-- Posted Sunday, 1 May 2005 | Digg This Article

Market Analysis from CapitalUpdates.com:

A very volatile Friday closed another volatile week for the markets as mixed economic reports, another batch of company news and earnings, talk over possible Chinese currency revaluation, and an oil drop below $50 all had significant impacts on the markets.  Worries over a slowing economy and higher inflation continue to battle decent earnings news, but it seemed that the drop in oil had the biggest impact on the markets Friday.  Following oil’s late day drop, the major indices rallied broadly, treasuries turned gains into losses, and the U.S. dollar index turned losses into gains.  Precious metals had already closed for the day, but gold and silver equities held their gains as the gold ETF’s weakened just slightly.

Personal Income for March came in higher than the expected 0.4% at 0.5% and February’s mark was revised up to 0.4% from 0.3%.  Personal Spending for March came in higher than the expected 0.4% at 0.6% and February’s mark was revised up to 0.7% from 0.5%.  The personal savings rate fell to 0.4%, the lowest since October 2001.  “The PCE price index, one of the Fed's favorite measures of inflationary pressures, rose 0.5 percent in March after climbing 0.3 percent in February, a move that may fan growing worries about price pressures in the U.S. economy.  Stripping out volatile food and energy prices, the core PCE index rose 0.3 percent, matching Wall Street expectations and topping its 0.2 percent February gain.”

The Employment Cost Index for the 1^st quarter came in less than the expected 1.0% at 0.7%.  Michigan Sentiment came in lower than the expected 88.9 at 87.7.  Sentiment fell from 92.6 in March and is the lowest since September 2003.  Chicago PMI fell from its 17 year high of 69.2, but came in higher than the expected 62.5 at 65.6.

Oil traded slightly lower Friday morning before dropping off sharply in late trade and ending with a loss of $2.05 or 3.96% to $49.72 to make a new 10 week low.  Oil is down by $5.67 or 10.24% on the week.  Increased output and rising supplies were cited as reasons for the drop as slowing economic growth may dampen demand.  Before Friday, oil had remained quite resilient as it closed above $50 every day for the past two months.  “It was the first time since Feb. 18 that U.S. oil prices settled under $50. And oil prices fell 10 percent in the past week.  Prices have dropped 14.7 percent since the $58.28 record high for U.S. crude on April 4.”

The spread between the 2 and 10 year note yields is becoming increasingly smaller as the 2 year note yield rises and the 10 year note yield falls, bringing back worries about a future recession and also Greenspan’s “conundrum” talk.  The 10-Year Treasury note yield traded lower Friday morning, but turned up in afternoon trade as investors sold treasuries and bought equities that rallied from a drop in oil.  The yield closed with a gain of 0.028 points to 4.201% as the June 2005 US Treasury bond fell from morning gains and lost 6/32 to 114 27/32.  For the week, the yield is still lower by 1.27% and the bond is higher by 0.74%.

The Dow, Nasdaq, and S&P saw losses Friday morning and remained mixed for most of the day before rallying a little after 2PM EST as oil fell below $50.  The major indices just about erased their losses seen Thursday as they gained around 1%.  The Dow gained 122.14 points or 1.21 % to 10192.51 on Friday and is higher on the week by 0.34%.  The Nasdaq gained 17.47 points or 0.92% to 1921.65 on Friday, but is lower on the week by 0.55%.  The S&P gained 13.63 points or 1.19% to 1156.85 on Friday and is higher on the week by 0.41%. 

Despite the gains seen in the major indices by the end of the day Friday, things were looking pretty grim this morning.  The Nasdaq fell below the critical 1900 level to make a new intraday low for the year and if the Dow had lost 30 points today, it would have been the worst April loss in 35 years according to the Wall Street Journal.  The Dow, Nasdaq, and S&P have fallen in 3 of the past 4 months, with the only gains this year coming in February.  These early months are typically pretty strong along with the last two months of the year, but that is not the case so far this year.  For the month of April, the Dow, Nasdaq, and S&P are down about 3%, 4%, and 2%, respectively.  Year to date, the Dow is down 5.48%, the Nasdaq is down 11.67%, and the S&P is down 4.54%.

Among the names making news in the markets Friday were Morgan Stanley, Verizon, Sun Microsystems, Clear Channel, Calpine, Cardinal Health, Archer Daniels Midland, Renault, Saks, AIG, US Airways, Dow Corning, ChevronTexaco, Bayer, Clear Channel, and Microsoft from their earnings released after the bell on Thursday.

The U.S. dollar index was trading below 84 Friday morning on China revaluation rumors, but rebounded to end near its highs and gained 0.07 points to 84.44.  For the week, the index is higher by 0.94 points or 1.13%.  The euro index lost 0.29 points to 128.58 on Friday and is lower by 1.95 points or 1.49% on the week.  The yen found strength Friday on increased speculation that China will revalue its currency, which is currently pegged to the US Dollar.  It is not likely that they will float their currency, at least not right away, but a revaluation to an enlargement of the peg is looking increasingly likely.  The yen made a new 6 week high as it gained 0.97 points to 95.32.  For the week, the yen is higher by 0.84 points or 0.89%.

This week’s economic reports:

Next week brings another slew of economic data that starts on Monday at 10AM EST with Construction Spending for March expected at 0.3% and the ISM Index for April expected at 55.0.  Among the highlights for the rest of the week are the FOMC policy announcement on Tuesday, Q1 Productivity on Thursday, and April’s jobs data on Friday.

Gold & Silver Report from GoldSeek.com & SilverSeek.com: 

COT Gold Report - April 29, 2005

COT Silver Report - April 29, 2005

Gold and silver traded mixed in Asia before making modest gains in London, but both metals then fell off a bit following Friday morning’s first batch of economic data.  Gold then took of between 9:30 and 10AM EST, surging from $431 to $436, but silver was left behind as it only surged about 10 cents before falling off and actually ending the session with a small loss.  Speculative buying and short covering by hedge funds seemed to fuel the rally as traders positioned themselves for the weekend and took advantage of low prices resulting from liquidation in the metals earlier this week.  Early US Dollar weakness over possible Chinese currency revaluation also played a factor in gold’s rally Friday.  Gold gained $3.90 to $434.40 on Friday and is higher by $0.70 on the week.  Silver lost $0.01 to $6.87 on Friday to further its 11 week lows and is lower by $0.39 or 5.37% on the week.

Gold and silver equities rebounded from 8 and ½ month lows as they surged about 1.5% higher at the open Friday and remained near those levels for the rest of the day.  The new gold ETF’s surged almost 1% before leveling off, but fell off just a bit in the last two hours of trade as the U.S. dollar index rebounded.

“London's commodity markets will be closed on Monday for the May Day holiday. China will also shut that day for a labor day holiday, and Japan will close all next week for Golden Week.”

For the week, the XAU is lower by 4.88 points or 5.52%, the HUI is lower by 10.71 points or 5.67%, the GDM is lower by 35.30 points or 5.72%, and GLD IAU are lower by $0.04 or 0.09%.

Gold & Silver Stock News Update from GoldReview.com:

Great Basin’s agreement for the Burnstone Gold Project, Meridian Gold’s first quarter earnings release date, first quarter results from Richmont Mines, AngloGold Ashanti’s results, and earnings released late last night from Northgate and Compania de Minas Buenaventura were among the big stories in the gold and silver mining industry making headlines Friday.

WINNERS

LOSERS

- Written by Chris Mullen

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-- Posted Sunday, 1 May 2005 | Digg This Article

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