Stocks continued to inch higher on Wednesday as investors continue to focus on strong earnings and better than expected economic growth. The S&P closed higher by 0.45%. Breadth was strong on the day at 2:1, but volume was once again very weak. This remains the most alarming trend of the recent rally. Stocks rallied in the face of a stronger dollar.
From Daily Futures:
The March Japanese yen looked like it was ready to fall on February 3rd, but was then interrupted by concerns about Greece on the next day. Now that those concerns are easing, the yen broke decisively below the 100-day average again – a sign of significant weakness.
U.S. Economy
Minutes from last month’s Federal Reserve meeting showed that “policymakers were unanimous in the view that it will be appropriate to shrink the supply of reserve balances and the size of the Federal Reserve’s balance sheet substantially over time.” Just how and when is not yet known. The March U.S. dollar index jumped up .72 to 80.47.
The U.S. Census Bureau said that housing starts were at an annual rate of 591,000 in January, up 2.8% from December’s pace and a little better than expected. May lumber ended down .80 at $288.10.
The Federal Reserve said that industrial production was up .9% in January, slightly more than expected. The March 2011 eurodollars ended down .045 at 98.695.
The Mortgage Bankers Association said that its index of mortgage applications was down 2.1% last week to 600.5. The fixed rate on a 30-year mortgage remained at 4.94%.
The U.S. Treasury said that the federal budget deficit totaled $42.6 billion in January, a somewhat smaller deficit than expected.
Grains and Cotton
March corn fell 6.5 cents to $3.607, blamed on new supplies on the way from South America.
Livestock
Bitter cold temperatures continue to hang on in the central U.S. and are likely slowing the weight gain schedules for cattle and hogs. April hogs closed up .92 at 69.20, the highest close in two weeks.
May feeder cattle closed up .0060 at a new contract high of 1.0375, supported by a smaller inventory of cattle and soft corn prices.
Orange juice
Late yesterday, the USDA’s Florida Weather Crop Report said that temperatures at Brooksville, Florida reached into the 20’s for five consecutive hours on Sunday morning. May orange juice was down .0055 at $1.4145 while Florida continues to wait for warmer weather.
Metals
The World Gold Council said today that world mine production was up 6% in 2009. Also in 2009, the total supply of gold increased 11% while total demand decreased 11%. April gold ended up .30 at $1,120.10.
May copper closed up 1.95 cents at $3.2590, helped by today’s positive housing starts report.
Energies
This week’s U.S. crude oil inventory report will be released tomorrow due to the holiday schedule. April crude oil closed up .32 at $77.73.
Currencies
The U.K.’s Office for National Statistics said that the unemployment rate in October to December stayed at 7.8%, the same as a month ago. Jobless claims were up 23,500 in January to the highest total in nearly 13 years. The March British pound fell .0092 to $1.5685.
Statistics Canada said that wholesale sales totaled C$42.8 billion in December, up .7% from November and the sixth gain in seven months.
Japan’s Trade Ministry said that their index of services was down .9% in December, weaker than expected. The March yen dropped .0121 to 1.0974 while concerns about debt problems in Greece fade.
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.