Summary
It's about time for a detailed update on interest rates and the stock market. This is not it, but...
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I hope to get around to a more detailed missive on the bond and stock markets over the coming weekend. The title I've tentatively decided upon is, "Stocks: The Ecstacy and Agony of Instant Gratification." In turn, this will be a reference to the piece I wrote on 2/21, entitled, "Stocks: My Near-Term Outlook Moves to a More Ominous 'Red Alert.'"
February 21st was a market holiday. The following day, stocks got clipped badly. That was the day the DJIA took a 174-point hit; the S&P 500 and NASDAQ 100 were down 17 and 21 points, respectively.
While the 2/21 missive expressed some major and growing concerns about the stock market's relatively near-term prospects, believe me, it was not the very next day I had in mind! (Nevertheless, I'm not looking a forecasting gift horse -- the "ecstacy" part -- in the mouth.)
The upcoming missive will refresh all of that, to include some observations about what took place after the market's 2/22 setback -- the "agony" part. Overall, however, I would say that some of the more serious market-oriented items discussed in the 2/21 missive are in the process of going wrong, and for the right reasons, too!
Over the last few weeks, the interest-rate situation has been in transition. Yields at the longer end of the Treasury curve have risen materially between 2/18 and yesterday, as reflected by respective rises of 24 and 17 basis points in the 10-year and 30-year maturity sectors.
It is my own view that this is at least partially the result of the beginning of a serious attempt to unwind carry trades, a process I think could get pretty ugly. In turn, I suspect this could contribute to a very bumpy road for the stock market.
Through yesterday's close, my seven-measure tracking group stood an average 1.8% below respective 2004 closing highs, all set towards the end of December. Returns ran in a range of a positive 1.4% for the NYSE Composite, to a negative 6.3% for the NASDAQ 100. The NYSE Composite was the only one of the group's seven components that remained in the black.
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KEEPING TRACK OF 2/22/05 (Respective Point Changes
on That Date, Plus Cumulative Results Going Forward)
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Stock Prices
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Wilsh. NYSE NAS. S&P Russ. Value
Date 5000 DJIA Comp. 100 500 2000 Line
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2005
02/18 11842 10785 7287 1515 1202 630 394
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02/22
Close 11665 10611 7211 1494 1185 618 388
Change -177 -174 -76 -21 -17 -12 -6
Change -1.5% -1.6% -1.0% -1.4% -1.4% -1.9% -1.5%
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03/09
Close 11886 10806 7355 1522 1207 631 396
Cum. 44 21 68 7 5 1 2
Change 0.4% 0.2% 0.9% 0.5% 0.4% 0.2% 0.5%
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Interest Rates (US Treasury Yields, %)
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Date 90-Day 2-Year 5-Year 10-Year 30-Year
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2005
02/18 2.59 3.43 3.86 4.27 4.65
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02/22 2.62 3.42 3.87 4.28 4.68
Cum. 3 -1 1 1 3
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03/09 2.75 3.65 4.13 4.51 4.82
Cum. 16 22 27 24 17
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