Market Snapshot 06-24-2011

from Sigma Research

Treasuries and mortgages a little weaker in early activity but still holding most of the gains of yesterday. The stock indexes in pre-market activity pointing to a little better open at 9:30.

At 8:30 May durable goods orders were better than thought, up 1.9% and ex transportation up 0.6%. April durables were revised better, overall from -3.6% to -2.7% and ex transportation from -1.6% to -0.4%. Q1 GDP final report improved from +1.8% in the preliminary report last month to +1.9%. It is old news and the fractional increase is relatively meaningless to traders.

Most of the talk this morning is still over the IEA and Obama Administrations decision to take oil from the strategic reserve to supposedly drive down the price of oil thus gasoline. Both oil and Gasoline had already fallen in the past two weeks, gasoline down about 20% from recent highs and crude oil down about $10.00 frm recent highs. Was it just a political move by Obama, or was it necessary? I'll leave the answer to those that are more familiar with the details in the global oil markets. 60 mil barrels accounts from anywhere between 16 hours and 8 hours of oil usage globally, we hear both stats being bantered around. Politically Republicans saying tapping the reserve at this point was unnecessary and set a bad precedent; Democrats saying it is necessary for improving economic recovery. The other view being talked about, showing OPEC they can't get away with not increasing output as it did a week ago.

 As far as helping economic recovery with 60 mil more oil over the next 30 days seems a little too optimistic. The world will get 2 mil barrels a day for 30 days, then what? If the global economy were to immediately re-start growth the price of oil and gasoline will climb right back up. The only way to get oil lower and keep it low is for oil producers to open the taps and increase output dramatically and that isn't on the table now, and likely will never be there.

Yesterday afternoon reports hit that the EU and IMF had agreed on a bail-out package for Greece; the news hit at 3:00 with the DJIA down 180 points, at the end of the session an hour later the DJIA closed down 59 points. The news was welcome but at the moment there still is no lock on the plan. Greece’s next hurdle is to shepherd 78 billion euros ($111B) of austerity measures through parliament, after yesterday’s endorsement of the program by from the European Commission, the European Central Bank and the International Monetary Fund. “We have agreed that there will be a new program for Greece,” German Chancellor Angela Merkel told reporters at an EU summit in Brussels today. “This is an important decision that says once again we will do everything to stabilize the euro overall.”

In Washington, the land of Oz, the work on the budget and debt increase continues. Work of course is a relative term, in this case the work is about who gets re-elected. That is what we have in Washington, people sent there to work on their re-election campaigns. Stupid is as stupid does according to Forrest Gump, he must have spent time in the city. Republicans walked away from discussions yesterday, a show of adolescent behavior; Democrats equally childish, unwilling to accept cuts in most programs unless they get tax increases. The saga will go on and on until the final hour on August 1st, then it will not be a meaningful measure as our leadership continues to kick the can down the road as they have done for the last three years with no budget. Let the next Congress deal with it, I want to be re-elected and get my pension, health care and all the perks I can get! I couldn't care any less about what has to be done, its al;l about me!

At 9:30 the DJIA opened down 19 points after trading higher in pre-market activity. The 10 yr note moved back to unchanged after being down 8/32 at 9:00. Mortgage prices at 9:00 were down 5/32 (.15 bp), at 9:30 off 3/32 (.09 bp). The 10 yr note holding at and unable to break below 2.90% but may make it as long as the equity markets are under pressure as the economic outlook weakens.

globalhomefinance.com