Monday, December 11, 2006

12/11/2006 Morning Market Comment

Things are looking green on the screen this morning ahead of the Fed's policy markers meeting tomorrow. The Helicopter-Ben led FOMC is expected to leave rates unchanged Tuesday but likely to continue its hawkish mantra of seeing more risks of inflation rather than a weakening economy. Following Friday's stronger than expected employment data, interest rate futures now push back a potential rate cut to May, and then a series of cuts remain priced in later in 2007. As the Wall Street Journal points out this morning, the Fed has been saying nothing of the sort(subscription required). The differences between market expectations and the Fed aren't going to be resolved tomorrow but over the course of months which will make for an interesting drama - if you're into this sort of thing - which we are.

The dollar has given up its overnight gains which further demonstrates the dollar's beleaguered condition - it is just unable to gain a bullish head of steam. The dollar is another key reason why the Fed needs to put off a rate cut for as long as possible lest it grease the greenback's skids even more. Gold slid down to $627/oz overnight but bounced back to$630. For now, I'm on the sidelines with gold until the dollar resumes its slide.

Our short natural gas trade is in great shape this morning with nat gas down about 4%. It looks like our BSX calls are going to be dead money heading into the usual expiration games this week. Goldman Sachs earnings are out tomorrow morning and we're giving it a very close look as a potential play today. Wachovia says GS may earn as much as $6.20 a share vs street estimates of $5.87. One thing that gets me excited is that Jim Cramer on CNBC's "Mad Money" expressed concern about the level of GS shares (above $200 these days) - that may the best contrary indicator yet to jump in!

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