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Today's WrapUp by Scott Middleton 08.21.2003 Mon Tue Wed Thu Fri Archive |
Bulls vs. Bears
This debate goes on these days, just as a few months ago the constant debate was about inflation and deflation. While it seems with the latter, that in the end it was a little bit of the both, the bull vs. bear debate should be answered with some authority, real soon.
Today, it was the Bulls tooting their horn as economic data indicated economic growth in key areas. The short-end of the Treasury yield curve gave the bulls more reason to be excited as the yields increased significantly throughout the trading session. Jobless claims fell 17,000 in the latest week to reach 386,000 -- below the pivotal 400,000 level that economists believe to be the mark between an improving and deteriorating labor market. It was also the lowest level for claims since early February. The Philadelphia Fed’s business index rose to 22.1 in August from 8.3 in July. It's the highest reading in more than five years. Readings above zero indicate that most firms say business is getting better or no worse. About three times as many firms said activity was better in August than said it was worse. Economists expected the index to fall to about 7.8 in August.
The Bears however continue their chant of the same old story, as CNBC puts it. Even if the economic numbers are improving, valuations have gotten too far ahead of themselves and the consumer has buried themselves in debt, as such bankruptcies are on the rise. According to the Consumer Credit Counseling Service, the average amount of credit card debt per consumer is about $17,000 to $20,000. It wasn’t that long ago that the average was around $6,000 to $8,000 per consumer. Bears also point at the record budget gap in the U.S. as ammo for their argument. Just this week the Treasury Department indicated that the deficit grew to $323 billion dollars and will most likely finish above $400 billion before the end of this fiscal year. It is the Bears’ contention that with the market banging its head against the resistance levels of the Primary Bear Trend, there is no new Bull market.
In corporate news, yesterday afternoon, one day after HP announced that its personal computing business lost money, Dell cut prices on its computers, printers and other products by up to 22 percent, essentially telling the competition, “When we see an opportunity to lower prices, we do it.” Timing couldn’t be better for Dell as they enter the back to school buying season. In the Food sector, Hormel issued their latest earnings, reporting a 9 percent drop in 3rd quarter earnings. They cited lower sales of “Spam” as the key reason for the disappointment. Since “Spam” has always been a favorite when times are tough, I guess we should glean from this report that the consumer is thriving.
Financial Markets
The Dow Jones Industrial Average added 26.17 points, or 0.3 percent, to 9,423.68. The Nasdaq Composite closed higher by 17.01 points, or 1 percent, to 1,777.55 and the Nasdaq 100 Index rallied 14.92 points, or 1.1 percent, to 1,314.65. The Standard & Poor's 500 Index headed 0.3 percent higher adding 2.97 points to 1,003.27. Volume came in at 1.38 billion on the NYSE and at 1.72 billion on the Nasdaq Stock Market. Advancers sprinted past decliners by 20 to 12 on the NYSE and by 21 to 11 on the Nasdaq.
In the currency market, the U.S. dollar was mixed against its major trading partners, losing 0.2 percent to 117.80 yen, a low not seen since mid-July. But the euro extended its losing streak to six straight sessions, falling a hefty 1.7 percent to reach a fresh four-month low of $1.0925. Gold fell to a low at $359.50 an ounce before closing at $361.80 an ounce, down $5.20.
Treasury Markets
The short-end of the bond market was a primer for expectations of a tighter monetary in the near future. The yield curve flattened on the short-end of the scale and the rates on the long end remained unchanged on the day. The 10-year Treasury note slid 10/32 to yield 4.475 percent while the 30-year government bond dropped 1/32 to yield 5.285 percent.
Overseas Markets
European stocks advanced as the dollar rose to a four-month high against the euro, boosting optimism exporters including Royal Philips Electronics NV and L'Oreal SA will benefit from rising sales in Europe's largest export market. The Dow Jones Stoxx 600 Index advanced for the 11th session in 12, adding 0.9 percent to 217.23, its highest in eight months, as of 4:50 p.m. in London. The Stoxx 50 climbed 0.7 percent to 2523.31, its highest since January. Benchmark indexes rose in all 17 Western European markets, except Denmark and Italy.
Asian stocks gained, led by exporters such as Toyota Motor Corp. and Samsung Electronics Co., as some investors anticipate U.S. jobs and manufacturing reports today will show growth in the world's largest economy is accelerating. Japan's Nikkei 225 Stock Average gained 0.7 percent to 10,362.69 at the 3 p.m. close in Tokyo. South Korea's Kospi index surged 2.3 percent, the biggest advance in two months. In Hong Kong, the Hang Seng Index added 1.6 percent to a 13-month high, while Taiwan's TWSE Index climbed to its highest in 15 months.
© 2003 Scott Middleton
August 21, 2003
chart courtesy ~ Bloomberg
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