A confluence of negative events brought stocks to their knees today as the S&P 500 retreated 1.3% on the day. Commodities were very weak as the dollar rallied. Another high reading on initial jobless claims didn’t help matters. The biggest news of the day though came from analysts at Merrill Lynch who downgraded the semiconductor sector on concerns over cyclical weakness. Techs and the beta trade have led the market higher so any crack in the foundation there could be foreshadowing more difficult times ahead for the market. The volume was again light, but losses were broad based as no sector of the market was spared from losses. Daily Futures has all the action from the markets:
The U.S. Labor Department said that jobless claims were unchanged last week at 505,000.
The Mortgage Bankers Association said that the delinquency rate on mortgage loans increased from 9.24% to a record high 9.64% in the third quarter. The foreclosure rate increased from 4.30% to 4.47% in the third quarter. The December 2010 eurodollars closed up .035 at 98.83.
The Conference Board’s index of leading indicators was up .3% in October.
The Philadelphia Federal Reserve’s regional index of manufacturing increased from 11.5 to 16.7 in November, a sign of expansion.
The OECD said that its members are experiencing a weak recovery, but they do not expect unemployment levels to peak in the U.S. until mid-2010 and in Europe, sometime in 2011.
The U.S. Treasury said that next week, it will sell $44 billion of 2-year T-notes, $42 billion of 5-year T-notes, and $32 billion of 7-year T-notes, all roughly as expected.
Grains and Cotton – Soybean Exports Surprisingly Strong
The USDA said that, as of last week, 2009-2010 exports of:
Corn fell from up 10% to up 8% from a year ago.
Soybeans jumped from up 17% to up 24% from a year ago.
Wheat improved from down 33% to down 32% from a year ago.
Cotton fell from down 31% to down 34% from a year ago.
The USDA said that China bought 116,000 tons of U.S. soybeans. January soybeans jumped up 12 cents to $10.39.
Dow Jones Newswires reported that Egypt bought 60,000 tons of wheat from Russia, 60,000 tons from France, and 55,000 tons from Germany. December wheat was down 3.75 cents at $5.625.
Dow Jones Newswires said that the Brazilian Coffee Industry Association expects domestic consumption to be up about 7% this year. March coffee closed down 3.50 cents at $1.3705, spooked by today’s slight gain in the dollar.
After the close, the USDA estimated 2009-2010 world sugar production at 153.5 million tons, up 6.8% from the previous year. They also said that 2009-2010 ending stocks will fall 1.6 million tons to 26.0 million tons, or 17% of implied total use, the lowest ratio since 1993-1994. March sugar closed down .56 at 22.74 ahead of the report.
The World Gold Council said today that gold demand totaled 800.3 tons in the third quarter, up 15% on the quarter, but down 34% from a year ago. Mine production totaled 670 tons in the third quarter, up 6% on the quarter and from a year ago. December gold started the day lower, but finished up 70 cents at $1,141.90.
Bloomberg news reported that a strike at the Spence copper mine in northern Chile is costing BHP Billiton 50 tons of production per day. March copper fell 2.95 cents to $3.1060.
The U.S. Department of Energy said that underground supplies of natural gas were up 20 billion cubic feet to 3.833 trillion cubic feet. Supplies are now up 10% from a year ago and near 3.89 trillion cubic feet which some say is maximum U.S. storage. January natural gas ended up 5.6 cents at $4.715.
December crude oil fell $2.12 to $77.46, blamed on profit-taking and today’s slightly stronger dollar.
Statistics Canada said that wholesale sales were up .2% in September, but down 10.4% from a year ago. Inventories were down .9% on the month. Also, the composite index of leading indicators was up .7% in October, the fourth consecutive monthly increase. The December Canadian dollar closed down .49 at 94.12.
The U.K.’s Office for National Statistics said that retail sales were up 3.0% in October from a year ago.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.