Tough Week for the Equity Markets

[Excerpted from Bill Cara's Daily Report]

Along with Shanghai, the European and North American equity markets had a tough week. Only a final 30-minute rally attempt (or pre-weekend short squeeze) served to powder the face of this pig. The rest of the world seems to be oblivious to credit market issues that threaten to butcher equity markets at any point.

At the closing bell on Friday in New York, the S&P 500 (1,004.09 -8.64 -0.85%), the DJIA (9,321.40 -76.79 -0.82%) and the NASDAQ Composite (1,985.52 -23.83 -1.19%) closed lower, but the usual ‘buy the dip’ traders did not appear.

Following a very strong +1.55% rally day on Thursday, the Toronto Exchange Composite (10,848.01 +22.45 +0.21%) had another up day. The Toronto Venture Board (1,193.42 -7.08 -0.59%) pulled back a tad after rallying +1.22% the previous day.

All sectors and industries in the US equity market were flat or lower on Friday, largely due to an early morning sell-off that followed a disappointing Consumer Sentiment survey result.

The biggest losing sector was Basic Materials (XLB -2.5%), directly due to Papers ($DJUSPP -3.8%), which finally gave up a lot of ground.

For Cara 100 company stocks, there were just 9 winners, and the biggest were Research In Motion (RIMM +1.5%) and AmBev (ABV +1.2%). For the losers, there was a lot of selling, but not excessive damage in any one stock. Garmin (GRMN -6.6%), JC Penny (JCP -6.1%) and Brunswick Corp (BC -4.3%) were the worst hit.

After three days of losses, the US Dollar firmed ($USD 78.81 +0.40 +0.51%), the Yen (105.35 +0.52 +0.50%) tightened up even faster, as risk-takers disappeared. The Euro (142.04 -0.84 -0.59%), British Pound (165.39 -0.39 -0.24%) and Canadian Dollar (91.01 -1.02 -1.11%) dipped against the $USD.

With the stronger $USD, the contracts for Crude Oil ($WTIC 69.60 -2.88 -3.97%) and $GOLD (948.70 -6.20 -0.65%) stumbled.

The US long bond ($USB 118.78 +0.59 +0.50%) gave back some of the previous day’s gains. Treasury yields lifted for the 30-year (4.406 -0.14 -0.32%), 10-year (3.558 -0.33 -0.92%) and 5-year (2.498 -0.59 -2.31%) instruments. I project that comes Saturday. The Treasury bill yield (0.170 +0.05 +3.03%) dipped.

On Friday, the Austral-Asian markets closed mixed, but that was prior to the US Consumer Sentiment data being published. Japan’s Nikkei 225 (10,597.3 Aug 14 +0.76%), Hong Kong (20,893.3 Aug 14 +0.15%), and Australia (4,465.1 Aug 14 +0.64%) were up, but Shanghai (3,047.0 Aug 14 -2.98%), and India (15,411.6 Aug 14 -0.69%) stumbled.

Later in the day, definitely impacted by the mood shift in America, the French CAC (3,495.3 Aug 14 -0.83%), German DAX (5,309.1 Aug 14 -1.70%) and FTSE 100 (4,714.0 Aug 14 -0.87%) headed south for the weekend.

The spot (cash) market at the close on Friday was as follows for: gold (946.85 -9.23 -0.97%); palladium (272 -1 -0.37%); platinum (1256 -14 -1.10%); and silver (14.69 -0.35 -2.33%), respectively.

Euro:Dollar futures (1.4170 -0.0094 -0.66%) dipped.

Sept. Crude Oil futures (67.510 -3.095 -4.59%) were big losers on the day.

US equity market futures were lower (9321 -67 -0.72%).