Summary
This is the first (and somewhat abbreviated) edition of "Market Thoughts," although I have labeled it #15, because it replaces "Last Week in the Markets..." This would have been the 15th edition of the latter publication.
In many respects, the new publication will be like the old one, but with a more appropriate title, I think. I will have more on my plans for "Market Thoughts" in its next edition.
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Interest Rates
* Based on the assessment of the federal funds futures market, Alan Greenspan will leave behind another 25 basis-point increase in the funds rate, to 4.50%, when he chairs his last meeting of the Federal Open Market Committee tomorrow. (Goodness, has that day rolled around already? It seems like just yesterday when Uncle Al, Wall Street's pal, reported for duty.)
* For what it's worth, the futures market is indicating that Ben Bernanke may or may not oversee another quarter-point hike in the funds rate when he chairs his first meeting at the end of March (3/28). (The FOMC does not have a scheduled meeting in February.)
* Meanwhile, and consistent with recent views I've expressed, the longer end of the Treasury curve is beginning to feel its oats in a more visible way. Last week, the 30-year bond rose a strong 17bp in yield. The 10-year note was up 16bp. This was against a rise in the 90-day T-Bill's coupon-equivalent yield of nine basis points.
Stocks
* After the strong drubbing it took during the week ended 1/20, the stock market bounced back last week in a major way (and with some major "help," too, I suspect). The GRA seven-measure tracking group registered an average gain of 2.5% (versus the prior week's average decline of 2.0%). In the process from a technical perspective, the market swung from modestly short-term oversold to strongly short-term overbought.
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SELECTED STOCK-MARKET MEASURES
(GRA Seven-Measure "Tracking
Group," Listed by YTD Returns)
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01/27
01/27 2006 12/31 Week From 2006 YTD
2006 High 2005 Ended 2006 as of as of
Close Close* Close 01/27 High High 01/27
===== ===== ===== ===== ===== ===== =====
Russ. 2000 732 732 673 3.9% 0.0% 8.8% 8.8%
Value Line (G) 436 436 413 2.9% 0.0% 5.6% 5.6%
NYSE Comp. 8096 8096 7754 2.5% 0.0% 4.4% 4.4%
NASDAQ 100 1711 1758 1645 2.1% -2.7% 6.9% 4.0%
Wilsh. 5000 12963 13011 12518 2.0% -0.4% 3.9% 3.6%
S&P 500 1284 1294 1248 1.8% -0.8% 3.7% 2.8%
DJIA 10907 11043 10718 2.3% -1.2% 3.0% 1.8%
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Average 2.5% -0.7% 5.2% 4.4%
Median 2.3% -0.4% 4.4% 4.0%
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*Russell 2000, Value Line (G) and NYSE Composite set their
2006 closing highs on 1/27. The other four measures' 2006
closing highs were set on 1/11.
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* As has been the case for the last few FOMC meetings, Wall Street bulls are licking their chops, waiting to find wording in tomorrow's post-meeting statement to justify a one-way stock market, on balance, for the rest of the year, based on an interest-rate play. You can be sure Uncle Al will try to "fashion" the wording to accommodate. After all, he has the zillions of dollars in upcoming speaking engagements to think about.
The Dollar
* Although the dollar had a timely bounce last week (Dollar Index +0.4%), I continue to believe the greenback is making/already has made a very important top.
Gold/Silver & Group Stocks
* Physical gold continues to do very nicely. The major stocks in the complex do, too, as measured by the XAU. The metal was up about 1% last week, accompanied by a strong 6.7% rise in the XAU. Physical silver finished last week with a gain of 7.9%.
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