Market Wrap-Up (2-11-2004)

FSO ^ | 2/11/2004 | Jim Puplava

[Orangedog]

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Today's WrapUp by Jim Puplava 02.11.2004  Mon   Tue   Wed   Thu   Fri   Archive

"Appropriate"

Greenspan’s description of U.S. interest rates was in stark contrast with the theme made just two weeks ago. Today’s remarks boosted speculation U.S. yields will remain lower than in the euro region and other major economies such as the U.K., driving the U.S. Dollar to within a cent of a record low versus the euro. The testimony today before the House Financial Services Committee indicated that the dollar’s decline should eventually help contain our current account deficit and noted, “Looking forward, the prospects are good for the sustained expansion of the U.S. economy, however risks remain.” Plenty of sound bites for the market watchers to trade debt, dollars and commodities, and trade they did.

In the day’s biggest corporate development, cable leader Comcast made an unsolicited bid to buy Walt Disney for $54 billion plus the assumption of debt after failing to engage Disney chief Michael Eisner in private discussions of a potential merger, sending shares of the media giant up 14.6 percent. The bid by Comcast overshadowed Disney’s release of its first quarter earnings. The company said it earned 33 cents a share, up from 2 cents a share in the same quarter a year ago. The Thomson First Call average estimate was for earnings of 23 cents a share. Revenue climbed 19 percent to $8.549 billion from $7.170 billion. The bid from Comcast essentially rained on Michael Eisner and the board’s hopes of showing a turnaround in Disney’s financial performance.

In other earnings news, Dow component Coca-Cola reported its fourth quarter net income of 38 cents a share, with revenues of $5.18 billion, ahead of analyst forecasts of $5.03 billion. Corporate earnings continue to impress investors, however, one must be careful as many of the companies showing strong numbers are multination companies that have benefited greatly from the precipitous drop in the US Dollar versus foreign currencies, Coca-Cola included. Looking to tomorrow Dell reports their much anticipated and talked about earnings report.

Financial Markets

The Dow Jones Industrial Average ended the day up 123.85 points, or 1.2 percent, at 10,737.70 while the Nasdaq Composite Index lifted 14.33 points, or 0.7 percent to 2,089.66, their highest closes since June 2001. The S&P 500 lifted 12.22 points, or 1.1 percent to finish at 1,157.76. Advancing stocks outnumbered decliners 1,939 to 1,249 on the New York Stock Exchange and 1,647 to 1,443 on the Nasdaq. About 952 million shares had changed hands on the Big Board while volume stood at nearly 1.3 billion shares on the Nasdaq.

In the commodities market, gold futures gained more ground following Greenspan's comments. The April contract closed up $3.70 at $410.70 an ounce on the New York Mercantile Exchange. Crude for March delivery added 13 cents to close at $34 per barrel and the euro jumped more than 1 percent to 1.2811 in afternoon U.S. trading, while the greenback dropped 0.2 percent vs. the yen, changing hands at 105.36 yen.

Treasuries

U.S. Treasury prices turned higher after the Fed chief told lawmakers the central bank could be patient because inflation remains low. The benchmark 10-year Treasury note closed up 23/32 at 101 26/32 to yield 4.02 percent vs. 4.13 percent at the previous U.S. close.

European Markets

European stocks rose as the Dow Jones Stoxx 50 Index added 0.1 percent to 2730.24 after gaining as much as 0.5 percent and falling 0.4 percent. The Euro Stoxx 50, a measure for the 12 euro countries, advanced 0.3 percent. The Stoxx 600 increased 0.2 percent. Benchmark indexes rose in 13 of the 17 Western European markets. Germany's DAX Index and France's CAC 40 Index gained 0.3 percent, while the U.K.'s FTSE 100 Index lost 0.2 percent. March futures on the Euro Stoxx 50 advanced 0.1 percent.

Asian Markets

Asian stocks such as Samsung Electronics Co. may gain on optimism U.S. Federal Reserve Chairman Alan Greenspan will affirm expectations of stronger economic growth in Asia's biggest export market later today. Japan's stock market is closed today for a holiday. The Morgan Stanley Capital International Asia-Pacific Index yesterday added 0.1 percent to 89.05.

Scott Middleton

© 2004 Scott Middleton
February 11, 2004

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[Rokke]

Don't eject too early. According to an earlier edition of this same newsletter, if the Dow ever managed to close above 10,650 we were officially into a bull market with no end in sight. That is about the only sentiment in this newsletter I could ever agree with.

[superloser]

So then the current price of $1.30 for a euro would increase as more euro demand (need to buy oil) would cause the price to go up?

Theoretically, yes. The currency markets would react to this stronger demand for Euros and price them higher.

How much higher can it go, the price has already gone up 30% in four months?

Are you sure the Euro has gone up as much as the Dollar has gone down? Remember, you're using a measuring rod that changes constantly.

In terms of Gold, the Euro is about flat.

In terms of the Dollar, the Euro has soared.

In terms of the Euro, the Dollar has dropped.

Who knows what the upper limit is? Whatever the market will bear? At some point the Central Banks would step in and intervene, but I don't know of anyone who has thought of a scenario where the Dollar wasn't King.....and I can't even guess at what point that would be.

[superloser]

I think the Fed would let the dollar float as did Canada.

The Dollar is already a floating currency and its not fixed in terms of anything. It is the 'global currency' so to speak. Other currencies are fixed in terms of dollars, but the dollar is not fixed to anything.

If the oil sellers did demand Euro's it sure would knock America off of the high post, wouldn't it?

