Dollar Up, Commodities Down

[Excerpted from Bill Cara's Daily Report]

The commodity price sensitive US stocks were hammered Wednesday after the $USD rallied hard, knocking down the prices of Crude Oil ($WTIC 66.12 -2.43 -3.54%) and Gold ($GOLD 964.00 -17.50 -1.78%). It’s not surprising then that the losing sectors were Energy and Basic Materials (XLE -3.85%, XLB -3.43%).

At the close, the DJIA (8,675.28 -65.59 -0.75%), S&P 500 (931.76 -12.98 -1.37%) and NASDAQ Composite (1,825.92 -10.88 -0.59%) were down. No sectors were down. Some call it profit-taking; others call it the Interventionists clearing out the stops before trying to move the market higher. All of us, however, appreciate the need to actively trade this market.

The Toronto Composite (10,290.12 -298.67 -2.82%) and the Toronto Venture Board (1,107.96 -33.78 -2.96%), which are dependent on strong commodity prices, sold off even more sharply.

Among the very few industry groups on the rise were the Biotechs ($BTK +3.17%). The many losers were led south by the Goldminers, NatGas, Oil and Semi-conductors ($XAU -5.38%, $XNG -4.26%, $XOI -4.22% and $SOX -2.21%).

There were 11 Cara 100 company stocks that lifted, led by Starbucks, Wal-Mart, Myriad Genetics and McDonalds (SBUX +3.24%, WMT +1.90%, MYGN +1.17%, MCD +1.01%). The 89 losers were led south by the commodity players and some of the most volatile ones: Mobile TeleSystems, Teck Corp, Kinross, Brunswick Corp, Embraer and Suncor (MBT -9.10%, TCK -8.38%, KGC -8.06%, BC -7.97%, ERJ -7.91%, SU -7.85%).

The $USD plunged on Tuesday (78.39 -0.82 -1.03%) but soared on Wednesday (79.52 +1.12 +1.43%). Most major currencies plummeted against the USD: Euro (141.58 -1.53 -1.07%), British Pound (163.13 -2.72 -1.64%), and Cdn Loonie (90.03 -2.46 -2.66%). The Yen (104.20 -0.30 -0.29%) was also down.

Earlier Thursday, equity prices were weak in Austral-Asian markets. Japan’s Nikkei 225 (9,668.96 -72.71 -0.75%), Shanghai (2,767.2 -11.4 -0.41%), Hong Kong (18,502.7 -73.7 -0.40%), Aussie All Ordinaries (3,932.5 -76.8 -1.92%) and India’s BSE 30 (18,502.7 -73.7 -0.40%) all took a rest.

At this point Thursday, with a $USD weakening, the European equity bourses are lifting. The French CAC (3,332.2 6:29AM ET +0.68%), German DAX (5,105.1 6:15AM ET +1.00%) and UK FTSE 100 (4,404.5 6:15AM ET +0.48%) were trading higher, awaiting a “positive surprise” in the US Employment Report on Friday.

In a volatile US bond market, the US long Bond ($USB 117.67 +0.91 +0.78%) managed another gain. The yields were lower as follows for 30-year (4.445 -0.44 -0.98%), 10-year (3.551 -0.93 -2.55%), and 5-year (2.437 -0.76 -3.02%). Treasury bill yields remained at 0.130.

Spot (cash) market prices earlier today were as follows: Gold (965.62 -1.13 -0.12% 06:30am ET), Palladium (243.0 +3.0 +1.25% 06:13am ET), Platinum (1245 +10 +0.81% 06:16am ET), and Silver (15.16 -0.19 -1.24% 06:31am ET).

Traders are being advised by pundits that with Chrysler coming out of bankruptcy and GM’s storm clouds soon to be removed, there would soon be more sales (???) and demand for platinum and palladium metal. This situation bears watching.

Dollar futures are lower and the Euro higher (1.4176 +0.0043 +0.30% 06:16am ET).

Crude Oil futures were a tad softer earlier today (67.22 +1.10 +1.66% 06:02am ET).

With the lower $USD, US equity futures for the DJIA were showing firmness this morning (8715 +46 +0.53% 06:17am ET).

Comments

[MadScientist:]

Nice synopsis, Bill.

I'm staying long on commodities for now, and took yesterday as an opportunity to add on to my holdings in DXO and AGQ.

It is hard to see how we can avoid continued depreciation of the $USD in the near-term, unless the rest of the world currencies fall as fast or faster. It looks like the ship's course is set for now, and while I'm not happy, I will sail with the wind rather than against it.

Disclosures:

Long DXO,UGL,AGQ,GDX,FCG
Short on $USD (through UDN)

Jun 04 12:45 PM