Markets Drop Then Rebound

[Excerpted from Bill Cara's Daily Report]

The US equity market indices dropped quickly in a sell-off that lasted for 30 minutes, then were able to reverse and move higher through most of Thursday.

At the closing bell, the S&P 500 (1,030.98 +2.86 +0.28%), DJIA (9,580.63 +37.11 +0.39%) and NASDAQ Composite (2,027.73 +3.30 +0.16%) were up marginally on the day, but technical momentum indicators continued to build on the downside.

Unlike NY, where stories were re-floated of the Boeing Dreamliner actually flying some time soon gave a rationale for higher prices, the Toronto Exchange Composite (10,933.96 +21.79 +0.20%) and the Toronto Venture Board (1,182.15 -3.94 -0.33%) took longer to get into gear and closed almost flat on the day. Of course, it was Great Reflation play day, so the Canadian Looney was expected to strengthen and it did (91.94 +0.91 +1.00%) against the USD.

So, as the US Dollar ($USD 78.06 -0.56 -0.71%) dropped against all major currencies, which is does whenever the Interventionists pump up equities, the Euro (143.47 +0.96 +0.67%), Yen (106.92 +0.82 +0.77%), and British Pound (162.67 +0.26 +0.16%) also soared.

Even $GOLD (948.20 +2.50 +0.26%) was flat, although the Crude Oil price did drop a bit ($WTIC 72.70 +1.27 +1.78%) made strong gains.

In NY, The Financials (XLF +1.0%) and Industrials (XLI +0.9%) led the sectors on the up side, while Energy (XLE -0.3%) was a loser despite the Crude Oil price rising.

Among industry groups, Pulp and Paper, Computer Storage, and Goldminers ($DJUSPP +4.0% $DDX +2.4% $XAU +1.9%) were strongest, while Biotech and Airlines ($BTK -2.2% $XAL -1.5%) were weakest.

Earlier Friday, the Austral-Asian markets were higher except for China (2,860.7 -2.91%) and China-inspired (ie, large cap listings] Hong Kong (20,098.6 -0.71%). Japan’s Nikkei 225 (10,534.1 +0.57%), India (15,922.3 +0.90%), and Australia (4,495.9 +0.85%) were higher, but over the week, only India showed any inclination for buying.

European stocks were soaring this morning. France (3,700.9 6:43AM ET +1.44%), Germany (5,545.9 6:43AM ET +1.38%) and the UK (4,918.6 6:43AM ET +1.01%) were all up over +1%.

The biggest winners of the Cara 100 company stocks yesterday were Boeing. Royal Bank of Canada, and Dell Computer, the latter two on good quarterly results (BA +8.4% RY +7.5% DELL +6.7%). The losers were Teekay LNG and Diageo (TGP -5.0% DEO -3.3%). The Diageo CEO says he is wanting to acquire the Moet champagne brand. Luxury products are on the outs, so maybe this is a good time to be a buyer. The L-Oriel CEO made some insightful comments in this regard.

If you download the shortened version, put the article headline into your browser and you will find the whole article picked up by Google (GOOG).

With the return of the Great Reflation play, along with a sinking $USD was a lower long bond ($USB 119.08 -1.73 -1.44%). That ended three straight winning sessions, which followed last Friday’s big loss.

Treasury yields lifted for the 30-year (4.230 +0.30 +0.71%), 10-year (3.462 +0.24 +0.70%) and 5-year (2.485 +0.38 +1.55%) instruments. The Treasury bill yield dropped again (0.140 -0.05 -3.45%) to a dangerously low level.

In precious metals trading earlier Friday morning, prices were continuing to gain from Thursday mid morning. The spot (cash) market was as follows for: gold (951.44 +2.76 +0.29% 06:51am ET); palladium (282 -2 -0.70% 06:32am ET); platinum (1237 +5 +0.41% 06:32am ET); and silver (14.46 +0.14 +0.98% 06:51am ET), respectively. Silver, so far, is having a winning week.

Earlier Friday morning, Sept futures prices were as follows for the Euro [1.4348 -0.0024 -0.17% 06:39am ET], and DJIA [9597 +30 +0.31% 06:39am ET], and for Oct Crude Oil [73.24 +0.75 +1.03% 06:39am ET]. The Crude Oil price has backed off a bit in the past couple hours, but is still up on the day.

Gold is moving quickly higher. Intel (INTC) has made a very positive report.