Risk Taking Returns to the Markets

[Excerpted from Bill Cara's Daily Report]

Following a choppy market session, with traders focused on the US treasury auction Wednesday and Thursday, the falling $USD, and the lift in crude oil prices into the 70’s, there is a sense that risk-taking and speculation is returning to markets.

At the close, the DJIA (8,763.06 -1.43 -0.02%) was flat, but the S&P 500 (942.43 +3.29 +0.35%) and NASDAQ Composite (1,860.13 +17.73 +0.96%) had made gains.

The Toronto Composite (10,547.86 -1.26 -0.01%) was also flat whereas the Toronto Venture Board (1,143.96 +12.14 +1.07%) made gains.

Earlier Wednesdasy, equity prices were significantly higher in Austral-Asian markets, including Japan’s Nikkei 225 (9,991.49 3:00AM ET +2.09%), Hong Kong (18,785.66 5:59AM ET +4.03%), Shanghai (2,816.247 3:00AM ET +1.02%), Aussie All Ordinaries (4,016.300 2:47AM ET +2.10%), and India’s BSE 30 (15,466.81 6:28AM ET +2.25%).

In the past few hours, the European equity bourses have been booming as well. The French CAC (3,365.25 6:43AM ET +2.08%), German DAX (5,119.43 6:28AM ET +2.43%) and UK FTSE 100 (4,498.29 6:28AM ET +2.12%) are up over +2% on the day.

In US trading Tuesday, the Basic Materials (XLB +1.8%) and Energy (XLE +1.0%) sectors were the leaders, showing that traders were favoring the commodity plays. Consumer Staples (XLP -1.0%) and Healthcare sector (XLV -0.5%) were anchors on the major indexes.

The industries that performed best were Semi-conductors ($SOX +4.5%) and Oil Services ($OSX +2.2%). The REITs ($DJR -0.4) were losers.

Semi-conductors improved after Texas Instruments (TXN) announced positive guidance.

The Cara 100 company stocks that lifted most yesterday were Brunswick Corp (BC +6.0%), Broadcom (BRCM +5.5%), SanDisk (SNDK +5.5%) and Dow Chemical (DOW +5.4%). Broadcom said it would reassess its unsolicited bid to acquire Emulex.

Vimpel-Communications (VIP -4.8%) and Kookmin Bank (KB -3.7%) led the Cara 100 losers.

The $USD plunged again Tuesday (79.82 -0.93 -1.16%) against all major currencies. The Euro (140.66 +1.69 +1.22%), Yen (102.70 +1.18 +1.16%), Pound (163.07 +2.54 +1.58%) and Cdn Dollar (90.60 +1.00 +1.12%) made significant gains against the USD.

In a choppy US bond market, the US long Bond lifted again ($USB 115.08 +0.20 +0.18%). The yield also (4.653 +0.18 +0.39%). The yields for 10-year (3.858 -0.31 -0.80%), and 5-year (2.854 -0.75 -2.56%) dropped as those bond prices lifted. Treasury bill yields were largely unchanged (0.175 +0.05 +2.94%).

Tuesday, $GOLD was showed signs of life (954.90 +3.10 +0.33%). This morning, it was looking stronger too. The spot (cash) market prices for precious metals were as follows: Gold (961.55 +3.98 +0.42% 06:44am ET); Palladium (257 +4 +1.58% 06:44am ET); Platinum (1237 +13 +1.06% 06:52am ET); and Silver (15.4000 +0.1700 +1.12% 06:43am ET).

Dollar futures were quiet earlier today. The Euro was a tad higher (1.4080 +0.0003 +0.02% 06:30am ET).

Crude Oil futures were also lifting (71.04 +1.03 +1.46% 06:16am ET), now above the 70 level that many traders figured would send an economic warning.

US equity futures for the DJIA were priced higher, in line with other international markets today (8850 +108 +1.23% 06:30am ET).

There will be lots of chatter about the Fiat-Chrysler deal.

Home Depot (HD) has reported optimistic guidance, which like Texas Instruments yesterday is having a positive impact on prices.

Comments

[Prudent Man...:]

Doesn't measure the magnitude of the risk compared to the highly questionable gains.

The performers on financial t.v. are once again talking about a nascent recovery. They, like a stopped clock being right twice a day, and we are in a recovery which, show nothing but wishful thinking with little to substantiate what is going to grow corporate income that, if improves, will be overly taxed thus expanding government ownership at the cost of private property.

We have our choices. If you see higher interest rates fixed income (if the Fascists don't continue to abrogate the Law of Contracts) will compete with government controlled equity income. If you see lower interests and continued deflation cash will be worth more than debt or equities with less risk.
All those who are attempting to sell their positions with complex strategies are making the simple complex.

I keep reminding myself the so-called, media manufactured "smartest guys in the room" on Wall Street were greedy idiots. So much for great intellect with stupid execution. Greed blinds rationale, a fact we all must deal with and control to stay in the game over the long haul.

Jun 10 11:24 AM

[Prudent Man...:]

Risk never left. Doing nothing is a risk. Life is a risk. Unfortunately, we don't know the risks and in most cases don't know the magnitude. Options help insofar as magnitude is concerned.

Jun 10 03:33 PM

[BlueOkie:]

How do you define risk? Is it volatility?

Jun 11 08:56 AM