Investors Ignore Risks, Chase Market Higher

by: Bill Cara

[Excerpted from Bill Cara's Daily Report]

Déjà vu; Wednesday seems like the second half of 1999 when investors ignored the risks and chased market prices higher. Except for Shanghai equities, the world is awash in green arrows Wednesday morning.

At the close in New York Tuesday, the S&P 500 (1,052.63 +3.29 +0.31%), DJIA (9,683.41 +56.61 +0.59%) and NASDAQ Composite (2,102.64 +10.86 +0.52%) all had a positive session. Like Monday, following a brief sell-off, traders lifted their bids through to the closing bell.

The Toronto Exchange Composite (11,495.83 +163.79 +1.45%) and Venture market (1,269.35 +15.52 +1.24%) were also reflective of the reaction against the early sellers, and the bids coming into Potash Corp, Crude Oil ($WTIC 71.30 +1.93 +2.78%) and $GOLD (1,007.20 +8.70 +0.87%) took these commodity-sensitive markets much higher on the day. Precious metals are even higher Wednesday morning.

The US Dollar ($USD 76.47 -0.14 -0.18%), appearing for a while like it might lift, dropped lower again, for its 7th straight daily loss. The Yen (110.65 +0.84 +0.76%), Euro (146.70 +0.09 +0.06%), and Canadian Dollar (93.47 +0.25 +0.27%) closed higher against the USD, but this was a Yen:Dollar spectacle. The Pound (164.88 -0.01 -0.01%), like the Euro, was almost flat.

The US treasury market was again in turmoil as the US long treasury bond dropped in price as yields lifted on the 30-year (4.262 +0.47 +1.12%), on the 10 year (3.452 +0.46 +1.35%), and on the 5 year paper (2.392 +0.42 +1.79%). The T-bill yield also dropped (0.125 -0.05 -3.85%), which indicates that traders are prepared to park cash without return, a sign of perceived market risk.

As to the equity sectors in NY Tuesday, the leaders were Basic Materials and Industrials (XLB +2.2% XLI +1.2%). Healthcare was a loser (XLV -0.9%), with all the industry groups, like biotech, drugs, products, and services) pulling back. On the plus side were, despite higher Crude Oil prices, the Airlines ($XAL +3.8%) and Pulp & Paper ($DJUSPP +3.1%).

For the Cara 100 company stocks on Tuesday, Canada’s Potash Corp and Silver Wheaton (POT +5.7% SLW +5.4%) were the big winners, while the big losers were Brunswick Corp and Best Buy (BC -6.0% BBY -5.2%). There was huge selling in BBY (+216% adsv).

In international equity markets earlier Tuesday, prices were hot everywhere but Shanghai (2,999.7 -1.12%). In the other Austral-Asian markets; Hong Kong (21,402.9 +2.57%), and Australia (4,652.8 +2.32%) and India (16,677.0 +1.35%) made solid gains. Even the Nikkei 225 of Japan (10,270.8 +0.52%) was higher but this week has been lagging the gains in the winning regional markets.

As for the European stocks, the mood was also hot Wednesday morning. France (3,804.6 8:12AM ET +1.40%), Germany (5,681.0 8:12AM ET +0.92%) and the UK (5,114.9 8:11AM ET +1.44%) were, like most of Asia-Pacific, lifting on the perception that economic news is rapidly improving.

Certainly the precious metals market is hot and getting hotter Wednesday morning: spot (cash) market prices are as follows for gold (1017.58 +8.80 +0.87% 08:27am ET), silver (17.25 +0.19 +1.11% 08:28am ET), platinum (1334 +8 +0.60% 08:16am ET) and palladium (294.0 +1.0 +0.34% 08:17am ET).

The Euro has lifted a tad Wednesday morning(1.4670 +0.0012 +0.08% 08:15am ET),

In the other futures market Wednesday morning, Sept Crude Oil (71.00 -0.30 -0.42% 08:15am ET) is down, and the DJIA futures looking to open higher (9705 +43 +0.45% 08:15am ET).