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DATE: TUE 1-25-01
FUTURES
Institutional desks led the selling spree, setting off stops and sending Mar
S&P 500 futures through Monday's low around midday. Traders reported signs of
asset reallocation as bonds headed north and equities south, but bulls regained
the upper hand by afternoon. Dealers were selling at the opening but the market was able to bounce back,
with some aid from a rise in bond prices.
Market bulls needed a close above 1432.00 in Mar S&P 500 to
restore confidence, and the market may be hard pressed to make any significant
upside progress until after the Feb 1-2 FOMC meeting.
CREDIT
European bonds took their lead from overnight gains in the
US, albeit in modest volumes. In the euro zone, German inflation numbers came in
above expectations and there was a brief break below parity in euro/dollar. Both
factors were bond-negative but not too any huge extent, and markets ended the
day in positive territory. Following a rise of 20 ticks for US Treasuries overnight, Bunds opened
sharply higher, reaching an intraday high of 103.24.
In the US, the East Coast snowstorm threatened to limit
activity and resulted in the cancellation of Tuesday's main event, Fed Chairman
Alan Greenspan's appearance before the Senate Budget Committee. But the Treasury
market managed to keep busy, mostly by trading off stocks.
FX
Euro/US dollar dipped its toe a little further below parity
in Europe Tuesday, but withdrew it no less quickly than on previous occasions.
After marking out a new 10-year low of 0.9987 on "synthetic" euro charts, the
pair recovered to around 1.0050.
A Swiss account and a US moneycenter bank were spotted selling euro/dollar
in early European trade, despite some fairly encouraging euro-zone economic
data.
Talk made rounds that either a regional Asian central bank or an individual
European central bank was seen bidding at the sub-parity levels, but the rise
to $1.0072 seemed to have been herded by position squaring in a light market.
Euro/dollar reversed its half-hearted rebound as a US bank was noted sell
ing a good amount from $1.0065 to $1.0050. Weighed by these sales, the pair
slipped steadily back toward parity in the afternoon, with additional drag from
the recovering US stocks.
Mar euro made a fresh contract low of 1.0030 early in the
US session Tuesday as traders geared up for an anticipated upward correction in
the US stock market that failed to pan out early. But euro futures pulled back
from the lows to close at 1.0053, down 26 from Monday. Volume was very light as
a snow storm sent New York traders to their homes.
Traders said the euro weakness wasn't too surprising. Currency trader Yra
Harris said euro zone finance officials seemed to prefer a weak euro. That's why
European leaders Saturday shunned Japanese appeals to the Group of Seven finance
ministers to weaken the yen. And there's a sense that (Japanese finance officials) are pretty
comfortable where we are now.
UK December retail prices at highest annual rate since March 1999 and
German inflation numbers come in strong in state of Hesse. Italian November retail sales surge 5.5% on year.
EQUITIES
The Senate banking committee will conduct a hearing at 1000 ET, and members
are expected to quiz Greenspan on interest rates and the economy. The Fed
chairman's budget testimony was called off Tuesday due to a snowstorm along the
East Coast. Market watchers will look for signs the Fed might raise rates more
than a quarter point.
Leading the market higher were securities brokers, banks and biotechnology
issues. Software, gold and airline stocks generally dipped.
CRB
NYMEX heating oil futures rose 4.7% in the face of a
winter storm on the East Coast. Concern about refinery production in the region
and expectations that inventories decreased last week also supported the market.
Mar crude settled up 45c at $28.28 per barrel. Feb heating oil settled up 403
points at 90.38c per gallon; Feb gasoline rose 131 points to 76.79c.
At the close, the Commodity Research Bureau's index of 17 futures prices was
0.97 higher at 212.02.
The CRB reversed a mild trend of recent declines, stabilizing above the old
range highs. As long as the market stays clear of that new support line
(209.91), the bullish argument will remain intact.
FUTURES
CREDIT I
FX I
EQUITIES
CRB
