Monday, May 17, 2004
Issue Contents:
| 08:55 | The Day Ahead U.S. Market Calendar |
| 08:59 | Economic Data Summary of Today's Releases |
| 09:06 | Headlines and Reaction Between the Lines |
| 09:24 | The Swing Trade Today's Stock Picks |
| 16:16 | TrendVue Active Trader Today's transcript. |
| 16:16 | TrendVue Trader Talk Today's transcript. |
Monday, May 17
- 8:30AM NY Empire State Index
- 9:00AM Treasury Internation Capital Report
- 11:00AM 4-Week Treasury Bill Announcement
- 12:00PM Federal Reserve Governor Susan Schmidt Bies speaks about corporate governance to Arkansas Bankers Association convention in Hot Springs, Arkansas.
- 1:00PM 3-Month Treasury Bill Auction
- 1:00PM 6-Month Treasury Bill Auction
- 3:15PM Federal Reserve Governor Roger Ferguson speaks about the role of central banks at the Belgian National Bank in Brussels.
For earnings highlights, please see today's WSJ Earnings Calendar. For a list of speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. /Teresa
Empire State Manufacturing 30.21
(Econoday.com) - The Empire State Index eased back in its May reading to 30.21 from an exceptionally strong April level of 34.03. But the slip was more than offset by a strong rise in new orders to 36.59 vs. 30.56 last month, a reading that points to further strength ahead in the region's manufacturing activity.
Unfilled orders were also higher, rising to 15.74 vs. 6.04 in April and compared with 3.32 in March. Rising backlog is a reflection of strong order activity and may point to capacity expansion ahead. Shipments were also higher in the month while delivery times slowed, also both indicative of rising activity.
Price readings were also firm, perhaps raising tensions further that inflationary pressures may soon spill out of the manufacturing sector and into the wider economy. Prices received rose to 17.50 in May vs. 13.08 in April and 11.76 in March, suggesting that manufacturers are beginning to make price increases stick. Prices paid remained very high at 56.67 vs. 57.01 last month, no doubt a reflection of rising metal and energy costs. Note that price expectations six months out are also high.
Employment data also reflected improving conditions. The number of employees rose to 21.34 vs. 18.48 while the average workweek rose to 21.31 from 20.83 in April and well up from 11.86 in March.
Treasury International Capital
(Econoday.com) - The Treasury International Capital report continued to show strong foreign demand for U.S. financial assets, at least in March. Foreign purchases of long-term U.S. securities totaled $78.6 billion vs. $83.3 billion in the shorter month of February (TIC data are not adjusted).
Foreign purchases of U.S. Treasury bonds and notes were exceptionally strong, at $61.5 billion vs. $37.0 billion in February.
Japan, having to spend dollar proceeds from its massive first-quarter currency intervention, remained the top holder of U.S. Treasuries at $639.8 billion vs. a level of $607.9 billion in February.
China remained a top holder at $148.4 billion vs. $145.0 billion in February. The U.K.'s total at $153.8 billion was higher but the data reflect the nation's status as an international banking center, a factor that is not skewing China's total.
U.S. appetite for foreign securities continued to wane, contracting a further $3.7 billion in the month compared with a $1.7 billion contraction in February.
3-Month Bill Treasury Rate 1.040%
(Econoday.com) - Bill rates appear to have stabilized following last week's sharp jump, reflecting calmer expectations that the Federal Reserve will begin raising rates at a measured pace beginning in late June.
The high rate for Monday's $18 billion 3-month bill auction came in at 1.040 percent, down 2 basis points from last week's auction when the rate spiked 7.5 basis points.
The bid-to-cover was a moderate 1.96 vs. 2.27 for last week's auction of the same size.
6-Month Bill Treasury Rate 1.335%
(Econoday.com) - Bill rates appear to have stabilized following last week's sharp jump, reflecting calmer expectations that the Federal Reserve will begin raising rates at a measured pace beginning in late June.
The high rate for Monday's $15 billion 6-month bill auction came in at 1.335 percent, down 1/2 basis point from last week's auction when the rate spiked 16.5 basis points.
The bid-to-cover was a solid 2.37 vs. 1.91 for last week's auction of the same size.
Let's take a look at this morning's headlines at WSJ.com:
A CAR BOMBING KILLED a second member of the Iraqi Governing Council, dealing a blow to U.S. efforts to stabilize the country before the June 30 handover. The current president of the council was among four Iraqis killed by the blast near a Baghdad checkpoint.
- Pressure Mounts to Expand Abuse Inquiries
- Powell Fails to Placate Arab Leaders
U.S. stocks are expected to skid early after the car bombing in Baghdad raised concerns about the handover of power and the viability of Middle East oil markets.
India's stock market plunged in its biggest single-day drop ever, as investors panicked about the economic policies of Sonia Gandhi's incoming government. India's main communist parties said they would support, but not join, the new coalition.
- Other Asian-Pacific Markets Also Tumbled
- Concerns on Iraq, Oil Prices Hurt Europe Stocks
The U.S. has been filling its emergency oil reserves to their highest levels ever, as terrorism fears boost the price of crude. Some experts question whether the U.S. should use its reserves to help drive down prices.
- Factory Activity Cools in New York
- SEC Targets Lucent Over Cooperation in Probe
- Nortel Paid Cash Bonuses Before Stock Fell
- Siemens Sets China Expansion Plan
- XTO to Buy Assets From ChevronTexaco
- GM Europe to Get a Major Tune-Up
- Insurance Fees Are Scrutinized
- Strong Financial Nears Settlement
Reaction: Boy, they're not holding anything back now. Bad news is everywhere and investors now know all the reasons why stocks should go down at this point in the sentiment cycle.
Well, it's only Monday morning, and we've got a case of "the best laid plans of mice and men..."
One of the reasons why I almost never decide on things the night before is that fact that it's important to look at market conditions in the hour or two prior to the open. This is a very annoying habit for subscribers because you want to have your orders lined up, after reading about the picks the night before.
There are times when a relaxed approach is appropriate and there are times like these when the market is in upheaval where we need to be mindful of risk. For example, it looks like S&P futures are going to open down 12 points from Friday's close.
Given that the 5-day average true range is 15 points, what we can say is that we can expect the [ESM04] to move 15 points today. With a down open of 12 points, we can say that 80% of today's expected move it down at the open.
If we had any short sale setups for today as swing trades, it would not be a good idea to push that order button at the open on a big gap down. Instead, the right thing to do is to attempt an intraday entry due to the extreme gap down open. Watch and wait for a bounce and then see if it is a good one to sell.
For background information on our approach to swing trading, please visit the Swing Trading Principles section in the Knowledge Base. /Teresa
Today's transcript.
Click on the title above to expand this document.
Today's transcript.
Click on the title above to expand this document.