Behind the Numbers: Month to Date Market Review (Jan.9)

The economy continues to send very mixed signals. The market screams like a scolded dog. The more things change, the more they stay the same. Welcome to our weekly Sense on Cents Week in Review. I will provide a streamlined recap of the major economic news and the month-to-date market moves. Let’s navigate.

ECONOMIC DATA:

1. Manufacturing Index: 55.9 vs expectation of 54.8, a positive

2. Pending Home Sales: 96 vs 114.3 prior reading, a big negative

3. Fed Minutes: mixed economic review with debate about continuing quantitative easing via the purchase of mortgage securities.

4. Unemployment: a decidedly weak report, see all details in Unemployment Report: January 8, 2010

The economy continues to have major problems in housing and employment as it attempts to adapt to the reality of a world awash in debt. How did the markets respond? As the economy is awash in debt, the markets are awash in cash and investors are scrambling to put it to work.

The statistics provided are the weekly close and the month-to-date returns:

U.S. DOLLAR

$/Yen: 92.65 vs 93.00, -.38%

Euro/Dollar: 1.4405 vs 1.323, +.6%

U.S. Dollar Index: 77.49 vs 77.86, -.48%

Commentary: the overall U.S. Dollar Index weakened slightly given the generally weak domestic economic data.

COMMODITIES

Oil: $82.94/barrel vs $79.62, +4.2%

Gold: $1139/oz. vs $1098, +3.7%

DJ-UBS Commodity Index: 142.4 vs 139.2, +2.3%

Commentary: cold temperatures across the country are definitely supporting the oil market. Commodities, in general, continue to gain strength from global currency concerns.

EQUITIES

DJIA: 10,618 vs 10, 428, +1.8%%

Nasdaq: 2317 vs 2269, +2.1%

S&P 500: 1145 vs 1115, +2.7%

MSCI Emerging Mkt Index: 1016 vs 989, +2.7%

DJ Global ex U.S.: 206.4 vs 201.09, +2.6%

Commentary: lot of green on this board as cash on the sidelines poured into the market. People should be aware that money directed to 401-Ks and IRAs is typically allocated in the first few weeks of the year. That money always provides a nice boost to the market.

BONDS/INTEREST RATES

2yr Treasury: .98% vs 1.14%, -16 basis points or .13% (rates down, bond prices up)

10yr Treasury: 3.84% vs 3.84%, unchanged

COY (High Yield ETF): 7.00 vs 6.89 +1.6%

FMY (Mortgage ETF): 18.25 vs 18.24, unchanged

ITE (Government ETF): 57.35 vs 57.07, +.49%

NXR (Municipal ETF): 14.65 vs 14.64, unchanged

Commentary: bonds were either flat or positive on the week depending on the sector. Same song: cash, cash, and more cash in institutional accounts is pouring into the market. The steepening of the yield curve is an indication the Fed will remain on hold. Is the steep slope indicating a rebound in the economy, an increase in inflation, the negative long term impact of our massive fiscal deficit? Or all of the above?

SUMMARY/CONCLUSION

The calendar may have changed, but little else in terms of the economic challenges facing us. Wall Street and Main Street are in different worlds. Where and when will these two worlds meet?

When and how will the Fed withdraw stimulus and support for the market? How will that play out? How will it be executed? Are we in a bubble? Can we gently ease the air out of the balloon? All these questions are historic in nature.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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