Not entirely, although, it would chip away at the pedestal quite a bit. Any drop in demand for the Dollar, since it is a "floating" currency, would cause it to drop in value. There is no intrinsic value to the Dollar other than demand for it.

Who would step up to take the position?

The Europeans would LOVE to take center stage, but that is not likely to happen. There is a lot invested in maintaining the Dollar as the global reserve currency. Hence the agitation at the G7 meeting about the relative value of the dollar.

For me, I can see a situation developing where OPEC decides to poke America in the eye and switch to Euros. That would be an economic attack as the lower demand for dollars would cheapen them on the world stage. It would also be just like OPEC to try something like that. If it was just oil, then the dollar would likely drop a bit then stabilize, as most other commodities are still priced in dollars. However, after the initial shock of imports suddenly exploding in terms of price, America might end up becoming the world's manufacturing center again.

Gold would probably blow through the roof at that point as a "safe haven" though, that much is certain. But...the rest of it? I don't think there is a single person out there who could lay out a prediction as to the aftermath.

What do you think? Let's open this up and prognosticate!

[imawit]

Well, there's traders and then there's traderbots.

The traderbots outnumbered the traders today by 5 to one. Look for it on the WJ Report.

[B4Ranch]

Let's open this up and prognosticate!

I could see this a a way to allow the demand for a one world government to occur much faster, which is something I'm afraid our President wants.

[imawit]

Who wants to take a crack at what stays up tommorow and what goes down.

No cheating, we all know the dollars goin down. Pick something else.

[superloser]

Wouldn't you think that since allegedly most of the supposed proponents of a "one-world Government" are American -- that keeping the Dollar in place would indeed facilitate this?

Food for thought, but I'm not much for conspiracy theories. Too little data to back them up.

[Beck_isright]

"OK, anyone want to take a crack at trying to figure out what it means when every damned class of investment moves in the same direction...even the ones that are supposed to move against other counter to others?"

It's the P.T. Barnum theory of economics. There's a sucker born every minute. Patience is the only virtue now.

[headsonpikes]

I like it when every market rises, but that can't go on long. As you know, I'm long a few Canadian gold and silver juniors - IMHO, that's the best sector.

The silver stock I gave you guys 3 months ago is hitting new highs day after ka-ching day(triple+ so far); the gold stock I gave you has also tripled and is presently getting ready for another move to new highs, imo.

So they'll both be down tomorrow, no doubt!

I'm kidding. They're still both worth at least due diligence and a tire-kick.

(SPM-V and ITS-V, in case you all forgot. ;^)

[mac_truck]

The Europeans would LOVE to take center stage, but that is not likely to happen.

I agree. the Europeans seem to have less control over their own currency then either the US or the Asians. If they can't bring themselves to buy our debt to defend the Euro, then they may be forced to lower interest rates and hope for the best.

[B4Ranch]

"Wouldn't you think that since allegedly most of the supposed proponents of a "one-world Government" are American"

Where on earth did you get this idea? The OWG idea is being put into place world wide, not just North America.

[Orangedog]

Maybe what he's getting at is that Americans might not think the OWG would be a "bad thing" if they believed that the US would be running it. Of course we all know the difference between how things are billed and how they end up.

[imawit]

Hey ! I'm a watchin. How bout NGG>V. Huh ?

ps: gottem all except the silver. Gonna look inta it tanight.

Remember I said $412 POG is the next target !!!!! It's trashin it in spades right now !

NOW, DON'T NOBODY FORGET WHAT I SAID ABOUT GREENEY ! I wrote his script for today. See what happened !

[headsonpikes]

Let me paraphrase the U.S. Treasury position:

'A stronger, lower dollar'.

Frankly, I'm all for it! Go gold!

[Soren]

You must see stock charts in your head when you close your eyes at night. I'll bet you take a laptop to the can! ;-)

[B4Ranch]

A few instances of world participation in OWG. Quote from United Nations' World Constitution, "...The age of nations must end... The governments of the nations have decided to order their separate sovereignties into one government to which they surrender their arms."

World Employment Programme-,
World Bank,
World Court,
World Health Organization,
World Forestry Congress,
World Water Development,
World Peace Summit,
World Conference on Human Settlements,
World Drug Report,
World Conservation Monitoring Centre,
Human Settlements Programme,
World Conference on Human Rights,
World Institute for Development Economics Research,
World Public Sector Report 2003,
World Tourism Organization (WTO),
World Crime Surveys,
World Summit on Sustainable Development,
WORLD ASSEMBLY ON AGEING,
World Space Week,
World Federation for Mental Health,

There is more than the US working for OWG. I wish we could figure out how to put somebody in the White House who knows what the Constitution actually says.

[Gunslingr3]

OK, anyone want to take a crack at trying to figure out what it means when every damned class of investment moves in the same direction...even the ones that are supposed to move against other counter to others?

What do you call a general rise in the price level...

[Orangedog]

What do you call a general rise in the price level...

I'll take "Inflation" for $1,000,000,000.00, Alex.

[B4Ranch]

That's what I was thinking but my number has another zero on it.

[Soren]

I think arete nailed it on TOS. Greenspan's message was basically the USD is headed lower and the Fed will not raise rates any time soon. The SM is always juiced when Greenspan speaks, plus there may be some optimism that exports will increase with a lower dollar. My understanding is that there is quite a bit of playing the yield curve right now (borrowing short end, buying long end), so confirmation that short rates will not rise helps the long end (because at the first hint of a rise in short rates, this trade unwinds). That plus ongoing Japanese/Chinese intervention may have helped the bond market. Commodities have been moving opposite the dollar, so they rose.