NAPM Detonates Bonds

  • February 1, 2001
  • Marc Dupee

The talk is that the Fed’s “surprise” inter-session interest rate cut
on Jan. 3 came in response to a weaker-than-expected December National Association of Purchasing Managers
(NAPM) report. Today’s January 2001 NAPM came in at 41.2, versus
a consensus estimate of 42.5, again weaker-than-expected.

The Fed, no doubt, got
an early look at today’s NAPM numbers and based their decision to cut rates by
50 basis points in large measure because of this indicator of a rapidly decelerating economy. One of the
Fed’s key statements was that the economic “circumstances have called for a
rapid and forceful response of monetary policy.”

Debt futures gapped open in follow-through buying this
morning and are continuing to rally on the release of this morning’s NAPM data.
The economic figures provide further evidence that the Fed will have to remain
on the offensive in stimulate the economy.

T-bonds
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10-year notes
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are up more than 1 point. 

S&P futures
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bleaker economic picture but held at a critical coincidence
of six Fibonacci price relationships, a cluster pivot defined by Carolyn Boroden in her Futures
Perspectives at the 1361.50 – 1367.00 area. The low
for spooz today is 1366.50, at the top of this zone. (Intraday

Fibonacci zones from Carolyn are available through our new TradingSubscriptions
premium service).

In currencies,
March dollar index futures
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prospect–that the Fed will have to continue slashing rates and that the economy
is slowing. As expected, the European Central Bank (ECB) left interest rates
unchanged, keeping the interest rate differential between the US and Europe in
favor of holding euro-denominated assets. Euro FX futures
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Swiss francs
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British pounds
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Cocoa
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List, is coming back after a down session in a bullish outside day bar.