Strong Morning Gives Way to Selling

[Excerpted from Bill Cara's Daily Report]

A strongly positive morning session on Wednesday gave way to renewed selling of equities as major averages slumped after the release of the FOMC minutes, and traders began counting down the days to the 4th of July holiday. While most indices eked out small gains (S&P +0.65%), one has to wonder what catalyst could vault the index meaningfully above the 960 area, or substantially below S&P 880.

At the close, S&P 500 (900.94 +5.84 +0.65%) and the NASDAQ (1,792.34 +27.42 +1.55%) reflected the internal market strength, while the DJIA (8,299.86 -23.05 -0.28%) closed with a small loss because of Boeing (BA-5.8%). Also noted in the Cara 100 losers on the day were some other big name DJIA components.

The Toronto Composite (10,100.93 +204.21 +2.06%) and the Toronto Venture Board (1,090.66 +16.48 +1.53%) had strong moves higher.

Earlier in the day Thursday, Austral-Asian markets were generally strong however there were pockets of weakness. Japan’s Nikkei 225 (9,796.1 +2.15%), Hong Kong (18,275.0 +2.14%), and Aussie All Ordinaries (3,851.5 +1.30%) were strong, while Shanghai (2,925.0 +0.09%) and India’s BSE 30 (14,380.0 -0.30%) were not.

At this point on the European equity bourses, prices are soft. The French CAC (3,155.8 5:59AM ET -0.91%), German DAX (4,778.2 5:44AM ET -1.19%) and UK FTSE 100 (4,253.8 5:45AM ET -0.61%) were all down.

In US trading Wednesday, all sectors and almost all industries were higher because of the rocket boost at the start of the session caused by positive economic data plus news of a massive credit expansion program by the European Central Bank. The best performing sectors were Technology, Financials and Basic Materials (XLK+1.4% XLF+1.2% XLB+1.0%), while the laggard was Consumer Staples (XLP +0.3%).

The leading industry groups were Hospitals and Goldminers ($RXH+3.7% $XAU+2.9%). On the losing side were Pharmaceuticals, Oil Services and Big Oil ($DRG-0.08% $OSX-0.03% $XOI+0.2%).

Cara 100s that gained the most were Oracle, China Telecom and Kinross Gold (ORCL+7% CHA+5.6% KGC+5.2%). Wednesday’s biggest loser by far was Boeing, with follow-through selling on concerns the Dreamliner 787 cannot yet be test flown (BA -5.8%).

The $USD followed through on the recent pattern of up-down-up days with a gain (80.42 +0.58 +0.73%). The Yen (104.50 -0.55 -0.52%), Cdn Dollar (86.45 -0.50 -0.58%), the Euro (139.29 -1.52 -1.08%), and British Pound (164.06 -0.50 -0.30%) were all weak against the Dollar as the huge Treasury offering of 5-year notes went well. Today will be the huge offering of 7-year notes.

In US bond market trading, the US Treasuries followed up three days of gains with a small loss. Wednesday, the US long Bond dipped ($USB 116.56 -0.64 -0.55%), while the yields for 30-year (4.425 +0.52 +1.19%), 10-year (3.685 +0.45 +1.24%), and 5-year (2.701 +0.16 +0.60%) all lifted for the first time since last Thursday. Treasury bill yields were soft (0.180 -0.15 -7.69%).

After a $10 rocket move in the morning, $GOLD traded down the rest of the day, but still closed with a solid gain (931.60 +6.20 +0.67%). That was not much, but enough to spur more buying among the miners ($XAU +2.9%).

With the stronger $USD, Crude Oil was weaker (68.67 -0.57 -0.82%).

The Euro was a tad stronger early this morning (1.3942 +0.0023 +0.17% 05:45am ET), but still lower than the past couple days.

Spot gold, palladium, platinum and silver are presently quiet at: (933.65 -1.80 -0.19% 05:57am ET); (235.0 +1.0 +0.43% 05:56am ET); (1173 -1 -0.09% 05:57am ET); and (13.90 -0.04 -0.29% 05:57am ET), respectively.

US equity futures for the DJIA are indicating a flat opening this morning (8257 +1 +0.01% 05:44am ET).