STOCK MARKET WATCH, Tuesday 14 December

http://quotes.ino.com/chart/?s=NYBOT_DXY0

Last trade 82.13 Change +0.03 (+0.04%)

http://futures.fxstreet.com/Futures/news/afx/singleNew.asp?menu=economicnews&pv_noticia=MTFH65499_2004-12-14_11-39-25_L14210486

GLOBAL MARKETS-Shares, dollar flat, bonds ease as Fed looms

LONDON, Dec 14 (Reuters) - European shares failed to hold early gains and eased back from 29-month highs on Tuesday, as investors braced for an expected U.S. interest rate rise and kept the dollar on an even keel before key data.

The spotlight is mostly on the Federal Reserve's accompanying text and whether it restates plans to tighten monetary policy at a measured pace, with a quarter point hike in U.S. rates to 2.25 percent widely expected when it makes its announcement at 1915 GMT .

That would push U.S. interest rates above European Central Bank base rates for the first time since the introduction of euro notes and coins in January 2002, just when the gap between U.S. Treasury and German bund yields is near a four-year high.

U.S. trade data at 1330 GMT could weigh on the greenback and, by extension, dollar-denominated U.S. Treasuries if the deficit widens significantly, with capital flows and current account data still to come later this week.

But that could be countered if an upbeat Fed statement increases the likelihood of continued and rising yield support for the U.S. currency, some strategists said.

"They will be optimistic on the economy... This means they will raise rates over the coming six months, raising 25 basis points every meeting," Johan Javeus, currency strategist at SEB in Stockholm said.

...more...

http://www.bloomberg.com/apps/news?pid=10000101&sid=aocd2EHla4X8&refer=japan

Dollar Ends 3-Day Rally; Trade, Current-Account Gaps May Widen

Dec. 13 (Bloomberg) -- The dollar ended a three-day advance as some traders took advantage of last week's rally, the first in two months, to renew bets on the currency's decline.

Speculation that government reports this week will show the U.S. trade and current-account deficits widened are undermining support for the dollar even as the Federal Reserve is expected to raise interest rates tomorrow for the fifth time this year.

``There's no incentive out there for people to buy the dollar,'' said Steven Englander, a senior currency strategist at Barclays Capital Inc. in New York. ``As long as the deficit remains at record levels and there's no surprises by the Fed, the dollar will continue its descending path.''

<snip>

The dollar has dropped 6.4 percent against the euro and 4.8 percent versus the yen this quarter, partly on concern the U.S. will fail to attract enough international investment to compensate for the shortfall in the current account, the broadest measure of trade.

Barclays predicts the dollar will decline to $1.35 per euro and 100 yen in the next three months. The U.K.'s third-largest bank is among firms, including Credit Suisse First Boston, ABN Amro Holding NV and BNP Paribas SA, that have cut their dollar forecasts in the past month.

...more...

Have a Great Day Marketeers!

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38335.3666214815-829738919&siteID=mktw&scid=0&doctype=806&property=symb&value=&categories=&

CHICAGO (CBS.MW) -- The dollar slid briefly in the wake of a report that showed the U.S. trade deficit widened to a record, but the buck has since improved against the euro and the Japanese yen as traders await what's expected to be the fifth U.S. interest-rate hike of the year later Tuesday. The October trade gap expanded nearly 9 percent to a record $55.5 billion. The dollar went from 105 yen to 104.96 yen after the report, but had since turned positive, trading at 105.04 yen. The euro improved from $1.3312 to $1.3316 before falling back to $1.3294.

methinks "intervention"

Dec 14 8:30 AM
Trade Balance Oct
report -
briefing.com -$53.5B
market -$53.0B
last report -$51.6B
revised -

Dec 14 9:15 AM
Capacity Utilization Nov
report -
briefing.com 77.7%
market 77.8%
last report 77.7%
revised -

Dec 14 9:15 AM
Industrial Production Nov
report -
briefing.com 0.1%
market 0.2%
last report 0.7%
revised -

Dec 14 2:15 PM
FOMC Meeting

9:15am 12/14/04 U.S. NOV. INDUSTRIAL PRODUCTION UP 0.3% V FORECAST 0.2%

9:15am 12/14/04 U.S. NOV. CAPACITY UTILIZATION 77.6% V FORECAST 77.8%

http://www.wkowtv.com/$spindb.!query.1listnews.storeview.13681.news

High Risk List

A looming wave of layoffs is making it tough for employees of the Wisconsin Department of Transportation to enjoy the holidays, or much else, this year.



