The hand off from last weeks volatility trading to this weeks data-driven market has not been a smooth one. Though the first session this week with economic releases has generously printed some of the top market movers, the majors have yet to reveal whether new anti-dollar trends will carry through or if retracements are in order.
In the dollars most liquid pairings, the action was relatively tame considering the grumblings in both fundamentals and technicals. The euro spent most of the early hours in its previous range against the dollar, but a steady 80-point advance finally pierced the new high to continue all the way up to 1.3200 resistance. A similar situation developed in the GPBUSD which has risen 160 points to just north of 1.8500 since the early European hours. The Japanese yen on the other hand hasnt left its 50-point range with 115.90 acting as support. Finally, the USDCHF has spent the session basing on 1.2030 support, with a broad 60 swing higher offering only temporary relief.
Tuesday was the first session with heavy-hitting fundamental indicators, but the volatility was still no where near the levels seen in the otherwise quiet sessions last Thursday and Friday. The economic scene played out this morning with the governments durable goods report leading the later released consumer confidence, Richmond industry and existing home sales reports. Putting the market into motion, the durables number printed worst than expected in both its headline and core reads, suggesting demand and business spending entering the final quarter of the year could detract even further from already frail GDP. Statistically speaking, the 8.3 percent drop in orders for goods with a life span of more than three years was the largest in over six years. Even when the volatile transportation group was excluded, a 1.7 percent contraction marked the worst performance since July of last year. The breakdown shows that three components were responsible for the bulk of the decline: a 19.2 percent easing in capital goods; 10.2 percent less demand for computers and electronics; and a 21.7 percent plunge in the transportation complex.
When 15:00 GMT rolled around, the dollar received the second wave of data. The Richmond fed printed 30 seconds ahead of schedule triggering a light bid in the greenback. On improvements in sales, new orders and employment, the overall activity index jumped more than expected into positive territory with a 7 read. Though this factory report generated mild surprise, the critical reaction came with the conflicting sentiment behind the existing home sales and consumer confidence indicators. Fully expecting optimism to improve into the holiday season and housing to extend its drop, the market was thrown for a loop when exactly the opposite was announced. Despite the strong start to the holiday shopping season, falling energy costs and steadily rising equities market, consumer sentiment still slipped to 2.2 points to 102.9 in November. This was consistent with the University of Michigan report for the same period which recently reported that confidence among its pool of respondents pulled back slightly from its 15-month high. A bigger shock to the market was the unexpected improvement in existing home sales last month. Purchases of previously owned homes rose for the first time in 8 months by 0.5 percent to 6.24 million units on an annual basis. Whats more, a derivative from the sales report revealed a 3.5 percent drop in housing prices from the same time a year ago, the biggest decline on record. Together, these two statistics could offer among the first sings that the housing market heading to a soft landing. However, inventories over the same month actually bloated to the highest levels since early 1993. This contradictory data will leverage the importance of the forthcoming new home sales report and third quarter housing price index as market participants attempt to sort out the health of this important sector.
Equities were treading water for most of the active session with mixed macro data and comments from Fed Chairman Ben Bernanke keeping the benchmark indices on par with the open. BY 17:05 GMT, the S&P 500 was chalking up the only advance in a 0.18 percent rise to 1,384.38. Both the Down and NASDAQ Composite were off only marginally at 12,116.82 and 2,405.43 respectively. From the Blue-Chips list, plan maker Boeing Co. didnt suffer too much from the weak durables report as Air Berlin Plc placed an order for 60 planes. Shares of Boeing rose $0.74 on a 0.8 percent run to $88.14. Cutting down on market cap and leveraging the volatility, Palm Inc. shares sank 8.5 percent or $1.30 to $14.07 after the firm cut its second quarter forecast. The outlook was lowered on account of a delayed roll out of its new Treo to the US.
Benchmark treasury rates were printing new 10-month lows in intra-day trade Tuesday, but the mixed nature of the US data left most popular contracts trading near even. The ten-year note was 4/32nds higher at 100-28 with yields 2 basis points lower at 4.513 by 17:05 GMT. Bonds were up 7/32nds at the same time at 98-14 while its yield edged a basis point lower at 4.597.
