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Stocks staged a big rally once again as investors begin to view the sell-off as a buying opportunity.  We’re back to the old reflation trade of 2009 where the dollar sells off and everything else rallied.  The S&P gained 1.3% on the day, but remains about 1% lower on the year.  Volume was moderate on the day and breadth was once again strong at 3:1.  The VIX has nearly reversed its entire gain from the last two weeks as the market has stabilized and risk has come back to the market.

From Daily Futures:

U.S. Economy
The National Association of Realtors said that its index of pending home sales was up 1.0% in December and up 10.9% from a year ago. March lumber ended up $2.50 at $261.00, continuing its rebound from depressed levels in 2009.

Grains and Cotton
According to Bloomberg news, China’s Cotton Association estimated that cotton plantings will be down 5% this year, possibly increasing their need to import more. March cotton closed up 1.04 cents at 69.26.

March coffee finished up 2.50 cents at $1.3505, supported by lean world supplies and today’s softer dollar.

Reuters reported that Consumer Reports did a test of 37 coffee blends, but did not find any that tested “excellent” or “very good” – a result of this year’s smaller world coffee harvest (see article).

Late yesterday, Fortis Bank predicted that the world will consume 48,000 more tons of cocoa than it will produce in 2010-2011. They also expect the ending stocks to use ratio to fall from 42% to 35%. March cocoa was down $20 at $3,132.

March crude oil closed higher, supported by last week’s positive GDP report and yesterday’s strong gain in the manufacturing index.

April gold jumped up $13.00 to $1,118.00 while the U.S. dollar rally shows signs of stalling.

U.S. vehicle sales at Ford were up 25% in January from a year ago, better than expected. March copper closed up .0060 at $3.0895.

The Reserve Bank of Australia surprised the markets today by keeping their interest rate unchanged at 3.75%. Most analysts were expecting a quarter-percent increase. The March Australian dollar closed down .0053 at 88.17.

Eurostat said that producer prices in the Euro area were down 2.9% in December from a year ago, the twelfth consecutive decline.

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