Market Summary May 11, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
from prudentbear.com
Bonds Break, Stocks Stumble
Asia was a little higher last night as Hong Kong and Japan both rose a touch. Europe was down a hair, and the US futures were off slightly. Consumer sentiment and retail sales data came in stronger than expected, and that got everybody in a buying mood early on as we tried to rally at the open. Then everybody seemed to notice that the bond market was in freefall, and we took a dive for about a percent in the S&Ps. From there, things slowed down, and we mostly flopped around and grinded sideways but with a bias to the downside. The last couple hours saw a dive to new lows for the day followed by the usual recovery into the close. Volume was a real stinker (.9 bil on the NYSE and 1.4 bil on the NASDAQ.) Breadth was slightly negative on both exchanges. Big winners were hard to find, but the utilities were up as the UTY rose a percent. Big losers were in the Internuts as the INX fell 4 percent.
IBM and INTC had their usual cheerleading sessions last night in front of analysts with nothing new to offer other than INTC now appears to also see a “bottom” in the server market. Recall they claimed a month or so ago that they saw a bottom in the PC business, which DELL apparently didn’t get the memo on because they’re still firing people as of last week. INTC’s assertion is also rather interesting considering what SUNW’s chairman, Scott McNealy, said yesterday afternoon: “People are claiming that they're seeing the bottom. I don't know where they're getting that data. They certainly didn't see the cliff, so how in the world can they see the bottom?” Enough said on that subject. INTC ended down 4 percent and IBM 3 percent. The chaos pattern was at work once again today in tech for the most part, but there was more selling than buying. Semis were mixed but on the weak side as the SOX slipped a hair. Semi equipment stocks (they’ve “left the station” if you recall) were mostly lower again also. It was just another weak day in general, but like yesterday there weren’t any big downside movers. Financials were weaker on the day. The BKX and XBD both fell a percent. GE fell 2 percent. FRE and FNM both slipped 3 percent as mortgage rates moved higher. Retailers were a little stronger again as the RLX rose a hair on this morning’s stronger than expected retail data, which showed a .8% jump in April sales after 2 months of declines.
Oil rose 3 cents. The XOI and OSX both slipped a percent. Gold fell $1.20, and lease rates were quiet again. The HUI slipped 2 percent but remained above yesterday’s lows. The BOE auction is next Tuesday morning, and that will be the next big test for gold. In the past when the metal has rallied into the BOE auction, it has tanked on the results and vice versa. So, we’ll see if anything changes this time or not. The US dollar index rallied a touch again and is now closing in on its 118 high back in March. The zero slipped back below 88 cents. Data out this morning in Europe made the ECB’s move yesterday look a little silly. The CPI equivalent in France and Germany showed the annual inflation rate accelerating to 2 and 2.9 percent, respectively. Treasuries were clubbed with the 10yr getting beat for more than point as yield rose to 5.48%. From a chart hugger perspective, we could see 6% in short order, and it looks like we may want to sell off right into the Fed meeting. With Uncle Al, the printer, cutting rates as fast as he can, gold starting to awaken, and energy prices still on fire, the bond market is understandably spooked about inflation. As we discussed before, I continue to believe that we saw a major low in yields in Q1. The April PPI showed a .3 percent rise after a .1 percent decline in March on the back of moves up in the stuff we all use every day like food and energy.
So, as we go into the FOMC next week we’ve got the bond market starting to get into trouble, the gold shares and the metal getting some interest, and stocks looking extremely tired. That’s not exactly a bullish recipe. Anybody thinking that Uncle Al and the Fed took a look at today’s stronger data and is now reconsidering their current aggressive easing course that they’re on is dreaming, I think. The Fed has made it very clear that they’re going to keep cutting, and that inflation is not a concern. So, we’ll probably get our 50 bp chaser on Tuesday to follow up the BOE's and ECB’s 25 bp cuts this week, and we’ll see what people can do with it. I doubt they can do much as this rally looks to be showing the early signs of falling apart. I’d start strapping in Tuesday morning if I were you. Once the initial reaction to the cut is over and done with, we could hit some air pockets on the downside… |
