Equities Higher on Weak Volume

[Excerpted from Bill Cara's Daily Report]

Pre-holiday Friday equity prices were higher, but volume was anemic. However, trading in the US Treasury bond market was clearly under the microscope as the 30-year bond (119.97 -1.75 -1.44%) was hammered for the second day in a row, reflecting terrible interest by foreigners.

Could the strong US Dollar ($USD 76.43 +0.46 +0.60%) and pumped up treasury yields be attributed to remarks of Fed Chairman Bernanke that the Fed, when they see improvement in the economy, might be ready to tighten its monetary policy and shrink its balance sheet to prevent inflation? I think so.

The 30-year yield (4.227 +1.33 +3.25%) is back well over 4.0% after closing Wednesday at 3.992; and the 10-year (3.384 +1.29 +3.96%, after closing Wed at 3.175) and 5-year (2.346 +1.21 +5.44%, after closing Wed at 2.162) were also much higher as bonds sold off following the Bernanke remarks.

Crude Oil lifted ($WTIC 72.25 +0.56 +0.78%), but Gold dropped ($GOLD 1,049.40 -5.90 -0.56%) a bit.

At the close of the week, the higher S&P 500 (1,071.49 +6.01 +0.56%), DJIA (9,864.94 +78.07 +0.80%) and NASDAQ Composite (2,139.28 +15.35 +0.72%) were seemingly not concerned by Earnings Season.

Pulled down by the stronger $US as well as a -3.0% loss to index heavyweight Potash (POT), the Toronto Exchange Composite (11,436.92 -47.59 -0.41%) took its first loss of the week. The Venture market (1,307.35 +1.17 +0.09%) made a very small gain for its fifth winning session in five this week.

As the $USD strengthened during the day, the Euro (147.31 -0.63 -0.43%), Yen (111.40 -1.70 -1.50%) and Pound (158.37 -2.39 -1.49%) crashed. The $USD seemingly was ready to burst out to new high ground as a result; however, in what appears to be a coordinated action, the Canadian Dollar also soared (95.97 +0.92 +0.97%). With POT down, the TSE Composite losing ground, $GOLD down almost -$6/oz $USD, traders were wondering why the Loonie was up ~+1.0% to a new 52-week high.

For the Cara 100 company stocks, the strongest were Broadcom on a snapback from Thursday’s loss, Linear Tech in a strong semi group, Tenaris steel and IBM, with expectations of strong earnings (BRCM +3.5% LLTC +3.5% TS +3.4% IBM +3.0%). In addition to Potash Corp, the losers were led by a couple of India companies, Tata Motors and InfoSys (TTM -5.1% INFY -3.5% POT -3.0%), reflecting weakness in the India market.

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 Friday’s close, France (3,799.6 -0.19%), Germany (5,711.88 -0.08%) and the FTSE 100 of London (5,161.87 +0.14%) were mixed, but gained a tad stronger later in the session.

In futures trading at the close Friday, the Euro (1.4707 -0.0068 -0.46%) and the DJIA December futures (9807 +60 +0.61%) got a bit softer as the day progressed, but Crude Oil futures (72.25 +0.11 +0.15) reversed and closed a bit higher.

At the close, the precious metals markets were quiet. Spot (cash) trades were as follows: for gold (1048.55 +1.27 +0.12%), silver (17.69 +0.09 +0.51%), palladium (316.0 +2.0 +0.64%) and platinum (1330 0 0.00%) were basically unchanged for most the day.