Stocks staged a huge reversal this afternoon after the allure of Ben Bernanke’s comments waned and the Euro moved lower. The market was 1.25% higher in afternoon trading, but began a dramatic sell-off as the Euro lost ground. Stocks closed lower by 0.6% on relatively light volume. Breadth was even. The problems in Europe continue to dominate the headlines.
U.S. Economy
The Mortgage Banker’s Association said that its index of mortgage applications was down 5.7% last week to the lowest level in over three years.
The U.S. Commerce Department said that wholesale sales were up .7% in April while inventories were up .4%. The June 2011 eurodollars are steady to higher.
The U.S. Treasury sold $21 billion of 10-year T-notes at a median yield of 3.20% with a bid to cover ratio of 3.24.
Federal Reserve Chairman Bernanke told Congress that he has seen some modest improvement in the labor market, but that “a significant amount of time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009.”
In today’s Beige Book, the Federal Reserve said that “economic activity continued to improve since the last report across all twelve Federal Reserve Districts, although many Districts described the pace of growth as ‘modest.'”
Grains and Cotton
July cotton is limit-up and December cotton is trading higher with temperatures in Lubbock, Texas rising into the high-90’s today through Saturday.
The USDA said that 40,000 tons of U.S. soybean oil was sold to China in the current 2009-2010 season. Also, 240,000 tons of U.S. soybeans were sold to China for 2010-2011. November soybeans are steady to higher.
December corn is steady to higher ahead of the USDA’s monthly supply and demand estimates, due out tomorrow morning. July wheat is trading lower.
Livestock
Bloomberg news quoted a vice-president of AgStar Financial Services as saying that hog producers are not likely to expand production until late in 2011 because they need to pay down debt (see article). August hogs closed higher.
Energies
In today’s Monthly Oil Market Report, OPEC raised its estimate of world growth from 3.5% to 3.8% for 2010. Its estimate of world oil demand was roughly the same as last month, at 85.37 million barrel per day. July crude oil is trading higher.
The U.S. Department of Energy (DOE) said that crude oil supplies were down 1.8 million barrels last week to 361.4 million barrels. Supplies of gasoline were unchanged from a week ago and total distillates were up 1.8 million barrels.
The DOE also said that refinery use was at 89.1% of capacity last week. Over the past four weeks, gasoline demand was down 1.0% from a year ago and distillate demand was up 12.1% from a year ago.
The U.N. Security Council voted 12-2 in favor of a fourth round of stiffer sanctions against Iran (see article).
Metals
China’s government is expected to report on exports tomorrow, but some news outlets are already saying that exports were up 50% in May from a year ago, much more than expected. An official did say that consumer prices were up 3.1% in May from a year ago. July copper closed up 7.05 cents at $2.8500.
August gold finished down $15.70 at $1,229.90 while the stock market regained lost ground early in the day – a possible sign of reduced anxiety about Europe or a pause in the panic?
Currencies
OPEC also mentioned in its Monthly Oil Market Report how surprised it was by the improvement in Japan’s economy in the first quarter of 2010. They raised their estimate of Japan’s GDP growth in 2010 from 1.5% to 2.7%.
Japan’s Cabinet Office said that core machinery orders were up 4% in April, better than expected. The June yen is steady.
OPEC concluded this about Europe: “Taking this slight improvement in exports and in the industrial orders into account, while considering as well the continued pressure by the sovereign debt situation to the Euro- zone, the growth forecast for 2010 was slightly increased from 0.6% to 0.7%.” The June euro is trading higher.
The U.K.’s Office for National Statistics said that exports were down .6% in April while imports were down .4%. Trade was disrupted by Iceland’s volcano eruption.
The June Canadian dollar is trading higher, still finding support from relatively healthy economy and last week’s rate increase.
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.
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