Here it is! Today's prudentbear -->
Market Summary June 01, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
Market Gives Hope Another Whirl
Asia was off a hair last night. Europe was up a touch, and the US futures traded up after the unemployment report showed May’s unemployment rate fell for the first time in 8 months, to 4.4 percent from 4.5 percent. As always, it’s the reaction that matters, and the market seemed to want to buy this number, or at least they did at the open. We traded up at the open, had a lot of motion, and then tanked when the napalm (that’s the NAPM report) was tossed into the pit as it showed another drop in the manufacturing index for May to mirror yesterday’s decline in the Chicago PMI. That selloff didn’t last long though as I assume everybody figured this just means we get more rate cuts, not that more cuts will make any difference. We got down about a percent in the spoos and found some traction. From there, it was a steady march to the upside till we had a slight giveback in the last hour. Volume was light again (1 bil on the NYSE and 1.5 bil on the NASDAQ.) Breadth was slightly positive on both exchanges. Big winners were in the golds as the HUI rose 5 percent. Big losers were in the airlines as the XAL fell 2 percent.
Last night’s mid-quarter calls were a mixed bag. IDTI puked up a hairball and said that revenue would be down a whopping 44 percent sequentially in Q2. IDTI fell 7 percent, closing just off the low despite the rally in the rest of the semis. ALTR said they expected revenue to be down another 5 percent in addition to the 20 percent they had already warned of due to deterioration overseas. The market decided, “what’s 5 percent among friends?” and rallied ALTR for 5 percent. So, bad news didn’t matter there, thus giving us somewhat mixed signals again on the psychology of the market. Has the hope for a 2nd half recovery not been totally broken, or was this just a death spasm? NVLS left guidance for Q2 unchanged but said they had a 300-mm pushout just yesterday, and they do a big chunk of their business in the last month of the quarter so it remains to be seen whether they’ll make numbers or not. They also said that they saw no sign of a Q3 upturn that others seem to, but they “hope” that they are right about it. NVLS rallied 5 percent on that. With all that data out, the boys decided it was time to run the semis again. The SOX rallied 3 percent with the equipment shares out in the lead. Handset shares were a little weaker, although semis like RFMD that supply NOK were up a bit on the day. Consequently, I’m not sure if that’s the market trying to “think” or just the usual chaos. CSCO slipped late in the day to fall 2 percent and seemed to lead the last hour pullback after the wires picked up on a note in their 10Q filed today where they said they see no end to the slowdown in spending by telecoms. That information comes under the heading of “duh, we know that already,” but the market didn’t seem to like it. And as always, that’s all that matters. So, today was somewhat of a return to the days of “damn the bad news, full steam ahead.” It was certainly not as bullet proof a rally as we have seen before with stocks like CSCO sliding and IDTI going down and staying down on its bad news. But the bulls deserve some credit for being able to ignore everything else. Financials traded down, then up, and then back down to end roughly where they began the day. The BKX and XBD both rose a hair. GE was unchanged. Credit cards were up a bit here and there, and credit insurers MBI and ABK both fell a couple percent. In the cyclicals area, DD said they would be letting more people go than previously discussed due to continued economic weakness. The TRAN took a hit today and fell 2 percent after a sharp rally yesterday much like today’s rally in the Dow. We’ll see if the Dow theory sell signal that we got when the TRAN failed to confirm the Dow’s move to 11,000 means anything or not very soon I suspect.
Oil fell 44 cents. The XOI and OSX were both basically flat. Gold rose $1.10, and lease rates fell a touch. The HUI rose 5 percent. More rate cuts (fed funds futures priced in a 100% chance of another 25 bp cut in June on the back of today’s data) and the continued strength in lease rates means the contango, which is the spread between forward prices and spot, will be narrowing further. That’s bullish for gold all by itself no matter what the dollar does since much of the supply over the last several years has been due to spec short-selling and miners selling production forward. A simple removal of this supply will put upward pressure on the price of gold. Of course, with the continued decline in interest rates and the faltering US economy, the dollar will eventually have trouble too, but gold will probably discount a lot of that before it occurs I suspect going forward. The COT showed the commercial net short position in gold had risen again slightly as of Tuesday, although much of that was likely liquidated on Wed and Thursday. The US dollar index traded higher this morning and then reversed to close down. Much of that was due to the zero’s reversal to trade up to just shy of 85 cents after moving to a new low this morning. The yen fell back a hair to 84 cents. Treasuries traded up then down then up off of this morning’s data to end in the middle of the day’s range with the 10yr’s yield going out at 5.41%. Returning to my speculation about the Japanese and treasuries that we discussed on Wed, if there’s anything to that we should see the yen continue to rally and treasuries begin to sell off soon. Otherwise, it’s probably just noise.
For the week, we managed to go out in the middle of the range on most of the indexes. I tend to think today was just the last gasp of bulls trying to give “hope” one last whirl on the first day of the month, but we’ll just have to see what next week brings. The question continues to be one of psychology and not facts. The question being: "when does the hope for the Fed engineered 2nd half recovery that is currently holding up stock prices give way to fear about the reality of there not being a recovery in the 2nd half" because that's when we'll see an absolute avalanche of selling. The commercial net short position in the spoos was roughly unchanged for those who care. |
