Stocks reversed course this afternoon in dramatic fashion and closed down over 1.2%. The news was largely attributed to a report out of Washington that the homebuyers tax credit would be allowed to end. The move, however, appeared to be largely tied to a reversal in energy and materials stocks which moved sharply lower as the dollar spiked and oil declined. With high valuations, earnings fully priced in and the economic recovery still very much in doubt investors appear to be rethinking the sustainability of the stock market rally. Daily futures has the action from across all markets:
U.S. Economy
The Chicago Federal Reserve’s index of national activity slipped from an upwardly revised -.65 to -.81 in September. Their index of manufacturing in the Midwest increased from 81.6 to 82.3 in September. The December 2010 eurodollars closed down .055 at 98.195.
Grains and Cotton
Is there better harvest weather ahead? Yesterday’s 6 to 10 day forecast from the National Weather Service is expecting below average temperatures for the northern half of the Midwest with normal to slightly above average precipitation. December corn closed down 19.75 cents at $3.78, the lowest close in a week.
The USDA said that last week’s export inspections of:
Corn totaled 24.0 million bushels, down 5% from a year ago.
Soybeans totaled 43.8 million bushels, down 7% from a year ago.
Wheat totaled 14.3 million bushels, down 35% from a year ago.
December wheat fell 20.75 cents to $5.27, pressured by profit-taking and plentiful world supplies.
Livestock
December hogs finished up .37 at 60.82, in spite of today’s stronger dollar and ongoing concerns about “swine” flu.
Lumber
Statistics Canada said that lumber production by sawmills was down 17.8% in August from a year ago. January lumber ended up $1.00 at $195.00.
Metals
China’s government said that refined copper imports totaled 282,828 tons in September, up 29% on the month. December copper closed down 2.35 cents at $3.0110.
Energies
December natural gas finished down 27.2 cents at $5.212, pressured by expectations of mild U.S. temperatures in the latest 6 to 10 day forecast.
December crude oil closed down $1.82 at $78.68 in response to today’s higher dollar.
Currencies
Has selling in the dollar been over-done? Investor George Soros was quoted over the weekend as saying: “As long as the renminbi (China’s currency) is tied to the dollar, I don’t see how the decline in the dollar can go too far.” The December U.S. dollar index gained .595 to end at 76.195.
Source: DF
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.