Employees were scheduled to be notified of the cuts just after Thanksgiving, but will now have to wait until after the holidays for the news to be released. The department employs people at the State Patrol, Department of Motor Vehicles, and Highway Construction and Maintenance. From those branches, the department has created a list of about 340 people who are at high risk of losing their jobs. Employee John Nordbo says morale is low. 'One of the things you always hear people working for the state say was that there was good benefits, good retirement, and it was secure. Nobody that I know feels that way anymore.' He says he's worried who will be left when this is all over. Not only will a certain number be laid off, but many are not waiting to see their name on the layoff list, they're looking for new jobs now.

...more...

http://www.theoaklandpress.com/stories/121404/loc_20041214017.shtml

Community facing layoffs, cuts

Across-the-board cuts in personnel - including inside the police and fire departments - will be considered when Waterford Township trustees meet Wednesday to discuss the community's 2005 budget

The proposed $35,152,323 budget includes layoffs of four positions in district court, a code enforcement officer in the planning division, a technician in the facilities and operations division, and a clerical position in parks and recreation.

The police department budget is listed to be cut by $300,000, but this would be offset by an additional $250,000 expected in property tax revenue, according to Robert Seeterlin, the township's fiscal and human resources director.

"It's nowhere what they need for 2005," said Carl Solden, township supervisor. "There is no purchase money for cars and equipment."

He said the department is planning to reorganize to meet demands. Compared with last year, the department will be down four patrol officers and one clerical staff member.

...more...

http://business.mainetoday.com/pulse/041214pulse.shtml

Holiday layoffs just 'bad luck'

It may seem that executives are deliberately heartless about making cutbacks during the holiday season, but business experts say there's probably no malice behind eliminating jobs and closing plants as Christmas and Hanukkah near.

There's been a spate of bad economic news in southern Maine in recent weeks, just as the holiday season kicked off. Sanmina-SCI led off the season of supposed good cheer with the announcement - just after the Thanksgiving weekend - that it will close its Westbrook plant early next year, wiping out 325 jobs. Just a few days later, Tyson Foods said it will shutter the Jordan's Meats plant in Portland, where 285 people work. Those jobs should be gone by Valentine's Day.

"I'm not sure there's anything going on more than bad luck," said Charles Colgan, an economist at the University of Southern Maine's Muskie School of Public Service.

...more...

Were the Lessons Learned a Few Years Ago the Right Ones?
Musings of a Crackpot

In doing these weekly Wrap-Ups, my goal is to provide something thought provoking that may not be available somewhere within the mainstream financial media. As a technical analyst, this often takes the form of observing whether “the red line crossed the green line.” But as I draft this on a Sunday holiday season afternoon, there will probably not be anything of that sort to report on this week. I would like to explore whether technical analysis (TA), a craft that is seemingly being successfully practiced by everyone, is a sure fire way of avoiding peril in the stock market. My thought is, maybe not, because following the bursting of the 2000 bubble, TA has become essentially a means of getting a lot of people and money to do and think the same thing at the same time. Everyone doing the same thing at the same time has been a characteristic of all markets before major crashes. Dismissing the authors of thoughts such as these as crackpots, especially during a major stock market rally, has also been a pre-crash characteristic (so please read on).

After making a lower low, the green line crossed the red line in mid-August and only checked in to tickle its 50-day moving average for about a minute before celebrating the presidential victory of George W. Bush over John Kerry with a sharp and decisive rally. Aggressive and short-term technical analysts seem to be high-fiving while searching for even more breakouts to 52-week highs. The total market internals are extremely positive. If you were to look at charts of a broad portfolio of sector stocks and international indices you will see chart after chart of bullish patterns and very few bearish ones except for perhaps energy, precious metals, and oil shipping companies. I look at point-and-figure charts because for trending markets, they tend to be easier to view objectively than time/price charts. Using point-and-figure, all you have to do is see if the most recent column that protrudes the most is a column of X’s going up (bullish), or O’s going down (bearish). If you were to perform this exercise today, you would find that practically every sector is in a bullish pattern (X’s protrude), and the current column is a column of X’s, indicating that the most recent stock action is bullish. Beyond the simple X/O patterns observed from point-and-figure, there are the volume tendencies. Again, throughout most markets there is a tremendous bullish tendency – up on higher volume, down on lower. If you are in the market with long positions, there is no reason to get out because you are playing with the “house money.” If you are short this market, good luck!

