Stocks lost 0.25% on the day, but closed well off their worst levels in the morning trade. Equity markets were jittery after comments by Ben Bernanke that were seen as a bit hawkish. As the day wore on investors seemed to realize that it was not quite the near-term concern that many immediately thought. Stocks still failed to tack on gains after yesterday’s sizable jump. Trading was relatively light as volume was not particularly heavy and breadth was even at 1:1. Downside volume outpaced upside volume by nearly 2:1, however. The VIX traded marginally lower on the day as signs of fear subside from the market following the spike last week.
From Daily Futures:
U.S. Economy – Discount Rate Hike Coming
Federal Reserve Chairman Bernanke said that the Fed is likely to raise the discount rate soon, but that should not be interpreted as any change in monetary policy (wink, wink). The March 2011 eurodollars fell .07 to 98.61.
The U.S. Census Bureau said that exports were up $4.6 billion in December to $142.7 billion while imports were up $8.4 billion to $182.9 billion. The result was net imports of $40.2 billion in December, up from $36.4 billion in November. The March U.S. dollar index was up .15 at 80.14.
The Mortgage Bankers Association’s index of mortgage applications was down 1.2% last week while the rate on a 30-year fixed mortgage dipped to 4.94%.
The U.S. Treasury sold $25 billion of 10-year T-notes at a median yield of 3.64% with a bid to cover ratio of 2.67. The March U.S. T-bonds closed down 24/32nds at 117.18/32nds.
Grains and Cotton
July wheat closed up 14.25 cents at $5.242, the highest close in two weeks, blamed on short-covering.
May cotton closed up .65 at 73.63, still supported by yesterday’s lower USDA ending stocks estimate.
Orange juice
Weather.com reported a low of 34 degrees in Orlando, Florida this morning, but no additional damage is expected to the citrus groves from today’s cold. March orange juice ended down .0070 at $1.3695.
Energies
The U.S. Department of Energy’s (DOE) Short-term Energy Outlook said that they expect the price of West Texas Intermediate crude oil to average $81 per barrel in the second half of this year. They expect retail gasoline to average $2.84 in 2010 and $2.97 in 2011. The DOE’s weekly inventory report will be released on Friday morning.
OPEC’s Monthly Oil Market Report kept its estimate of world oil demand in 2010 roughly the same at 85.12 million barrels per day. That is slightly lower than the DOE’s estimate of 85.3 million barrels per day. April crude oil closed up .69 at $74.89.
The DOE also said that they expect the spot price of Henry Hub natural gas to average $5.53 per thousand cubic feet this year, up from $4.06 last year. April natural gas ended up 1.3 cents at $5.278.
Currencies
The U.K.’s Office for National Statistics said that its index of industrial production was up .5% in December and down 3.6% from a year ago, a little better than expected. For all of 2009, the index was down 10.2%. The March Canadian dollar finished up .65 at 94.20.
Statistics Canada said that exports were up C$.5 billion in December to C$32.2 billion while imports were up C$.5 billion to C$32.4 billion. The result was net imports of $246 million, up from $201 million in November.
Japan’s Cabinet Office said that core machinery orders were up 20.1% in December, more than expected and the first gain in three months.
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.