Why The Markets Had Second Thoughts About Today’s Data
The equity and bond markets
had a fairly choppy session today,
as Investors continue to make up their minds
about what direction the US economy will take in the coming months and quarters.
Although today’s ISM and productivity
data for April were weaker than the market had hoped for, these releases
included data that was collected during the Iraq war, which made investors less
pessimistic than one would normally expect.
Equities
The equity markets began the day on a sour note
on the back of weak economic data (which still included part of the Iraq/war
time period) and finished mixed after late afternoon buying in IBM, Hewlett
Packard and Dell pushed technology shares higher. The Nasdaq index futures
contract
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down 11.00 to finish at 905.80,
and the Dow
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finish at 8450.
Fixed Income
The Treasury markets bounced off their recent
highs after the equity markets took back their earlier losses. The 10 year
futures contract
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was unchanged at 114-01; and the five year note
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up 0-20 to close at 113-260, breaking outside of its recent trading
range.
Metals
Gold
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was pushed lower for a second day, and the precious metal was up by 3.0 to
finish at 342.40. Silver
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12.30 to finish at 4.6710. The industrial metals were slightly lower on the
weaker manufacturing data (which again was partially tainted by the Iraq time
period). Copper
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up .0010 at .6430.
Energy
Oil was higher for a second day today without any
significant news or data. June crude
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gasÂ
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Currencies
Trading in the currency markets was pretty light
today, as the rest of the world was celebrating May Day (Labor Day).
Nevertheless, the US dollar was lower after weaker-than-expected US
manufacturing data led investors to speculate that US interest rates will remain
depressed relative the those of other nations — generally speaking, investors are
attracted to countries with higher yielding instruments and therefore buy the
respective currency. Currently, the US has the second-lowest yield, after Japan.
But as I have mentioned in the past, as economic growth in the US begins
to outperform Europe’s, and as the interest rate differential begins to narrow
(decreasing the relative attractiveness of the euro vs. the greenback), the
dollar should reverse some of its losses and trade within a wide range against
the European currency. The USD index
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finished at 96.88.