Traders Still Unwilling to Take on Risk

[Excerpted from Bill Cara's Daily Report]

Oil prices spinning, mining companies shutting down mines, the grounding of Fedex, the Detroit Big 3 reined in by a government ‘czar’, the crash of the Illinois Governor; it’s enough to make your head spin. What happened to the good old days when we mostly talked about how Martha might get along in prison, and, you know, when corporate earnings were the prime driver of market prices?

At the end of the session Tuesday, the DJIA (-242.85 -2.72% to 8691.33), S&P 500 (-21.03 -2.31% to 888.67) and NASDAQ Composite (-24.40 -1.55% to 1547.34) gave back part of Monday’s gains. The Toronto Composite was down as well (-169.56 -1.98% to 8397.56), while the Venture Board was little soft too (-12.16 -1.74% to 686.02).

Some traders were calling it just a needed break from the usual ballooning of prices we’ve seen in four of the past five days and seven of the past nine, and that today will be another good one – although the banks and broad markets in Europe are not showing us much at this point.

Earlier today, the Asia-Pacific equity markets were solidly higher. Japan (+3.15% to 8660.2), Australia (+1.12% to 3573.3), Shanghai (+2.03% to 2079.1), Hong Kong (+5.59% to 15577.7), and India (+5.37% to 9654.9) were well up.

The European bourses at 8:15am ET were flat: the French CAC, German DAX and UK FTSE were +0.11%, +0.42% and -0.26%. Traders there are still unsettled with the banks.

In America, a government "car czar" with the power to force U.S. automakers into bankruptcy will be given authority to lend $15 billion in emergency loans to the Detroit Big 3, but apparently Ford (F) doesn’t like the conditions.

In the U.S. at this hour, the DJIA futures are up +79 to 8799. Crude Oil futures are a bit stronger again (for the third straight morning this week) at 44.01, and precious metal prices are a bit higher, especially gold (to 789.41) and silver (to 10.01), while palladium (175.5) and platinum (815.5) are quiet.

Tuesday’s weakness in NY was led by the Financials (XLF -4.0%), whereas the Energy (XLE +1.0%) was the only sector that lifted.

While there were several weak industry groups, the notables were the ones that had gained most the previous day: REITs ($DJR -8.4%), Banks ($BKX -5.4%), Retailers and Broker-Dealers ($RLX and $XBD, which both dropped -3.0%).

Semi-conductors ($SOX +4.8%) gained most, while the Goldminers ($XAU +0.8%) were up a tad.

Fedex (FDX -14.5%) plunged on massive volume. The loss was the greatest in 20 years. After the close on Monday, FedEx announced that the company was dropping its 2009 fiscal year projections from $4.75- $5.25 per diluted share to $3.50-$4.75 per diluted share.

For the Cara 100 company stocks, volume was quite low again. The leaders were Votorantim Celulose (VCP) +12.3%, Westpac Banking (WBK) +12.2%, Linear Technology (LLTC) +6.5%, and Brunswick (BC) +5.8%. The losers were led by Fisrt Solar (FSLR) -13.1%, Electronic Arts (ERTS) -11.5%, optionsXpress (OXPS) -8.5%, and Royal Bank of Canada (RY) -7.5%.

The U.S. long bond ($USB) gained +0.67% to 134.36. Yields on the 30-, 10- and 5-year bond dropped to very low levels at 3.075%, 2.669%, and 1.619%. The yield on the T-Bill is now at 0.010%, which is practically nil, indicating that traders are extremely nervous and unwilling yet to take on risk. The continuing evidence of low volume in equity markets confirms that.

These are interesting days as money and politics have joined at the hip.

Comments

[Takayama:]

Global asset de-leveraging in progress. The Nikkei went from 38000+ to 12000-. The Dow should move from 14000 to 4200 in X years.

2008 Dec 11 10:32 PM

[Takayama:]

Global asset de-leveraging in progress. The Nikkei went from 38000+ to 12000-. The Dow should move from 14000 to 4200 in X years.

2008 Dec 11 10:33 PM