Weak Dollar Continues to Boost Commodities

[Excerpted from Bill Cara's Daily Report]

Thursday trading was remarkable in all markets: the 30-year US Treasury bonds collapsed (-1.16 -0.94% to 121.72), the US Dollar plunged ($USD -0.49 -0.64% to 75.97), Crude Oil soared ($WTIC +$2.12/bbl or +3.1% to 71.69), Gold soared ($GOLD +$11.30/oz or +1.1%) and equities soared (S&P 500 +7.90 +0.75% to 1,065.48).

At the close, the DJIA (9,786.87 +61.29 +0.63%) and NASDAQ Composite (2,123.93 +13.60 +0.64%) were higher at the onset of Earnings Season where easily beatable earnings results are being reported.

As commodity prices were much higher and the US Dollar much lower, the Toronto Exchange Composite (11,484.51 +134.63 +1.19%) and Venture market (1,306.18 +16.36 +1.27%) made gains for the fourth day in four this week.

The TSE Composite and Venture markets closed last week at 10,958 and 1,244 respectively, so Canadian stocks have taken advantage of the drop in the $USD from 77.05 to 75.97 over that time. But the Canadian Loonie has lifted from 92.58 to 95.05, which is an unsustainable move without the Canadian economy hitting the wall soon, unless Canada finds a new trade partner.

Since this continues to be a speculative US Dollar-based market.

Yesterday, the Euro (147.94 +1.08 +0.74%), Canadian Loonie (95.05 +0.85 +0.90%), Yen (113.10 +0.23 +0.20%) and Pound (160.76 +1.19 +0.75%) were all sharply higher against the USD.

For the Cara 100 company stocks, yesterday there was higher volume and only 12 losers. There were 24 of the 100 that hit 52-week highs. The strongest were Teck Corp (TCK) at +8.5% and Black and Decker (BDK) at +6.3%, while the weakest, by far, were Broadcom (BRCM) at -4.7% and Aetna (AET) at -4.4%.

Baird downgraded BRCM based on valuation, opining that current order strength is not sustainable relative to true end-demand.

AET was taken down by House of Representative lawmakers saying they might add to their health overhaul bill a tax on insurance providers' windfall profits.

After being up on Wednesday after a supposedly successful auction of 10-year bonds, yesterday was a totally different picture as the 30-year auction did not go well. Subsequently, Treasury yields jumped. The 30-year (4.094 +1.02 +2.56%) is back over 4.0%; the 10-year (3.255 +0.80 +2.52%) is now well over 3%; and 5-year (2.225 +0.63 +2.91%) yielding well over 2%.

The T-bill yield (0.060 0.00 0.00%) continues to trade at almost zero as traders understand the capital market risks are so great at this point they will keep cash earning no return.

Earlier Friday in Asia-Pacific equity markets there was mixed trading in the Nikkei 225 of Japan (10,016.4 +1.87%), Australia (4,754.5 -0.18%), Hong Kong (21,499.4 +0.03%) and India (16,642.7 -1.19%). The BSE 30 Sensex index of India is down on the week from 17,135 to 16,643, but the other markets are up. After having been closed since Sept 30 for the 60th anniversary of the Communist Party takeover of China, the Shanghai equity market got caught up to the other markets with a strong gain (2,911.7 +4.76%).

At 6:40AM ET, France (3,796.2 -0.28%), Germany (5,703.6 -0.23%) and the FTSE 100 of London (5,148.7 -0.12%) were showing a little weakness.

In futures trading at 6:42am ET, the Euro (1.4736 -0.0039 -0.26%), the DJIA December futures (9732 -15 -0.15%), and Crude Oil futures (71.32 -0.37 -0.52%) were all soft.

At 6:56am ET, the precious metals markets were quiet. Spot (cash) trades were as follows: for gold (1048.94 +1.66 +0.16%) and silver (17.63 +0.03 +0.17%).

Let’s see how the week ends.