RSS FeedStocks Trade Flat As Oil Prices Fall
Stocks Trade Flat As Oil Prices Fall
Investors this week, appeared to throw caution to the winds as regards interest rates. Instead they took note of some upbeat economic data and invested in stocks.
Reports from the Philadelphia Federal Reserve indicate the highest growth in regional manufacturing in June since April 2005 as evidenced by the leap to 18 from 4.2 in May. However, the market remains unaffected by this report. Investors, aware that the Open Market Committee are due to meet next week, are on the look-out for raised interest rates on account of any new economic strength that might be imminent.
Treasury yields rose on Wednesday but have now calmed down thus alleviating worries over interest rates. There was a slight rise on the benchmark 10-year Treasury from 5.15% to 5.17%.
There was a reversal of course in oil Thursday when light, sweet crude dropped by 21 cents to $68.65 per barrel on the New York Mercantile Exchange. This was a relief as there had been concerns regarding a general strike in Nigeria, the largest producer of crude oil in Africa. Referring to minor shifts as in bond yields, the chief economist, Tom Higgins at Payden & Rygel Investment Management says, Things on a fundamental basis haven’t changed all that much. He goes on to say that the market may rise for the year now that things have calmed down but would suffer volatility in the process.
The dollar remained set amongst other major currencies as gold prices dropped. Comments from Ben Benanke, together with concerns about rise in inflation indicate the possibility of an increase in rates by the central bank. It appears certain that they are not about to cut interest rates this year, thus negating previous predictions. This is all due to the relative volatility of the market in recent weeks following steady advances in stock over 4-week periods.
Due to caution on the part of investors there has been an increase in the yield on the 10-year note to over 5%. This is for the first time since last summer. As a result, spikes in yields have sometimes rocked stock markets as they move inversely to bond prices. In the last three days of last week the Dow leapt by 344 points indicating that as yields receded stocks have achieved rapid but short term gains.
The American Stock Exchange had been compelled to stop trading last Thursday due to technical problems but was able to return to trading of stocks and funds later in the day when these were resolved.
Unemployment seems to be on the increase according to a Labor Department report on an increase by 10,000 in unemployment benefit applications. This is good news for Wall Street as there is still relatively low unemployment and employers do not have to compete for workers, which would be bad news for wage inflation.
There are signs of a modest improvement in the US economy within the next few months according to the Conference Board’s May index of leading economic indicators. Otherwise there is only a smattering of quarterly results from companies as far as news is concerned. In a few weeks we will see a stream of reports on corporate earnings and the usual profit forecasts that Wall Street is accustomed to receiving at around this time. Investors are looking forward to a continued run of solid profits that will serve to raise stocks higher in the coming months.
At the moment it is a matter of wait-and-see as to which direction the market is set to move. The next time we receive news from the Fed we will know which direction this will be.