Yesterday, the DJIA (+9.44 +0.08% to 12289.76) was marginally above water, while the S&P 500 (-3.32 -0.24% to 1358.44) slipped back. The NASDAQ Composite (-10.52 -0.43% to 2448.94) continued to sink. The Toronto index was down -224.6 -1.50% to 14736.2.
Holding the market up were the Consumer Discretionary (XLY +0.38%) and Financials (XLF +0.30%) sectors. The worst hit sectors were Energy (XLE -2.5%) and Basic Materials (XLB -1.3%).
On the macro front, the ICSC reported a 1.7% increase in comparable store sales last week, largely due to spending of the income tax rebate checks. At 2:00pm ET today, the May Treasury Budget will be reported. The Consensus Forecast is for a deficit of -$155.0 billion. Over the past 10 years, Econoday points out that the average deficit for May has been $47.4 billion, but we are likely to see a surge in the deficit due to the mailing of income tax rebate checks.
Also, the US trade balance in April widened sharply to $60.90 billion as imports (+4.5%) rose faster than exports (+3.3%). This was primarily due to a run up in oil prices. The Consensus Forecast had been for a $59.5 billion deficit. There March deficit was revised to $56.5 billion deficit.
In corporate M&A news, Japan's Daiichi Sankyo announced the agreement to purchase 50.1% of India's Ranbaxy Laboratories for $4.6 billion. XTO Energy (XTO) will buy Hunt Petroleum for $2.6 billion in cash and 23.5 million shares of XTO stock, in a deal worth $4.19 billion.
Hawkish talk from the Fed and from Treasury Secretary Paulson firmed the US Dollar again. That led to profit-taking in the oil and gold commodities and equities. The Oil stocks ($XOI -2.6%) and Goldminers ($XAU -4.5%) sagged. For the commodities, $WTIC Crude Oil futures dropped -$3.04/bbl (-2.26%) to 131.31, while $GOLD futures closed down -$26.90 (-3.00%) to 871.20.
US Treasury selling accelerated as the 10-year yield closed up to 4.099%, and the 30-year T-Bond sank -0.86% to 113.95.
Cara 100 winners on the day were KO +3.8% and DIS +2.0%--both DJIA components, which says to me that the DJIA is being pushed. Also higher were SBUX and OXPS each up +1.8%.
Losers were commodity related: CCJ -7.8%, ABX -6.8% and GG -6.6%.
This morning, the $USD futures are weaker with the Euro futures up to 1.5511 and precious metal prices are modestly higher: at 8:31am ET, the Gold, Palladium, Platinum and Silver spot prices are: 877.9, 425, 2019, and 16.70 respectively.
Crude oil prices are way up again (+2.415/bbl) to 133.725.
The equity futures are up +32 to 12308. Overnight, in Asia-Pacific equity markets, Australia gained +0.32% to 5561.9, Shanghai lost -1.57% to 3024.24, Hong Kong was down -0.21% to 23327.6, while India’s Sensex gained +1.99% to 15185.32 and the Japanese Nikkei was up +1.16% to 14183.5.
Comments & Outlook
Inflation in Japan hit a 27 year high. Inflation has become an issue everywhere in the world, while economic slowdown doesn’t appear to be as bad as anticipated. That is not a good mix for lower interest rates. The consensus is growing that rates have bottomed and may rise later this year.
Wal-Mart (WMT) traded at a 52-week high of $59.95, closing at $59.78. We issued a Sell Alert on 2008-06-06 at $58.37. The stock should have been bought last September into weakness in the low 40’s and sold this week into strength in the high 50’s.
