U.S. equity markets treaded water most of the morning following the release of earnings reports from Goldman Sachs and Citigroup but still managed to close higher for the day. The Dow see-sawed over 10,000 indicating traders were having a difficult time adding to their already established positions at current price levels. Many investors are questioning stock values at this time and are wondering whether they are buying momentum or sound fundamentals. Today was a good example of this thinking as Goldman blew out the estimates but traders still had trouble buying the stock on strength.
U.S. Treasury futures finished the day lower. Yields continue to rise as Treasury instruments are being forced to compete for investor dollars against other higher yielding assets. This morning’s CPI report showed a bigger increase than estimated. This news spooked traders into selling December Treasury Bonds and Treasury Notes early because of inflationary fears. Today’s move was contrary to what yesterday’s FOMC minutes were highlighting. In the FOMC minutes it appeared the Fed was not in a position to hike rates for a while, but the trading action in the markets is saying otherwise. .
The U.S. Dollar finished the day mixed. The December British Pound rallied sharply higher following rumors the Bank of England may end its asset buyback program early. The December Euro weakened early in the session on poor economic news but managed to erase all losses following a supportive statement from European Central Bank President Trichet. The December Canadian Dollar is posted a closing price reversal top. Traders feel this market has gone up too far, too soon. Comments from the Japanese Finance Minister are helped pressure the December Japanese Yen.
December Gold diverged from the Dollar and finished the day on the downside. Wednesday’s technical closing price reversal top was confirmed in the morning. This gave short-term traders an excuse to take profits after a prolonged rally. The chart pattern suggests a break to $1028.80 is possible over the short-run. Traders should be careful selling weakness, however, because of the possibility of another rally to test the recent high and set up a secondary lower top.
A bullish gasoline supply report helped drive December Crude Oil over the $76.00 barrier. Refineries operating at lower capacity led to the smaller supply number. A close over this level could trigger an acceleration to $80.00 tomorrow. A cut in supply with an increase in demand is likely to keep a bullish tone in this market.
