A little fear is creeping into the market psychology. Today’s contributing factors were the President’s announcement of limiting the scope of banks trading activities, a negative weekly Initial Jobless Claim number, a negative Philly Fed Manufacturing 10am number, weakness in basic materials lead by metals, whispers of Chinese monetary policy tightening and dollar strength.
While the weekly Jobless Claim and Philly Fed numbers did not meet expectations, the markets reaction to both was muted. The major indexes showed little reaction to the pre-market and 10am releases. Perhaps because all eyes were on the pending presidential announcement and the sinking financials that started the selling at the open.
The presidential announcement to curtail lenders risky trading tactics hit the markets hard however, the focus of that bill was on the banks who play the proprietary trading game and not those who don’t. Since it is primarily the larger lending institutions who venture into risky trading the big names took an undercut to the chin while the smaller regionals realized positive volume which helped balance out the the losers to mitigate the damage to the banking indexes.
The PHLX KBW Bank Index ($BKX) managed to stay a float defying the negative action of many of it’s components.
Basic materials, as illustrated above with the iShares Dow BM ETF symbol (IYM), got thrown to the mat with metals leading the sector down. Symbol GOLD mentioned in Market Update 1/20/2010, took another hit today on continued dollar strength. Gold appears to be torn between being a hedge and a speculative play as it has decided to move in negative correlation with the dollar and positively with the markets.
Colorado’s own Newmont Mining (NEM) is feeling the heat from the metals as it has now pulled back into the daily 200SMA.
US Steel (X) is cooling off quickly as it just dropped below a short consolidation after a parabolic move.
As illustrated above, the dollar reached up to kiss it’s daily 200SMA and add another leg to creating a Cup and Handle pattern. The key here is if the dollar can hurdle and hold above the pattern handle and 200SMA.
In this new global market world, one countries itch can become another’s knee jerk reaction. Such as in the context of super powers US and China dependent trade relationship, if China does tighten monetary policy to reign in it’s fast paced growth, it could reduce commodity demand and increase cost of goods. We in the US would definately feel the affects.
A partial list with big names: AMD, ACX, AXP, COF, CMA, IGT, WDC, GE, HOG, KMB, MCD, SLB. For a more inclusive list go here.
Nothing notable in the US. For a global list go here.