August 2nd, 2012
in Gary's blogging
Midday Market Commentary For 08-02-2012
As reported at Foxnews, “Wall Street is sustaining heavy selling on the heels of a grim European session after the European Central Bank came short of taking action aimed at stemming the debt crisis. The Dow is down 150 points, or 1.2%, while Bourses in Spain and Italy ended the day nearly 5% to the downside.”
That explains pretty well what is going on as I watch the markets slide in a self-destruct mode after closing lower in the three previous sessions. The major averages slide firmly into negative territory after investors digested the Draghi reversal from last weeks promise to 'Do Whatever Was necessary' speech. Carl Weinberg, Chief Economist at High Frequency Economics, said, "Once again, we have no commitment to action from the ECB, and no execution of promises previously made. Nothing seems set to happen now," he added. "Traders and investors who expected immediate action are, and should be, disappointed."
Follow up:As the markets did not see any recovery on the early downward move this morning, traders shifted their focus to tomorrow's monthly U.S. jobs report from the Labor Department. Volume, although red, is waning as the afternoon session progresses on one should be cautions and look out for for sudden reversals.
The DOW at 12:30 is at 12801 down 174 or -1.34%. (and falling)
The 500 is at 1358 down 16.62 or -1.22%.
The $RUT is at 766.30 down 5.06 or -0.66%.
SPY is at 135.83 down 1.73 or -1.26%.
The trend is neutral and the current bias is up.
WTI oil is at 87.65 trading between 89.60 and 87.00 and the bias is neutral.
Brent crude is at 106.15 trading between 107.28 and 105.05 and the bias is positive.
Gold is down today at 1588 trading between 1613 and 1587 with a negative bias.
Dr. Copper is at 3.30 down from 3.38 earlier and falling.
Earlier the USD tumbled from 83.20 to 82.25 and shot up to 83.40 and recovered later to 83.55 and still climbing.
Spanish sovereign bond spreads blew almost 60bps wider today - that is the single-largest absolute move in spreads on record.
Almost the entire gain in bonds post-Draghi 'Believe' speech from last week has been retraced in a mere few hours and while the front-end of the Italian and Spanish curves has outperformed, the sad fact is that in promising to maintain that end, then the entire rest of the curve becomes subordinated and therefore is sold as hope fades.
Swiss, German, and Dutch short-dated bond yields all dropped to new record low rates.
EURUSD has retraced its entire gain from Draghi-'believe', back to 1.2150 - despite his call not to short the EUR. Equity markets in Europe has dumped across the board today - with Italy and Spain -7% from pre-Draghi this morning - though notably still full of some hope from last week.
It would seem that perhaps Mr. Draghi should keep his arrogant mouth shut a little more as we thought price stability was his mandate? The largest rise in EGB yields in a decade - all on the back of his misguided and over-confident egotistical attempt to jawbone markets to his reality. All mouth; no trousers.
According to a report from Challenger, Gray & Christmas employers announced 36,855 planned job cuts in July, down 1.9% from 37,551 in June.
** RRR = Risk Reward Ratio
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Written by Gary