Weak Treasuries; Fed Stimulus Unwinding Plan

123jump.com Staff
10 Feb, 2010
New York City

U.S. stocks gyrated after Fed Chairman Bernanke laid out his plan to unwind stimulus and tighten monetary policy. Treasury yields rose and a auction drew a weak response. December trade deficit increased. Northeast U.S. face blizzard conditions with most government offices closed in Washington, D.C.

[R]4:00 PM New York, 9:00 PM London, 8:00 AM Sydney – U.S. stocks fluctuated after Fed Chairman Bernanke laid out his plan to unwind stimulus and tighten monetary policy. Treasury yields rose and a auction drew a weak response. December trade deficit increased. Northeast U.S. face blizzard conditions with most government offices closed in Washington, D.C.[/R]

Federal Reserve laid out plans to unwind a large part of stimulus as it looks for ways to shrink its balance sheet. Fed also stated that it is looking for ways to tighten the monetary policy through higher reserves or charging higher rates for parked bank reserves that will increase rates in the money market funds.

U.S. goods and services deficit increased in December to $40.2 billion from $36.4 billion in November. 2009 deficit dropped to $380.7 billion from $695.9 billion a year ago.

U.S. stocks fluctuated and recovered from a near loss of 1% at mid-day. Micron Technology agreed to acquire flash chip maker Numonyx Holdings BV for $1.25 billion.

Tiffany & Co led gainers in the S&P 500 index with a rise of 3.5%. Marsh & McLennan''s quarterly net falls. ArcelorMittal swings to profit but sales declined 16% and estimated lower than expected quarterly sales. Baidu Inc guides higher quarterly sales. Dean Foods Co. adjusted profit was below expectations.

European indexes closed higher ahead of the EU summit and a prospect of a Greek bailout. However, Greece may face tough conditions for any financial assistance. January passenger traffic increased at Fraport AG. PSA Peugeot Citroen full year revenues dropped 11%.

UK financials closed higher ahead of the EU summit tomorrow. BHP Billiton sales declined 17% in the first half. ICAP soared 11% after it was recommended by two brokers. Reckitt Benckiser Group increased 1.7% after it reported higher than expected earnings. Autonomy Corp dropped 5%.

Japan’s machinery orders surged 21.1% to 1.98 trillion yen in December. Honda said it will recall 378,758 models of Accord and Civic in the U.S. to fix a air bag trigger. MacDonald Japan profits climb 3.4% to 12.8 billion yen in 2009.

Stocks in Shanghai and Hong Kong closed higher ahead of weeklong Lunar New Year holiday next week. Resource linked stocks and automakers closed higher. Shanghai index for the year is down 9%. China exports surged 21% in January and imports soared 85.5%.

Mumbai stocks closed lower on the worries that stimulus may be withdrawn sooner than expected. Cement makers rise for the second day after cement sales increased 15% in January. Uttam Galva promoters plan to sell 4.9% stake to Arcelor Mittal. Iraq offers to increase crude oil supply by 60% to India.

BHP sales first sales declined 17.5% but the net surged to $6.1 billion from a year ago period. Australia’s consumer confidence drops 2.6% in February and housing finance declines 2.8% to A$21.9 billion in December. Commonwealth Bank of Australia estimated fewer bad loans and growing demand for loans.

North American Markets

Dow Jones Industrial Average decreased 20.26 or 0.2% to a close of 10,038.64, S&P 500 Index edged lower 2.39 or 0.2% to 1,068.13, and Nasdaq Composite Index decreased 3.00 or 0.1% to close at 2,147.87. Toronto TSX Composite Index added 12.09 or 0.2% to 11,286.33.

Latin American Markets Indexes

Mexico Bolsa Index decreased 72.43 or 0.2% to 30,746.05 and Brazil Bovespa Stock Index added 333.25 or 0.5% to 65,051.42.

Europe Markets Review

In London FTSE 100 Index closed higher 20.15 or 0.39% to 5,131.99, in Paris CAC 40 Index increased 22.85 or 0.63% to close at 3,635.61, in Frankfurt DAX index higher 38.11 or 0.69% to close at 5,536.37. In Zurich trading SMI increased 19.24 or 0.30% to close at 6,333.99.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 31.09 or 0.31% to 9,963.99, and Hang Seng index in Hong Kong increased 131.94 or 0.67% to 19,922.22, and CSI 300 index in China higher 44.94 or 1.42% to 3,214.13. ASX 200 index in Australia increased 8.30 or 0.18% to 4,513.40. The FTSE Bursa KL Composite index in Malaysia was higher 12.31 or 1.00% to 1,246.17.

The Kospi Index in South Korea decreased 0.37 or 0.02% to close at 1,570.12. SET index in Thailand closed higher 2.52 or 0.37% to 688.41. JSE Index in Indonesia decreased 6.05 or 0.24% to 2,483.44. The Sensex index in India decreased 120.01 or 0.75% to 15,922.17.

Commodities, Metals, and Currencies

Crude oil increased $0.73 to $74.48 a barrel for a front month contract, natural gas edged up 1 cent to $5.30 per mBtu and gasoline decreased 0.12 cents to 192.78 cents.

Soybean future closed up 13 cents to $9.37 a bushel. Wheat futures closed up 14.5 cents in Chicago trading to $4.96 a bushel. Sugar closed down 0.27 cents at 25.93 cents per pound.

Gold decreased $3.80 in New York trading to close at $1,073.40 per ounce, silver closed down $0.19 to $15.25 per ounce and copper for the front month delivery decreased 0.050 cent to $2.985 per pound.

Dollar closed lower against euro to $1.3728 and edged higher against the Japanese yen to 89.97.

Yield on 10-year U.S. bonds closed up at 3.69% and with 30-year maturities closed up at 4.64%. U.S. Treasury completed $25 billion of 10-year note auction in a weak response that saw the rise in yield to 3.64% and traded at as high as 3.692%. Bid-to-cover ratio was 2.67.

In yesterday’s $40 billion auction for 3-year note drew bid-to-cover ratio of 2.83 and yielded 1.307%.