Treasuries are feeling pressure overnight. Sellers are moving money into equities
in an effort to capture a better return on their investments. The biggest factor
for the decline, however, is traders taking protection ahead of the Treasuries
$115 billion government debt auction this week. Today will feature the initial
offering of $6 billion of 20-year TIPS.
Stock Index futures are indicating a higher opening this morning. Better-than-expected
earnings have been the most influential factor driving equity prices higher.
Today's key earnings reports will be Honeywell and Verizon. Much of the rally
has been led by the NASDAQ as technology stocks have been on fire despite poor
reports from Microsoft and Amazon last week.
Although equity indices have reached their highest levels of the year, they
have hit technically overbought levels. In addition, some traders feel that
under invested portfolio managers have been chasing this market higher which
makes it vulnerable to a correction if the continuous flow of new money begins
to subside. This could make the markets vulnerable to a sizeable correction
this week.
Overall, stronger stocks, higher crude oil and the weaker Dollar are all signs
that the global recession may be abating. Stocks and commodities are up on
increased demand for risk and the U.S. Dollar is down on less demand for safety.
Last week it was reported that German Consumer Confidence rose for the third
month while climbing to a 14 month high. This news is helping the September
Euro gain on the Dollar. There are also signs coming out of Europe that credit
quality may be improving.
The bullish move in the equity markets last week may be signaling a global
economic recovery that will lead to increased demand for crude oil. This is
helping to boost prices this morning despite the fear that increased gasoline
inventories will limit these gains.
Finally, another sign of an impending economic recovery is the sharp rise
in industrial metals. Last week September Copper hit a new high for the year
and is expected to open higher this morning. The weaker Dollar is also leading
to increased demand for precious metals. August Gold is up over $5.00 this
morning.
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Information provided in this correspondence is intended
solely for informational purposes and is obtained from sources believed to
be reliable. Information is in no way guaranteed. No guarantee of any kind
is implied or possible where projections of future conditions are attempted.
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