Thursday, January 03, 2008
$100 Oil!!
2008 got off to an awful start Wednesday with the major markets down sharply. The Dow gave up 220.86 points to close at 13,043.96. The SPX lost 21.20 points to finish the session at 1,447.16. We are in the green and looking ok.
The session got off to a rough start when the ISM Index for December fell sharply. This manufacturing index fell to 47.7 during the month, putting the index in contraction territory. The index has been hovering just above the 50 level, which separates contraction from expansion. However, December’s figure was the lowest since April 2003. Inside the data we see that new orders tumbled to 45.7 from 52.6 and that production dropped to 47.3 from 51.9. The employment component stayed below 50 as well at 48.0 This is not a good sign for Friday’s employment report!
Another bad sign Wednesday was the gains seen in oil prices. Crude tacked on 3.6% to close at $99.45. It however hit an intraday high of $100 earlier in the session. There continues to be concerns about supply ahead of tomorrow’s weekly inventory release in addition to the worries about political unrest in Nigeria and Pakistan.
With energy prices so high, this can lead to a drop in consumer sentiment and ultimately a decline in consumer spending as people pay more to fill up their cars. It also means inflation rises even though the CPI figure excludes oil!
And finally the Fed Minutes were released Wednesday. The minutes stated that the Fed is concerned about risks to economic growth, but that they feel high food and energy prices will fade in the months to come (don't know why!). The Fed also noted that they weren’t more aggressive with cuts in December because they feel the prior cuts haven’t yet filtered fully into the economy.
The data released yesterday seems to be pointing to stagflation. This is not good for the markets and people generally. For us though, we don't care. We make money on any type of market! We just need to be mindful of the downside.
Next big report out is the Employment report on Friday. If this is bad then watch out below.
Until next time.
The session got off to a rough start when the ISM Index for December fell sharply. This manufacturing index fell to 47.7 during the month, putting the index in contraction territory. The index has been hovering just above the 50 level, which separates contraction from expansion. However, December’s figure was the lowest since April 2003. Inside the data we see that new orders tumbled to 45.7 from 52.6 and that production dropped to 47.3 from 51.9. The employment component stayed below 50 as well at 48.0 This is not a good sign for Friday’s employment report!
Another bad sign Wednesday was the gains seen in oil prices. Crude tacked on 3.6% to close at $99.45. It however hit an intraday high of $100 earlier in the session. There continues to be concerns about supply ahead of tomorrow’s weekly inventory release in addition to the worries about political unrest in Nigeria and Pakistan.
With energy prices so high, this can lead to a drop in consumer sentiment and ultimately a decline in consumer spending as people pay more to fill up their cars. It also means inflation rises even though the CPI figure excludes oil!
And finally the Fed Minutes were released Wednesday. The minutes stated that the Fed is concerned about risks to economic growth, but that they feel high food and energy prices will fade in the months to come (don't know why!). The Fed also noted that they weren’t more aggressive with cuts in December because they feel the prior cuts haven’t yet filtered fully into the economy.
The data released yesterday seems to be pointing to stagflation. This is not good for the markets and people generally. For us though, we don't care. We make money on any type of market! We just need to be mindful of the downside.
Next big report out is the Employment report on Friday. If this is bad then watch out below.
Until next time.
# posted by Paul @ 5:31 AM 
