Another day, another drop in the US Dollar and another boost to equities and precious metal prices. In NY, all the sectors traded higher, but Energy and Basic Materials (XLE +2.4% XLB +2.1%) were clearly favored. At the close, the S&P 500 (1,054.72 +14.26 +1.37%), DJIA (9,731.25 +131.50 +1.37%), and NASDAQ Composite (2,103.57 +35.42 +1.71%) lifted about +1.4%. Due to the commodity price sensitive drivers, the Toronto Exchange Composite (11,247.97 +145.35 +1.31%) and Venture market (1,281.40 +27.15 +2.16%) had a similar result.
Since this is a speculative US Dollar based market, let’s start there. Tuesday, the US Dollar pulled back ($USD 76.31 -0.39 -0.51%) almost to the 75 cent level. Accordingly, traders were buying risk. For the second day this week, the Euro (147.15 +0.64 +0.44%), Yen (112.63 +1.00 +0.90%) and particularly the Canadian Loonie (94.33 +0.94 +1.01%) soared, while the Pound was a laggard (159.14 -0.25 -0.16%), in fact falling a tad.
Crude Oil ($WTIC 71.00 +0.59 +0.84%) was higher, but the major play of speculators was in precious metals. Gold ($GOLD +24.70 +2.43% to 1,042.00) was up almost +$25/oz, which followed Monday’s gain of +$14.30/oz. A gain of +$39/oz in two days has every Goldbug screaming in joy.
Heading into Earnings Season, which starts today, prices may become more realistic. I doubt whether we will see a repeat of the Goldminers group ($XAU +6.1%) or the gains made in Cara 100 company stocks like Buenaventura, Silver Wheaton and Goldcorp (BVN +7.7% SLW +7.6% GG +6.0%).
We are more likely to focus on REITs ($DJR +0.1%), which yesterday were laggards.
For the Cara 100 company stocks, yesterday there were only 9 losers. The previous day had only 10. Yesterday the weakest were Vimpel-Communications (VIP -2.5%), which had soared +9.8% the previous day, and Whirlpool (WHR -1.7%).
After being flat on Monday, the US Treasury Bonds ($USB 122.03 -0.28 -0.23%) resumed their gradual sell-off as yields are starting to lift. The 30-year (4.058 +0.35 +0.87%), 10-year (3.248 +0.24 +0.74%) and 5-year (2.237 +0.22 +0.99%) yields were a bit higher, which the Fed wants and needs if the $USD is to be given any protection here. The T-bill yield (0.070 -0.20 -22.22%) has fallen to almost zero as traders understand the capital market risks are so great at this point they will keep cash earning no return. I have never seen that before in America.
Wednesday in overseas equity markets, there was strong buying in Asia-Pacific markets, as the Nikkei 225 of Japan (9,799.6 +1.11%), Australia (4,695.8 +2.14%), and Hong Kong (21,241.6 +2.07%) were all much higher – but still not as high as just a couple days ago – but India (16,806.7 -0.90%) had a one-day sell-off.
At 6:11AM ET, France (3,779.1 +0.24%), Germany (5,667.0 +0.16%) and the FTSE 100 of London (5,143.1 +0.10%) were a tad higher as traders are awaiting the first of the stream of quarterly corporate reports.
In futures trading at 6:15am ET, the Euro (1.4729 +0.0020 +0.14%) was up and the $USD (76.375 -0.120 -0.16%) down a bit. The DJIA December futures (9690 +36 +0.37%), and Crude Oil futures (71.34 +0.46 +0.65%) were firm.
At 6:28am ET, the precious metals markets were trading higher. Spot (cash) trades were as follows: for gold (1047.21 +8.85 +0.85%), silver (17.46 +0.10 +0.58%), palladium (311 +4 +1.30%), and platinum (1332 +5 +0.38%).
It’s a bullish opening, perhaps. But let’s see how the day ends.
