Stocks were strong on the day and finished with gains of 1.4%. Breadth was positive at 3:1, but volume was again very weak – a continuing trend in 2010 on bullish days. Strong ISM and income data were the primary drivers. The story was quite the opposite in China where good news has become bad news. A stronger than expected PMI report in China fueled fears of further bank tightening. The VIX lost 8% as investors jumped back into the risk trade.
From Daily Futures:
U.S. Economy
The U.S. Commerce Department said that personal incomes were up .3% in December while consumer spending was up .2%. For all of 2009, personal incomes were down 1.4%, the biggest decline since 1938.
The Institute of Supply Management’s manufacturing index increased from 54.9 to 58.4, much stronger than expected. The March 2011 eurodollars were down .03 at 98.60.
The U.S. Census Bureau said that construction spending was at an annual rate of $902.5 billion, down 1.2% from November’s pace. For all of 2009, construction spending totaled $939.1 billion, down 12.4% on the year. Even so, March lumber closed up its $10 daily limit at $258.50, the highest in eight weeks.
Grains and Cotton
The USDA said that last week’s export inspections of:
Corn totaled 36.8 million bushels, up 29% from a year ago.
Soybeans totaled 40.0 million bushels, up 4% from a year ago.
Wheat totaled 17.8 million bushels, up 48% from a year ago.
March wheat closed up three-fourths of a cent at $4.747.
March corn ended up 2.5 cents at $3.59, helped by bargain-hunting after prices have fallen for three weeks.
Livestock
April cattle fell .67 to 88.70 after Friday’s report showed the U.S. cattle inventory down .9% from a year ago, a little more than expected.
Metals
Was last week’s sell-off in gold an over-reaction to the dollar? April gold finished up $21.20 at $1,105.00.
March copper closed up 3.10 cents at $3.0835, encouraged by today’s positive manufacturing news.
Energies
March crude oil finished up $1.54 at $74.43, also supported by today’s positive U.S. manufacturing report.
Currencies
An index of manufacturing in Australia increased from 48.5 to 51.0 in January, a sign of expansion.
An index of manufacturing in the U.K. increased from 54.6 to 56.7 in January, stronger than expected.
An index of manufacturing in the Euro area increased from 51.6 to 52.4 in January, a little better than expected. The March euro closed up .0055 at $1.3920.
China’s Banking Commission, fearing excessive lending, ordered banks to cancel any recent loans that were issued for improper reasons.
Russia’s Federal Statistics Service said that real GDP contracted 7.9% in 2009, the worst performance in 15 years.
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.
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