Who Said The
The sensitivity to the word was heightened by
economic reports out today that increased the odds the Fed will cut interest
rates again in June. First, new home sales took an unexpectedly large dip last
month, falling 9.5%. Economists had expected a much smaller decline, despite the
implementation of a new formula for calculating the statistics that shaves about
3% from the figure.Â
Also, an unexpected rise in the number of folks lining up
at the unemployment office for the first time worked to confirm that an initial
unemployment claims surge in the last week of April was not an aberration. Those
receiving benefits also rose to nearly a seven-year high. Higher unemployment is
demonstrative of economic weakness. Â
So with the day’s economic reports giving the Fed
additional ammo to pull the rate-cutting trigger again on June 27, traders were
already pondering how much the lowest interest rates in nearly a decade might
impact inflation.Â
Enter Fed Governor Laurence Meyer.
In a speech made today, the monetary policy maker said, “that inflation
remains above the rate that I would find acceptable over the longer run”
and “that core inflation has been edging higher.” The Governor’s talk
about potential inflation and the Fed’s desire to not “overshoot” in
trying to pull the economy out of a nosedive, spurred bond traders to sell June
T-bondst
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inflation means the longer-dated instruments would have to be made cheaper to
account for the lower yields that the erosive effects of inflation would
net).Â
In intraday technical activity, the bonds held just above
the 99 27/32 trigger of their Pullback From Lows
setup and plunged after Meyer’s statements to settle 28/32 lower on the
session at 99 8/32.
Stock index futures tracked lower for most of the session in profit taking, then
turned definitively positive in the final two hours. Biotechs, Internets and
Microsoft
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higher.Â
July crude oil
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exploited the gap down left yesterday and followed through to the downside in
its biggest down day in a month. As mentioned in the Mid-Day Futures Markets
Alert, crude found support in 28.10 to 28.30 area, a level which coincides with
its 50-day moving average and the 50% retracement of its April to May run.
Crude took its lead from unleaded gasoline
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which fell after gapping to a new contract high of 1.1750. Traders shorted the
contract on the gap-to-a-new-high move, sending HGM1 to a loss of .0420 to
1.1169. As many as 30% of Americans have said they will scale back summer
driving due to higher gasoline costs.Â
Orange
juice
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Since its lows at the end of April, juice has shown several thrusts, laps and
gaps off its lows. Prior to yesterday’s selloff, the contract had four
consecutive up bars in another sign of momentum. Today’s expansion bar up turns
around yesterday’s expansion bar down in a reversal of a potential reversal, a
very constructive sign. Juice closed up 3.8%, or 3.00, at 82.15.