Markets Shake Off Bad Economic News

[Excerpted from Bill Cara's Daily Report]

The US equity market, flushed with buying momentum from Europe, opened with a significant gap, ignoring a deplorable GDP report, and then lifted through a ‘no change’ FOMC statement before closing well off the highs but at the same levels as at the point the Fed reported.

At Wednesday’s close, the DJIA (8,185.73 +168.78 +2.11%), S&P 500 (873.64 +18.48 +2.16%), and NASDAQ Composite (1,711.94 +38.13 +2.28%) were much higher across the board.

Clearly, there was a change in sentiment although many technical analysts are still unconvinced the rally was anything more than a final weeks blow-off of prices in advance of a significant pull-back.

The Toronto Composite (9,416.31 +68.28 +0.73%) and the Toronto Venture Board (1,013.97 +20.87 +2.10%) tagged along for the ride. The Venture Board caught bids after Europe showed capital flowing into the Euro and commodities.

Earlier Thursday, trading in the major international equity markets also showed higher prices, although China was quiet: Japan’s Nikkei 225 index (8,828.3 +3.94%), India (closed), Australia’s All Ordinaries (3,744.7 +2.26%), Hong Kong (15,521.0 +3.77%), and Shanghai (2,477.6 +0.38%).

In Europe, at mid day, prices were very strong, up over +2%: France (3,180.2 6:22AM ET +2.03%), Germany (4,819.5 6:07AM ET +2.44%) and UK (4,277.1 6:07AM +2.09%).

In NY Wednesday, the strongest sectors were Financials (XLF +4.3%) and Industrials (XLI +3.3%). That’s a net gain over two days for XLF of just +1.2%. Yesterday, Banks ($BKX +5.0%), which puts them into a two-day gain of +2.1%. Hospitals ($RXH +6.5%) was still the strongest industry group, for a gain of +11.3% this week so far, probably due to Swine Flu concerns. The weakest sectors were Healthcare (XLV +0.4%) and Utilities (XLU +0.7%), laggards but still winners.

Goldminers were stronger ($XAU +2.75%), and may continue higher as the Euro lifted Wednesday (132.58 +1.10 +0.84%) and is strong in the futures at about 6:15am ET this morning (1.3316 +0.0028 +0.21%). Wednesday, the $USD fell again (84.58 -0.61 -0.71%). The Yen (102.55 -1.17 -1.13%) was a significant loser against the USD, whereas the Pound (147.75 +1.40 +0.96%) and Cdn Loonie (83.06 +1.09 +1.33%) were sharply higher against the US Dollar.

For the Cara 100 companies, the winners [86/100] were led Brunswick Corp, ICICI Bank of India and Kookmin Bank of Korea (BC +18.0%, IBN +14.7%, and KB +10.0%). The worst of the losers were Aetna, Nike and SAP Software (AET -10.3%, and NKE and SAP -4.7%). There was not much volume, but the table shows that the huge volume was in two stocks [AET +313% avg vol) and SAP (+242% avg vol)] that were significant losers, which traders call a ‘tell’.

US Treasury yields lifted and bond prices pulled back as the FOMC decided against expanding the Fed balance sheet, leaving the market in a position to buy Treasury paper. The 30-year (4.026 +0.71 +1.80%), 10-year (3.096 +0.94 +3.13%), and 5-year (2.019 +0.92 +4.77%) yields lifted above the important 4, 3 and 2 handles, and the long bond ($USB 122.75 -1.06 -0.86%) sank below the important 124 support. The T-Bill yield dropped to 9½ basis points again, probably as the FOMC was required buy T-Bills from the Banks to liquefy them.

Crude Oil ($WTIC 51.825 +0.855 +1.69%) was lifting at about 6:30am ET this morning as capital continued to flow into commodities. Oil Wednesday had closed higher (50.97 +1.05 +2.10%), so the 50 level may hold up.

$GOLD futures moved up with a stronger Euro (897.90 +4.50 +0.50%), which was a partial recovery of the loss on Tuesday (-13.50) and Monday (-6.10).

Spot (cash) market prices at about 6:25am ET were on the weak side, and apparently under pressure: Gold (889.36 -5.04 -0.56% 06:25am ET), Palladium (220.0 +1.0 +0.46% 06:17am ET), Platinum (1108.5 +4.5 +0.41% 06:15am ET), and Silver (12.603 -0.088 -0.69% 06:24am ET). The price is back close to technical support levels.

Economic data expected this morning includes Personal Income and Spending, Employment Cost Index, Weekly Jobless Claims and Chicago PMI.

Stock futures were stronger Thursday morning (8272 +147 +1.81% 06:18am ET). Two hours later, it was up +106.