February 18, 2009

Better Trades US News

A day after the signing of the stimulus bill into law, the markets were unsure as to which way to trade. With much of the day seesawing back and forth between positive and negative territory, investors continued to wait for relevant signs that the economy is headed towards a recovery phase.

Wednesday’s session was mired with more disheartening economic news, which gave the markets no reason to sustain a rally heading into the afternoon session. As the nation’s economy continues to be mired in housing troubles, financial concerns and job losses, many persist to find ways to cope with an ever-tightening recession.

Before the opening bell, the Commerce Department announced today that construction of new homes and apartments in January declined to record levels, plummeting 16.8% during the month, to a seasonally adjusted rate of 466,000 units. Today’s number comes in well below analysts’ projection of 530,000.

Furthermore, the agency also released their findings showing applications for building permits slipped by 4.8% to an annual rate of 521,000, down from December’s filings of 560,000. With more than two million American homeowners facing foreclosure last year, an increase in mortgage defaults, tighter lending practices and the overall sour sentiment within the housing markets have kept buyer idle.

With the recession in full swing, the Federal Reserve revealed their findings this morning in which production at factories, mines and utilities declined by 1.8% in January, greater than the 1.5% decline economists had anticipated. Today’s reading, following December’s decrease of 2.4%, marks the third consecutive month in which production has been curtailed.

Looking deeper into the Fed’s report, factory production fell 2.5% in January, while output at mines slipped 1.3% during the month. On a positive note, production at utilities advanced during January, posting an increase of 2.7%.

As the recession continues to affect every aspect of the country’s economy and with massive layoffs and plants closing, the nation’s operating capacity receded to 72%, down from December’s rate of 73.3%. January’s reading comes in as the lowest such reading since February 1983.

Wednesday’s trading was also infused with words from Fed Chairman Ben Bernanke, in which he confirmed in a statement that he would do everything in his power to right the country’s woes and bring the nation out of its current recession. Despite his encouraging words, the markets remained near breakeven heading into the final hour of trading.

Within the oil industry, as the March delivery contract is set to expire this Friday, much of today’s trading volume was within the April contracts. However, by the sound of the closing bell, the price for a barrel of light, sweet crude for March delivery slipped $0.31 to trade at $34.62 a barrel. As for the April contract, it slipped in trading, falling $1.13 to settle at $37.41 per barrel.

In additional NYMEX trading, gasoline futures fell $0.0566 to $1.0652 a gallon. Heating oil slipped $0.04 to $1.1469 a gallon, while natural gas for March delivery retreated by $0.0089 to $4.203 per 1,000 cubic feet.

As President Obama unveiled his housing recovery plan earlier today, the Forex market turned out to be beneficial for the U.S. Dollar, posting gains against the major European and Asian currencies heading into the evening hours. By late afternoon, the 16-nation Euro slipped in price against the greenback, buying $1.2555, while falling to its lowest price since December, $1.2511, and well below yesterday’s price of $1.2615.

Additionally, the British pound also retreated in value versus the Dollar today, buying $1.4224, down from Tuesday’s price of $1.4266. Finally, the greenback also gained ground against the Japanese yen, buying 93.76, up from last night’s 92.42. Conversely, the Dollar declined in value against the Canadian dollar, falling from 1.2644 to 1.2599, while advancing on the Swiss franc, buying 1.1762, down from yesterday’s price of 1.1695.

With the Treasury Department adding more debt securities to the bond market to finance the stimulus package, Treasuries retreated by the close today, as the benchmark 10-year note slipped 1 1/32 to 99 27/32 as its yield increased to 2.76%, up from yesterday’s 2.65%. Additionally, the 30-year note declined as well, falling 1 16/32 to 99 25/32 while yielding 3.56%, up from Tuesday’s 3.48%. Finally, the 2-year note inched lower, dropping 6/32 to 99 26/32 as its yield increased to 0.96%, up from the previous session’s 0.86%.

By the sound of the closing bell, the Dow Jones Industrial average managed to reverse Tuesday’s massive sell-off, adding 3.03 points, or 0.04%, to end the day at 7,555.63, after having lost more than 3.7%, or nearly 300 points by the close of yesterday’s session. throughout the session, the Dow, at times, was up as many as 72 points, while also being down more than 65 points at its intraday lows.

The broader market indicators declined by the close, as the S&P 500 Index finished just below breakeven, losing 0.75 point, or 0.10%, to end the session at 788.40, while the NASDAQ composite index slipped 2.69 points, or 0.18%, to conclude the day at 1,467.97. Neither of the broader markets gained or lost more than 0.1% throughout the day.

2009 Better Trades Article

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BRIAN MULLIN