). March coffee ended down a half-cent at $1.3870.
Sugar
March sugar approached 30 cents this morning, but ended up .15 at 29.26 with the same old story – tight world supplies.
Orange juice
March orange juice was up .0095 at $1.3675 with ongoing concerns about the extent of damage to Florida’s citrus crop from this month’s cold weather.
Energies
The U.S. Department of Energy said that underground supplies of natural gas were down 245 billion cubic feet last week to 2.607 trillion cubic feet, a bigger drawdown than expected. Supplies are now up 1% from a year ago and slightly below the five-year average. March natural gas finished up 10.1 cents at $5.568.
The U.S. Department of Energy (DOE) said that crude oil supplies were down 400,000 barrels last week to 330.6 million barrels. Supplies of gasoline were up 3.9 million barrels and heating oil supplies were down 1.1 million barrels. March crude oil fell $1.66 to $76.08, the lowest close in four weeks.
The DOE also said that refinery use fell from 81.3% to 78.4% last week. Over the past four weeks, gasoline demand was down .2% from a year ago while distillate demand was down 6.8% from a year ago.
Metals
China’s Customs Office said that copper imports increased 25% in December to 244,013 tons. March copper fell 6 cents to $3.295, hurt by today’s weaker stock market.
Currencies
The March British pound ended down .0078 at $1.6203 after the government posted a budget deficit of 15.7 billion pounds in December, the biggest December deficit since at least 1993.
Real GDP in China was up 10.7% in the fourth quarter from a year ago. For all of 2009, real GDP was up 8.7%, better than the government’s 8.0% target.
Japan’s Cabinet Office said that its leading(?) index increased from 89.4 to 90.7 in November, less than earlier estimated. The March Japanese yen closed up .0098 at 1.1071, the highest in four weeks.
Markit Economics said that its composite index of services and manufacturing for the Euro area fell from 54.2 to 53.6 in January, weaker than expected, but still a sign of expansion.
The Bank of Canada predicted that real GDP will be up 2.9% in 2010. Also, Statistics Canada said that wholesale sales were up 2.5% in November to C$42.4 billion, the fifth increase in six months.
The World Bank increased its estimate of 2010 global growth to 2.7%, up from 2.0% in June.
Source: Daily Futures
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.