Tuesday, June 5, 2007

Wednesday Curtain Raiser

With the 10 year treasury yield at 4.99% and likely to cross up into 5% territory, the mettle of the Wall Street's bulls' willingness to buy stocks 'til the cows come home will likely be tested in the days ahead. I'm not ready to say the bull market is imminent peril, but I am a bit uncomfortable with the converging worlds of higher bond yields here in the U.S. and an outside negative like a cracking Chinese stock market. Often it's a one two punch, or a triple whammy of negatives that can upset the apple cart and change prevailing direction. The bull is not out of it by a long shot as evidenced by support holding up well today at S&P 1525, or the 47 level on QQQQ. But peer deeper into the market and everything from housing ($HGX) to retailers ($RLX) to utilities ($UTIL) are in various states of distress from topping out to rolling over. Close attention is needed on treasury yields in the day ahead. We're still in a bullish, but somewhat range bound situation as long as we remain above the S&P 1500 level imho.

Special attention will need to be paid to Fed-speak. While Bernanke today continued his mantra of "moderate" economic expansion, he did spend some time talking about housing's drag effect on the economy. Some took this as a dovish signal that the Fed won't be so quick to lift interest rates and the dollar fell on that perception even as bonds fell due to the opposite interpretation. IF Fed speakers start talking up housing's impact on the economy as a signal the Fed is conceding that it can't lift rates in the face of the housing debacle, imho that could easily re-ignite the Wall Street rally - as odd as that might be. Oh, and my mistake, Ben was not in Cape Town, he delivered his speech via satellite. Must See TV, right?

Ameritrade (AMTD) is likely to be active on Wednesday as big investors push for a sale: TD Ameritrade says hedge funds want it to merge. AMTD options in recent weeks have seen some very active trading days.

Do you know anyone who owns a Dell tv? Dell to Stop Producing TVs, Focus on PCs, People Say. Every so often I go into an electronics store and salivate over a 60" plasma. For a partially sighted person like myself, that big 60 incher would help me see the picture better - right? But alas the old 36" picture tube tv remains in my family room. If I were to shell out big bucks for a giant brand spankin' new HDTV, it sure would not be a Dell tv shipped from who knows where and thrown around who knows how many times like a football before it gets to my house. It's good they've figured this out.

The debate continues to rage over the Glaxo (GSK) diabetes drug Avandia. A company funded study says the drug is just fine and dandy, but other experts remain skeptical: Glaxo says Avandia data comforts, experts unsure. In something relatively trivial like investing, a good rule is, "when in doubt stay away." When it comes down to risk of heart attack, I can't imagine how this study will keep people from staying away from Avandia "when in doubt". GSK is hovering just a point above a 52 week low.

Wednesday's economic calendar features the latest MBA mortgage data, also government productivity figures and the Challenger jobs report.

Get ready for another ECB rate hike...

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