MARKET COMMENT
February 8, 2007
“But I make the weather!”
Phil Connors
A scene from movie favorite “Groundhog Day” seems
appropriate today as the weather folks said, “Sorry folks, two more weeks of
cold weather.”
So this drives up crude
oil which rose 3% today after falling 2% yesterday.
The central banker’s are trying to match each other’s tough
guy images since yesterday Fed Governor Plosser was
talking “vigilance” and the possibility of a rate hike and today ECB head Trichet said they needed to maintain “strong vigilance”.
Who’s tougher?
This last statement was telegraphing currency
traders that a rate hike would be coming in March.
This “tough talk” stuff is really impressive
isn’t it?
Just remember, if yield
differentials matter, the short-term rate for the EU as set by the ECB is only
3.5% versus 5.25% in the US.
You figure it out since we’ve said repeatedly
that there’s little to like about the euro.
In fact, there are rumblings in Deutschland and elsewhere in the EU preferring
to return to the D-mark.
How fun would
that be?
The Treasury completed its auction of 30-year bonds today
and by all accounts it was very successful.
For us, TLT which parallels 30-year bonds fairly well needs to climb
above $89 to get excited.
Now what was shaking in the stock market today?
The primary market moving story came from HSBC
and it was negative news regarding mortgages and potentially rising bad debt
charges.
The story is well-summarized here.
The contagion spread to other mortgage
lenders and even some homebuilders led by Toll Bros.
So, as has been the case all week, the overall stock market
opened weak and stayed that way for most of the session until the cavalry
arrived to pick things up toward the close.
I wonder if the Fed tossing in an extra $19 billion to the primary
dealers helped, ya think?
So what else was happening today?
Oh yeah, gold moved higher with a weaker
dollar and, yes, stronger energy prices.
I just don’t think the latter should be linked, but we don’t fight that.
Other sectors we’ve been promoting discussing include
small and mid cap sectors.
And other sectors of note include some similar names in ETF
sectors we’ve been posting for awhile.
Moving around the world again, let’s see what’s going on.
Like Phil, who doesn’t really make the weather, we don’t
make the markets.
We just follow along
as best we can.
Things can change on a
dime in this environment.
India looks
like a market you can’t lose in.
But
what if something happens to Pakistan’s
Musharaf and radicals take over armed with nukes and
missiles?
That’s the major “what if” negative
for that market.
The G-7 meets this weekend.
Who knows what they’ll do about exchange rates.
Most traders feel nothing will happen.
That could be, but then surprises have
happened from these events.
With the
markets at high levels globally, why would the leaders do something to rattle
them?
I hope you have a pleasant and warm weekend.
We’ll be blogging
again on Monday.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in: SPY, KCE, GLD, DBP, IWM,
UWM, MDY, MVV, QQQQ, FDN, IGN, PPA PHO, DVY, EFA, EEM, ILF, EWA, EWJ, INP and
EWM.