Major averages are trading at session lows

Tuesday, June 3, 2008

The major averages are currently mixed and nearly unchanged, with the Nasdaq outperforming with strength in tech bellwheters such as Oracle (ORCL), Cisco (CSCO), and IBM (IBM). Before the open this morning, at 9:00 ET, Chairman Bernanke spoke at an international monetary conference, commenting that the Fed is attentive to the implications of the dollar's slide. This comment is important as it is one of the first times we have seen the Fed have a verbal intervention regarding the dollar. Following these remarks, the dollar strengthened and commodities, including gold and crude, began to sell-off. The major averages then opened modestly to the upside, rebounding from yesterday's sharp sell-off. At 10:00 ET, the market received more positive economic news, with April Factory Orders exceeding expectations (+1.1% vs. -0.1% consensus). The factory orders data are not regularly followed by the financial markets, but this time they should be, since the data indicate that manufacturing remains surprisingly resilient and will be even stronger in the months ahead. This news boosted the major averages to their highest levels of the morning. However, the market gradually gave up those gains, and slid into negative territory at around 10:45 ET, making intra-day lows. Financials again are largely responsible for the fluctuations in the market, following yesterday's credit rating downgrades at S&P for a few large institutions and this mornings WSJ story about Lehman (LEH) potentially needing to raise $3-$4 bln in new capital. The major averages quickly snapped back off the lows, and trended slightly higher until about noon, when the market began its move back towards the unchanged level. Dow is currently -28 to ~12475; Nasdaq is currently +7 to ~2498; S&P is currently -0.5 to ~1386... From a technical perspective, the major averages are locked in a narrow range, inside day thus far, typical price action after a trend day down like we saw yesterday. The indices are mostly in the lower part of the daily ranges with the Dow (INDU) lagging, and the tech. heavy NASDAQ (COMPQ) leading @ midday. Internals remain fairly positive heading into afternoon trading with TRIN on NYSE & NASDAQ below the 1.00 neutral line. Advancers are outpacing decliners by better than 1.0:1 on NYSE and by 1.1:1 on NASDAQ... The Bond market traded slightly lower in overnight trading, and fell sharply at the open of pit trading. The 10-yr range traded for a few hours, and the spiked around 12:30ET above the levels at the open of pit trading.The 10-yr is currently +04/32 3.940%... In Commodities, this morning's comments by Federal Reserve Chairman Ben Bernanke (that the Fed is ‘attentive' to implications of the dollars slide) sent the dollar significantly higher, which in turn, sent tremors through other markets. The comments about the dollar also sent July crude ($125.10 -2.66) lower, falling about $1.50 initially. Following the preliminary move, crude has continued to grind lower, making lows at $125.20... In Europe, mkts ended higher, trimming some of the previous day's losses as Royal Bank of Scotland (ADR: RBS) and UBS (ADR: UBS) recovered, while a fall in oil prices helped bolster sentiment. FTSE closed +0.8%; DAX closed +0.2%; CAC closed +1.0%... Note in Asia, the Nikkei closed -1.6%, the Hang Seng closed -1.8% and the Shanghai Composite closed -0.7%... On the Earnings calendar, 7 cos are confirmed to report today after the close including GES and HOV. Tomorrow before the open, cos are confirmed to report including VIP and WSM... On the Economic calendar nothing remains on the schedule for today. Tomorrow before the open, preliminary productivity figures are scheduled to be rel4eased at 8:30ET.