MARKET COMMENT
March 7, 2007
EYE
OF THE STORM
Things were a little calmer today, but we should expect more
volatile conditions ahead.
There was some good and bad news today.
First the good news: the Fed’s Beige Book
noted economic weakness which for equity bulls meant the Fed may cut interest
rates sooner rather than later.
Second,
the bad news: the Fed’s Beige Book noted some economic weakness which for bears
means potential pressure on corporate profits.
So as usual, there are two sides to the same story.
Take your choice.
Yesterday’s oversold rally is now in the rear view mirror
and we’re left with whatever’s next.
If
you know, please pass it on.
One thing
is certain, the market is no longer “short-term oversold”.
Market breadth wasn’t that encouraging and reflected the
stalemate today.
The other big news of the day was the sharp rise in energy
prices following a larger than expected drop in inventories.
While some may attribute gold’s rise today to rising energy
prices, it’s really the weak dollar stemming from economic weakness driving the
price higher.
But, everyone’s entitled
to an opinion.
There was a very interesting story in Bloomberg discussing
Moody’s ratings of some bank debt.
Perhaps it was unintended, but the note that caught my [and other people’s
attention] was a reference to the assumed role the government would play during
any bank failure owing presumably to mortgage difficulties.
It’s the “too big to fail” deal again.
The entire article is here.
When I selected the image for the day, there was still some
time left on the clock before the close.
The smackdown into the close was reminiscent
of Monday’s close and so perhaps today wasn’t deserving of a tranquil
image.
But we’ll just let it stand.
There was no follow-through to yesterday’s explosive
rally.
The initial interpretation from
my “weekly” focus is that one day doesn’t a recovery make.
We’ll need to finish the week stronger over
the next two days.
Remember Friday is
the all important employment report.
If
the ADP jobs number reported today is reasonably representative of conditions,
job growth reported Friday could add fuel to the budding economic weakness theme.
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in:
DBE, DBC, GLD, FXY, SHY, IEF, TLT, EWJ and
EWA.