Behind the Numbers: Month to Date Market Review (Jan.23)

From Massachusetts to Washington and from Wall Street to China, fireworks were flying this week across our global economic landscape. While the political focus in America is grabbing center stage, make no mistake, the issues driving the politics are largely economic.

Welcome to our Sense on Cents Week in Review where I provide a streamlined recap of the major economic news and the month-to-date market moves. Pack lightly as we have much ground to cover. That said, let’s enjoy the journey as the twists and turns along our landscape are truly fascinating and historic in nature. Let’s navigate.


1. Housing Starts: a disappointing report as starts fell 4% after an upward revision to a 10.7% increase in the prior month. I still take all the housing numbers with a pound of salt knowing that delinquencies and defaults continue to move higher.

2. Producer Price Index: a better than expected core reading of no increase leads me to believe that deflationary forces continue to be prevalent in our underlying economy.

3. Jobless Claims: very disappointing report of an increase of 36k indicative of the ongoing issues in the labor market.

4. Leading Economic Indicators: a surprisingly strong reading of a 1.1% increase. What gives? Peel back the onion and we see it is largely reflective of Fed-induced and Fed-supported factors impacting the markets much more than real economic activity. I discount this report heavily.

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


$/Yen: 89.86 vs 93.00, -3.4%
Euro/Dollar: 1.4137 vs 1.4323, -1.3%
U.S. Dollar Index: 78.27 vs 77.86, +.5%

Commentary: the overall U.S. Dollar Index improved on the week given an increase in risk premiums reflected in declining equity and commodity markets. Are we witnessing early stages of an unwind of dollar carry trades that dominated trading in 2009?


Oil: $74.14/barrel vs $79.62, -6.9%
Gold: $1093/oz. vs $1098, -.4%
DJ-UBS Commodity Index: 134.9 vs 139.2, -3.1%

Commentary: Commodities weakened across the board driven by a story indicating China is implementing curbs in bank lending. Chinese economic activity propped up by massive stimulus supported a number of commodity markets, primarily oil and metals, in 2009. Many in China are concerned that an asset bubble has been created; the story of curtailing lending would lend credence to that concern being reality. The China story also had major negative implications for our equity markets.


DJIA: 10,173 vs 10, 428, -2.4%
Nasdaq: 2205 vs 2269, -2.8%
S&P 500: 1092 vs 1115, -2.1%
MSCI Emerging Mkt Index: 1013 vs 989, -.8%
DJ Global ex U.S.: 198.7 vs 201.09, -1.2%

Commentary: equities were down approximately 4% across the board and have now crossed into negative territory for the year. Many market prognosticators believe, “as January goes, so goes the year.” Will we rebound in the last week of the month? Earnings reports (IBM, GE, Citi, BofA, Morgan Stanley) were mixed, at best. In my opinion, the earnings were actually disappointing and indicative of a continued, challenging economic landscape.


2yr Treasury: .79% vs 1.14%, -35 basis points or -.35% (rates down, bond prices up)
10yr Treasury: 3.60% vs 3.84%, -24 basis points or -.24%

COY (High Yield ETF): 7.01 vs 6.89 +1.7%
FMY (Mortgage ETF): 18.50 vs 18.24, +1.4%
ITE (Government ETF): 57.80 vs 57.07, +1.3%
NXR (Municipal ETF): 14.32 vs 14.64, -2.2%

Commentary: interest rates on government bonds dropped by 8 basis points on the week. Bonds, in general, were flat to only slightly better across a wide array of market segments. The increase in risk premiums reflected in the equity and commodity markets also pushed out spreads somewhat in the bond market, although not dramatically. I believe more of the money exiting equities and commodities moved into cash as opposed to being reallocated to bonds. In fact, given the deficit concerns and tight risk premiums currently reflected in many sectors of the bond market, I could envision a selloff in the riskier bond sectors while the safer government bond sector remains static with little improvement.


Risks remain high. Markets are clearly unsettled. What are the risks? Will our economic landscape regain the calm induced by the massive flow of Fed liquidity? The risks are centered in the following areas:

1. A continued weak economy, especially within housing and labor.

2. Washington in disarray. The markets may ultimately like political gridlock, but for now the weakness in Washington is pervasive.

Speaking of which, somebody tell Obama to cease and desist with campaigning, throw a tie back on, act Presidential, and get back to work. His actions and words (i.e. yesterday’s Town Hall in Ohio) convey a President and a presidency focused on polling and political expediency. The markets view that style and approach as weak and risky.

3. The “thrown the bums out” mentality directed at Congressional incumbents on both sides of the political aisle has poured into the debate of whether Ben Bernanke should be reconfirmed for another term as chair of the Federal Reserve. This uncertainty also unsettles the market.

4. Just what will come from Obama’s plan to rein in proprietary trading and risk on Wall Street? More uncertainty and unsettledness . . . and thus greater risk.

5. 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?

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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