It’s been only 5-years after what was arguably the biggest stock market bubble of all time and now many averages sit at levels that are decisively higher (in dollar terms) now versus then. Following the technology, telecom, and Internet frauds of the 90’s sold to the gullible public, very few people on Wall Street went to jail or paid any fines to speak of. There was no purge, no revulsion, and no stock market bottom. Today after the market rallied back to all time highs in some indices, the gurus on TV are the practically the same personalities that graced the screen 5-plus years ago, and the mood is eerily the same. There are many stocks selling at bubble valuations that were typical of that era. The only major difference between then and now seems to be that some minor degree of profitability is needed for tech companies to be bid to ridiculous valuations, whereas in the first bubble, profit was not required at all for such a reward. Were no lessons learned? Indeed there were lessons learned, unfortunately as suggested here tonight, they were the wrong lessons. Here’s an excerpt from an e-mail I received last week:

“I continue to do very well trading miscellaneous “Investors Business Daily breakouts,” at least 60 percent of the trades are successful.”

http://www.financialsense.com/Market/wrapup.htm

http://cbs.marketwatch.com/news/newsfinder/pulseone.asp?dateid=38335.3543035648-829737375&siteID=mktw&scid=0&doctype=806&property=symb&value=&categories=&

WASHINGTON (CBS.MW) -- The U.S. trade deficit widened by 8.9 percent in October to a record $55.5 billion, the Commerce Department said. The trade deficit was larger than expected. The consensus forecast of Wall Street economists was for a deficit of $52.8 billion. Imports rose faster than exports in October. Imports rose 3.4 percent to a record $153.5 billion. This is the largest monthly increase in imports since Nov. 2002. Exports rose 0.6 percent to a record $98.1 billion. The U.S. trade deficit with China widened to a record $16.8 billion in October compared with $13.7 billion in the same month last year.

8:30am 12/14/04 U.S. OCT. IMPORTS WIDEN 3.4% TO RECORD $153.5 BLN

8:30am 12/14/04 U.S. OCT. TRADE GAP WITH CHINA RECORD $16.8 BLN

8:30am 12/14/04 U.S. OCT. TRADE GAP ABOVE CONSENSUS $52.8 BLN

8:30am 12/14/04 U.S. OCT. TRADE GAP WIDENS 8.9% TO RECORD $55.5 BLN

http://money.cnn.com/2004/12/14/markets/bondcenter/bonds/index.htm

NEW YORK (CNN/Money) - Bonds extended their fall Tuesday morning after a report that the trade deficit hit a record $55.5 billion in October, deepening losses posted earlier in the session in anticipation of a quarter percentage point interest rate hike later in the day.

The dollar fell, then turned higher, following the release.

The benchmark 10-year note lost 7/32 of a point to 100-18/32 to yield 4.18 percent, up from 4.15 late Monday. The 30-year bond sank 11/32 of a point to 108-2/32 to yield 4.83 percent, up from 4.81 on the session. Bond prices and yields move in opposite directions.

The two-year note edged lower 1/32 of a point to yield 2.99 percent, while the five-year note fell 4/32 of a point to yield 3.57 percent.

The Commerce Department said the U.S. trade deficit widened nearly 9 percent in October to a record $55.5 billion, easily surpassing Wall Street forecasts of a $53 billion gap.

snip>

This trend could well offset any positive effect of an expected hike in interest rates. Some analysts say a protracted dollar slide is necessary to help bring the trade deficit down to a more sustainable level. However, there also is a fear that too sharp a decline could shatter confidence in the greenback, the world's reserve currency.

briefing.com

9:18AM: S&P futures vs fair value: +0.5. Nasdaq futures vs fair value: flat. Futures trade holds steady following a November Industrial Production reading of 0.3% (consensus 0.2%) and a Capacity Utilization figure of 77.6%(consensus 77.8%)... As such, the cash market is expected to open on a flat note as previously indicated

9:00AM: S&P futures vs fair value: +0.5. Nasdaq futures vs fair value: +1.0. Still little enthusiasm seen in the futures market as current indications suggest the indices will open on a relatively flat note... Separately, reports suggest that Verizon (VZ) has received backing from Vodafone (VOD) to make a potential bid for Sprint (FON) and that ongoing acquisition talks between Symantec (SYMC) and Veritas (VRTS) may have come closer to completion... At 9:15 ET, the Fed will release its November Industrial Production (consensus 0.2%) and Capacity Utilization (consensus 77.8%) data

