Thursday, July 03, 2008

Daily Market Recap 07/03

Posted daily, just after the close. If you appreciate the effort, don't forget to rec or bookmark the source; JoshSebastian.BlogSpot.com. Enjoi

OK, so the market opened drunk today and stayed that way. People seemed to be selling anything with a bid. S&P down, gold down, oil down, alt energy down, financials up!?!? Who are these people? Basically everything was everywhere and I almost don't want to acknowledge the ignorance except to be aware of it. If we close up, look for buyers to be waiting with cash-in-hand on Monday (with the exception of terrible news or an attack on Iran).

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Interest Rate Chicken was today won by the EU - who hiked from 4% to 4.25%. If you're keeping score at home; that's India, Taiwan, Mexico, Poland and the EU. Again, price inflation cannot be global. The U.S. interest rate is basically being lowered by default.

The U.S. led into the credit crunch. The EU then caught the flu. Now that the EU is leading the rate hike charge, it should be interesting to see what transpires. Will a rate(s) hike cripple EU growth? I seriously doubt it. Other than Spain and the UK, it seems that Europe missed this credit / housing mess. If you have rising prices and a decent economy, the proper move is to hike and defend your people from inflating prices - created by the global market. The EU cannot make gas cheaper globally...it can however make it cheaper for it's people. Which in turn makes it more expensive for others. Remember...The U.S. interest rate is now being lowered by default.

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Unemployment - Payrolls fell by 62,000. Unemployment at 5.5% (only, really?). Somehow the futures jumped on this news. (Update: U.S. stock-index futures gained on speculation the Federal Reserve will hold off raising interest rates after a government report showed a decrease in jobs for a sixth straight month.) Again, there are fundamentals and there is sentiment. Notice the difference? How does more unemployment = equity growth? Ignorance.

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The Dollar - Also spiked upwards (~72.4) on the jobs data. I'm not sure what the assumption is here, but it can only be temporary at best. The dollar also spike because the EU signaled it would not raise rates further. So make sure you understand this. There was already one EU rate hike baked into the dollar. So today when we got word of no future EU rate hikes the dollar spiked....even though the monetary effect has not yet hit the dollar. In relation to the EU hike, the correct direction for the dollar is down.

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Hopefully no one got burnt on the falling knife that is Monsanto. I'm starting to salivate over MON, TRA and MOS. The market has made them whipping boys without cause. I think the same is true for alternative energy. So mark your shopping list, but don't be a hero. (Update: These all rolled over and headed upwards. Praise the man who caught MON from $116-121 within an hour.)

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That's it! I'm going on vacation.

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