Not Even Nasdaq Held Up This Time

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Includes: DIA, GLD, QQQ, SPY, UDN, USO, UUP, XLB, XLE, XLV
by: Bill Cara

[Excerpted from Bill Cara's Daily Report]

As it appears the Fed stepped in to support the falling US Dollar for the past two days, the Great Reflation took a step back. Energy (XLE -2.3%) and Basic Materials (XLB -2.1%) pulled the major equity indexes a bit lower Thursday. Not even NASDAQ was able to hold up.

At the closing bell, the S&P 500 (975.15 -4.47 -0.46%), the DJIA (9,070.72 -26.00 -0.29%) and the NASDAQ Composite (1,967.76 -7.75 -0.39%) were all down. As stated the past two days, the recent short-term S&P high follows a lower low, which hence must be tested soon, but not today with the futures looking firm Thursday morning.

Like Tuesday, Healthcare (XLV +0.5%) was the leading sector, pulled up by Hospitals ($RSH +2.0%). On the down side, once again, lower commodity prices, affected by a Fed supported US Dollar early in the day, negatively impacted Goldminers ($XAU -2.8%) and Oil Services ($OSX -3.3%).

The $USD (79.52 +0.64 +0.81%) was given solid support. The Yen (105.20 -0.56 -0.53%), Euro (140.44 -1.30 -0.92%), Pound (163.82 -0.52 -0.32%) and Canadian Loonie (91.70 -0.85 -0.92%) were losers against the Dollar. The Loonie and Euro are likely to strengthen Thursday.

The Crude Oil price on Wednesday was weaker ($WTIC 63.35 -3.88 -5.77%) following the surge in the Dollar. This morning, with the weaker Dollar, Crude is stronger (64.05 +0.70 +1.11% 07:38am ET), which is an indication the Great Reflation play is back on as equity prices get pushed up.

$GOLD on Wednesday, like Crude Oil, was hammered again, ($GOLD 930.00 -7.50 -0.80%), but this morning, like Oil, was recovering a bit in the spot market (932.60 +2.12 +0.23% 07:51am ET).

In the commodity price affected Canadian equity markets Wednesday, the Toronto Composite (10,455.33 -115.21 -1.09%) was down, but the Toronto Venture bourse (1,131.74 +3.63 +0.32%) eked out a gain.

The US long bond ($USB 116.47 +0.52 +0.44%) followed up Tuesday’s gain with another. For a second day, Treasury yields for the 30-year (4.503 -0.56 -1.23%) and 10-year (3.664 -0.24 -0.65%) were lower, but were higher for the 5-year (2.645 +0.46 +1.77%) instruments.

The Treasury bill yield softened (0.175 -0.10 -5.41%).

Earlier Thursday, Austral-Asian markets all closed higher: Japan’s Nikkei 225 (10,165.2 +0.51%), Shanghai (3,321.6 +1.69%), Hong Kong (20,234.1 +0.49%), Australia (4,195.9 +1.13%) and India (15,388.0 +1.41%) all lifted. Newswires from AP and others pumped out stories that corporate earnings have been “surprisingly” strong even though, in fact, they are down significantly Y/Y and at best management is merely hopeful in guidance reports.

The European bourses were also strong: the French CAC (3,401.2 7:50AM ET +1.06%), German DAX (5,297.4 7:35AM ET +0.51%) and FTSE 100 (4,601.6 7:35AM ET +1.19%) were all higher in the mid day.

Earlier Thursday morning in the spot (cash) market, gold, palladium, platinum and silver were a tad stronger: (932.60 +2.12 +0.23% 07:51am ET); (255.0 +1.0 +0.39% 07:50am ET); (1178 +10 +0.86% 07:30am ET); and (13.41 +0.09 +0.68% 07:51am ET), respectively. Prices have been unusually volatile in the past couple days.

The US equity market futures are higher at the moment (DJIA 9103 +56 +0.62% 07:37am ET. The Euro is also firm (1.4067 +0.0059 +0.42% 07:38am ET).