8:32AM: S&P futures vs fair value: +0.2. Nasdaq futures vs fair value: +0.5. Futures market pulls back a bit after the Department of Commerce released an October Trade Balance figure of -$55.5 bln (-$53.0 bln consensus)... Cash market expected to open flat in response to the higher than expected reading

8:00AM: S&P futures vs fair value: +1.0. Nasdaq futures vs fair value: unch Futures market versus fair value suggesting a flat open for the cash market... Reluctance on the part of buyers follows a day of broad-based gains ahead of this afternoon's FOMC meeting... Deutsche Bank downgrades Honeywell (HON) to Hold from Buy while JP Morgan downgrades Alcoa (AA) to Neutral from Overweight...

ino.com

The March NASDAQ 100 was lower overnight due to light profit taking as it consolidates some of Monday's rally. However, stochastics and the RSI have turned bullish again signaling that sideways to higher prices are possible near-term. If March renews this fall's rally, weekly resistance crossing at 1717 is the next upside target. Closes below last week's low crossing at 1586 are needed to confirm that a short-term top has been posted. The March NASDAQ 100 was down 3.50 pts. at 1627.50 as of 5:50 AM ET. Overnight action sets the stage for a steady to lower opening by the NASDAQ composite index later this morning.

The March S&P 500 index was lower overnight due to light profit taking as it consolidates some of Monday's rally, which marked a new contract high. Stochastics and the RSI are diverging but have turned bullish signaling that sideways to higher prices are possible near-term. If March extends this fall's rally, weekly resistance crossing at 1265 is the next upside target. Multiple closes below last Thursday's low crossing at 1175.70 would confirm that a short-term top has been posted. The March S&P 500 Index was down 2.00 pts. at 1200.50 as of 5:20 AM ET. Overnight action sets the stage for a steady to lower opening when the day session begins later this morning.

Dow 10,625.61 -12.71 (-0.12%)
Nasdaq 2,150.99 +2.49 (+0.12%)
S&P 500 1,198.37 -0.31 (-0.03%)
10-Yr Bond 4.186% +0.035

NYSE Volume 67,750,000
Nasdaq Volume 150,357,000

http://www.nypost.com/business/36394.htm

CONSUMERS can be forgiven if they haven't noticed that today's clothes dryers offer more bang for the buck than they did a few years ago. They'll still dry your towels, but the government thinks you are enjoying the machines more.
Same for refrigerators, as well as college textbooks, microwave ovens and audio equipment. In fact, over the next few years the government promises to keep track of hundreds of other everyday items to determine how technological changes — or, more often, just the elimination of older models — affects the price.

But this isn't just some arcane project aimed at keeping government statisticians busy until they can gently slide into retirement. In fact, this is the Bureau of Labor Statistics' "hedonic quality adjustment" project and it is crucial to Washington's efforts to keep you and me from realizing just how much more we are paying for stuff.

This all began in the 1990s when some Washington economists — most notable was Michael Boskin of the elder Bush's administration as well as Alan Greenspan — decided that they were pretty sure the Consumer Price Index that was released by the government each month overstated inflation.

The CPI also happens to be the gauge used by the government to determine how much of an increase Social Security recipients and others will receive each year, so there were some very real benefits if Washington could prove this point.

more...

http://www.morganstanley.com/GEFdata/digests/20041213-mon.html#anchor0

The dollar is topic du jour in world financial markets. While there was a sharp reversal in the US currency last week after an unrelenting bout of selling since early October, the case for a weaker dollar remains very much intact, in my view. It is central to what I have called global rebalancing -- the shift in relative prices that an unbalanced global economy needs in order to establish a more sustainable equilibrium. I have stressed from the start, however, that dollar depreciation can’t do the job alone. That point bears further elaboration.

The United States has a serious and worrisome current-account deficit problem -- an imbalance that hit a record 5.7% of GDP in mid-2004 and that, by our reckoning, seems likely to widen further to at least 6.5% over the next year. Fully 92% of America’s current account deficit shows up in the form of a trade gap on goods and services -- a shortfall that also hit a record of $623 billion (annualized) in the third quarter of this year. Currency fluctuations can have an important impact in shaping a nation’s competitive position. For that reason alone, many believe that a weaker dollar will boost US exports and inhibit imports -- thereby resulting in a sharp narrowing of America’s trade and current account deficits. This conclusion has also formed the basis of the belief that a weaker dollar will spur an important shift in the mix of US growth -- bringing output and jobs back home in a fashion that will establish a more solid base for domestic income generation. These conclusions may be wishful thinking.

