Stocks got clobbered on the day as the sideways churn continues into year-end. There is little to no conviction in either direction as light volume and a lack of commitment lead to a directionless market. Stocks fell 1.2% on the day as the dollar spiked over 1% against the Euro. The move in the dollar sent commodities lower with copper declining 2.5%, oil falling 1.5% and gold falling over 3%. Volume was light compared to previous months, but the heaviest day of the week thus far. Breadth favored the bears by a 3:1 margin. The spiked over 10% as the 20 level remains the sell-off point for equities. Investors are wary of taking on too much risk at these levels. Daily Futures wraps up the action from all markets:
U.S. Economy – Dollar Up; Commodities Down
The March U.S. dollar index closed up .755 at 78.09, the highest in fourteen weeks after Standard and Poor’s downgraded the debt rating for Greece. Most commodities finished lower.
The U.S. Labor Department said that jobless claims were up 7,000 last week to 480,000.
The Conference Board said that its U.S. index of leading indicators was up .9% in November, better than expected and the eight consecutive gain.
The Philadelphia Federal Reserve’s regional index of factory activity increased from 16.7 to 20.4 in November, stronger than expected and the highest in over four years.
In spite of today’s positive economic news, the March U.S. T-bonds closed up 1.14/32nds at 118.30/32nds, the highest close in a week, helped by a flight to quality.
Grains and Cotton
The USDA said that, as of last week, 2009-2010 export inspections of:
Corn remained up 5% from a year ago.
Soybeans remained up 40% from a year ago.
Wheat improved from down 31% to down 30% from a year ago.
Cotton remained down 37% from a year ago.
Grains were all lower, pressured by today’s stronger dollar.
The USDA said that net sales of beef totaled 4,500 tons last week, down from 6,500 tons the previous week.
Today’s Livestock Outlook from the USDA said it well:
“In 2009, economic recession, high unemployment, and abundant supplies of pork and poultry adversely affected demand for beef. As a result, demand was insufficient to maintain cattle and beef prices throughout 2009, which led to sluggish feedlot marketings, heavy dressed weights, and ample beef supplies, despite relatively low cattle inventories.” February cattle were down .35 at 84.55.
The USDA also said that a smaller supply of slaughter hogs and better pork demand are contributing to better fourth-quarter hog prices. February hogs fell 1.27 to 65.55.
March sugar is one of the few commodities that closed higher today, up .49 at a new contract high of 26.43, helped by the ongoing situation of tight world supplies.
The ten day forecast from Weather.com is expecting a low of 37 degrees in central Florida on Sunday – close, but not yet dangerous to the citrus groves. March orange juice ended down .0005 at $1.3280.
Energies – Natural Gas Supplies Drop
The recent stretch of cold weather finally made a dent in natural gas supplies. The U.S. Department of Energy said that underground supplies were down 207 billion cubic feet last week to 3.566 trillion cubic feet. Supplies are now up 12% from a year ago. February natural gas closed up 28.7 cents at $5.80, the highest close in seven weeks.
London inventories of copper are now at 474,575 tons, the most since April. March copper fell 7.75 cents to $3.1280.
Currencies – Greece Debt Rating Lowered
The March euro fell 1.65 cents to $1.4347 after Standard and Poor’s cut Greece’s credit rating from A- to BBB+.
Statistics Canada said that consumer prices were up 1.0% in November from a year ago, more than expected. The core index was up 1.5% in November from a year ago.
The U.K.’s Office for National Statistics said that retail sales were down .3% in November, weaker than expected.
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.