BetterTrades

February 11, 2009

Coming off a massive sell-off in yesterday’s trading session, the markets responded attentively today as a rebound was expected. Fortunately, the markets recovered from their earlier losses to post a positive showing heading into the close, with all the major indices closing in the green.

After waiting the approval of the proposed $800B stimulus bill, it was announced mid-afternoon that lawmakers had agreed on the bill valued at $789B. Today’s news followed yesterday’s statement about an overhaul to the already passed $700B financial rescue package,, which pushed the Dow Jones to its lowest point since last November.

In economic news, the Commerce Department announced early this morning that the trade deficit in December declined by 4%. Posting its lowest levels in nearly six years, today’s news marked the second straight year that the deficit decreased.

For the month, the deficit dropped from $41.6B in November, to its current level of $39.9B. For the year, the trade deficit declined by more than 3% to $677.1B, its second decline in as many years, following five straight years of increases.

Within the energy markets, the price of oil dropped today, following the EIA’s report of a 4.7 million barrel increase in supply. By the close of trading the price for a barrel of light, sweet crude for March delivery slipped $1.99 to settle at $35.94.

Furthermore, the national average for the price of gasoline advanced overnight, adding $0.012 to $1.94 a gallon. Today’s gas price is nearly $0.15 higher than this time last month, but still $2.17 below its peak price of $4.11 a gallon set back in July.

Treasury prices inched higher today, as investors remained cautious after yesterday’s plunge within the markets, keeping their money in safer, government-backed securities, rather than in the more volatile equity markets.

The Dollar was higher against the major European currencies by late afternoon, on news of the proposed stimulus package agreement, but declined versus the yen. In late trading, the 16-nation Euro slipped to $1.2882, down from $1.2913, while the British pound dropped from $1.4542 to $1.4367. Against the Japanese yen, the Dollar dropped from 90.47 to 90.30 heading into evening trading.

By the end of trading, the benchmark 10-year note was up 15/32 to 108 11/32, yielding 2.77%, while the longer 30-year note was up 21/32 to 119, yielding 3.46%. Adversely, the 2-year note slipped 1/32 to 99 30/32, while yielding 0.91%.

By the sound of the closing bell, the Dow Jones Industrial average added 50.65 points, or 0.64%, to conclude the day at 7,939.53, while the broader market indicators finished the day in positive territory as well.

The S&P 500 index gained 6.60 points, or 0.80%, to end the day at 833.75, while the tech heavy NASDAQ composite index advanced by 5.77 points, or 0.38%, to close out the session at 1,530.50.

Tomorrow’s session has the possibility of being influenced by two economic reports, Initial Claims, which is expected to come in at 610,000 claims for the week of February 7, and the Retail Sales report, which is expected to post a decline of 0.2% for January’s reading.

In addition to economic data, tomorrow’s session will see more quarterly earnings released by several well-known companies, including Coca-Cola (KO), Marriott (MAR), Waste Management (WMI) and Ecolab (ECL), all reporting before the markets open.

2009 Better Trades Article

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BRIAN MULLIN