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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 660.19

-0.8%

Nov 18 4:00 PM EST

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To: Compadre who wrote (15477)	6/1/1999 12:46:00 PM
From: Les H	Read Replies (2) of 99985

The FVX (5-yr) is close to crossing above the TNX (10-yr). Data Matters ( bonds-online.com ) Bonds are lower this morning on a strong NAPM report and on concerns how the other economic data will print this week. Thirty-year bonds are down 30/32, yield 5.90%. Two-year notes are down 6/32, yield 5.51%. The National Association of Purchasing Managers Survey (NAPM) for May rose to 55.2 from 52.8. Expectations were for a rise to 53.3. A reading above 50 indicates expansion. The number indicates the manufacturing sector has rebounded nicely from its slump last year. Important to the bond market; prices paid rose to 52.2 from 43.2. This is heightening fears of rising inflation and the Fed's response to it. Production, new orders, employment and the export orders all posted healthy increase. Inventories declined. Bonds fell sharply on the data. Leading economic indicators for April fell .1%. Expectations were for an unchanged number. This was the first decline in the index since last June. Of the ten components: six declined, three rose and one was unchanged. Construction spending for April fell 2.4%. Expectations were for a rise of .1%. This was the first decline since last October. There was little reaction to this number or leading indicators, as the market was concentrating on NAPM. Japan is expected to temporarily suspend its consumption (sales) tax. Additional fiscal stimulus is also expected to be announced. Both of these measures are being taken in an effort to stimulate the economy. Japanese bonds fell more than a point as these measures are expected to be financed by additional bond sales. The euro hovers near its low of 1.0399 dollars established Friday. The European Central Bank (ECB) is not expected to intervene in the currency markets in support of the euro. There were rumors the ECB would raise interest rates or sell dollars in order to stop the 10.5% decline in the euro this year. The ECB will try to jawbone the euro higher. Talk is cheap. Highlighting the continued weakness in Euroland, France announced its unemployment rate for April at 11.4%. Wednesday will bring data on new home sales. Expectations are for a decline of 1.7%. The most important number will be unemployment on Friday. Expectations are for an unchanged level of 4.3%. Non-farm payroll is expected to increase by 215,000 workers. Have a great day.

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