Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

In a week where we’ve taken a glance at the latest move higher in the 10-year note, and on the day we told you to “watch those interest rates” in the market wrap, Martin Goldberg at Financial Sense Online gives us a thorough examination of the 10-year Treasury.

That sure worked out nicely…

On a day when everyone thought that tech news would move the market, it turned out to be oil prices that made the difference. Sure, tech stocks got a bit of a bump, but the big moves of the day were in energy and commodity related stocks, and that move was downward.

The Dow Industrials gained 72 points (+0.7%) to 10629, the S&P 500 moved up 3 points (+0.3%) to 1227 and the Nasdaq gained 9 points (+0.4%) to 2153. You’ll read in the media that the Nasdaq closed at a new 2005 high. While that statement is technically true, it is rather misleading (and meaningless) as the market tanked the first week of the year. The real target number, on a closing basis, is the December closing high of 2178 set on December 30. The intraday high was on January 3rd, when the index reached 2192 before sinking to a close of 2152 that afternoon.

However, the broader market was weaker today, with the Russell 2000 falling 5 points (-0.7%) to 663. The Dow Transports gained 1.5%, the Utilities fell 1.1%, and bonds had another bad day, pushing the yield on the 10-year Treasury up to 4.18%. Watch those interest rates…

The market internals sent mixed signals today, as volume picked up, but breadth turned negative. There were more losers than winners on both exchanges, with advances/declines running about 4 to 5. Up/down volume, though, was positive, at just shy of 11 to 9 on the NYSE and 9 to 5 on the Nasdaq. New highs/lows still strong at 275/21 on the NYSE and 155/19 on the Nasdaq.

Winning groups included airlines (+5.0%), biotechs (+1.8%), semiconductors (+1.3%), health care products (+1.1%) and transportation (+1.0%). Commodity and interest rate related issues took the brunt of the hit: oil services (-2.6%), gold & silver stocks (-2.5%), natural gas stocks (-2.3%), oil stocks (-1.8%), steel stocks (-1.7%), REITs (-1.7%), commodities (-1.4%) and utilities (-1.0%).

Crude oil prices fell $2.21 to $57.80. The dollar held steady, the dollar index up 0.1% to 89.46, and the price of gold fell to under $420/ounce.

With crude oil prices falling by over $2.00 today, airline stocks are up big and energy stocks are getting smacked down hard. Oil stocks, oil services and natural gas stocks are down 2-3%. Bonds are also selling off, pushing the 10-year yield up to 4.19%. This move up in rates is dragging down the utilities and the REITs.

The market will likely start higher this morning on news of a somewhat benign CPI report and giddiness over Apple’s earnings.

On the CPI report, note that the drop in energy prices in May held things down. Also note that energy prices have gone right back up since then. Keep that in mind when the June and July reports come out, and they trumpet the number “excluding food and energy.” The article also says:

The report was likely to bolster betting on Wall Street that the Federal Reserve may soon call a halt to its year-long campaign of interest-rate rises.

At this point, I would disagree. As long as the market holds up and especially if long-term rates are rising, I think the Fed will continue to raise rates. They need to get rates up to a reasonable level so that they have some wiggle room if the economy slows, to encourage people to maybe start saving a little money (fat chance), to keep the dollar propped up, and they probably want to try and slow down the housing market. At least, that’s what they should be thinking…