Trade is the glue of globalization. And there can be no mistaking the explosive growth of global trade since the late 1980s. The ratio of global trade to world GDP rose from 17% in 1986 to a record 27% in 2004, according to IMF estimates. Over that 18-year period, growth in world trade volumes averaged 6.3% per annum, well in excess of the 3.5% average pace of world GDP growth. Not surprisingly, this surge in trade has provided a disproportionate benefit to low-cost manufacturers in the developing world. This has come at the expense of the high-cost developed world. While the US remains the world’s largest exporter with an 11.1% share of total global exports of goods and services in 2003, its portion has been declining over the past several years. In fact, in 2004, America’s average share of exports and imports, combined, fell to 13.2% -- down sharply from nearly 16% in 2000 and the lowest such portion since 1982. With America’s share in global trade on the wane, it would certainly be an uphill battle for the US to trade its way out of its current-account conundrum.

The arithmetic of America’s trade imbalance makes a currency-induced turnaround all the more daunting. The main reason is that US imports are currently 53% larger than exports. That means export growth has to be roughly 50% faster than import growth just to hold the trade deficit constant. Or putting it another way, if export growth was to surge and hold at double the pace of import growth, it would take about 10 years for the US trade deficit to be eliminated. Two conclusions follow from such calculations: First, the United States is unlikely to export its way out of its trade quagmire by a currency-induced improvement in competitiveness; with globalization pushing the US share of global trade down to the low end of historical experience, such an export-led resurgence seems highly unlikely. Second, the only real hope for meaningful improvement on the trade front over the next several years is on the import side of the equation; given the secular shift of rising import penetration into the US, that would undoubtedly require a protracted slowing of US domestic demand growth. More about that later.

But there is another important twist to this story. To the extent that output can be brought back home by a narrowing of the US trade deficit, job creation and income generation would potentially get a new assist. Such impacts could then spread to the economy at large through classic “multiplier effects” -- in effect, broadening the base of domestic demand support. This would be welcome news for a saving-short US economy that has turned increasingly in recent years to asset-based saving as a new means to support private consumption. It would also be an encouraging development for US businesses and investors -- potentially boosting market share at home and abroad and sparking related improvements in corporate profitability and equity prices.

Such a transformation may be a real stretch. In large part, that’s because of the secular erosion of the US manufacturing base -- ...

more...

http://biz.yahoo.com/rb/041214/economy_optimism_2.html

WASHINGTON (Reuters) - Optimism at U.S. small businesses rose in November to the highest point in more than 20 years on expectations of faster economic growth and stronger sales, the National Federation of Independent Business said on Tuesday.

NFIB said its Small Business Optimism Index rose nearly 4 points to 107.7, the highest since a matching level hit in 1983.

The small business lobby group said the index, which has been above 100 for 20 straight months, was pushed higher by business plans to hire workers and boost inventories.

"Job creation plans haven't been this strong since 2000 and inventory investment plans are at record levels. If owners follow through on their plans, the GDP (gross domestic product) growth will strengthen substantially," NFIB Chief Economist William Dunkelberg said. :eyes: Well the certainly followed thru in 2000 - HA!

Optimism among business owners may stem in part from confidence the re-election of President Bush will not cause changes in government economic policies, the trade association said. :puke:

more...

I heard this morning that only 24% of businesses plan to hire workers in 2005.


24% is reason for optimism?

Someone is hitting the spiked eggnog a little early this year.

Dow 10,640.09 +1.77 (+0.02%)
Nasdaq 2,152.80 +4.30 (+0.20%)
S&P 500 1,199.49 +0.81 (+0.07%)
10-Yr Bond 4.178% +0.027

NYSE Volume 297,468,000
Nasdaq Volume 506,584,000

10:05AM: Equities continue to trade in split fashion, with blue chips feeling some modest selling pressure... Contributing to early weakness in the Dow have been analyst downgrades on two components - Alcoa (AA 30.75 -1.56) and Honeywell (HON 35.85 -0.60)... The leading maker of aluminum products has been cut to Neutral from Overweight by JP Morgan due to rising costs, negative currency implications and weak demand while Deutsche Bank downgraded HON to Hold from Buy following the company's FY05 guidance and its plans to acquire Novar... NYSE Adv/Dec 1316/1233, Nasdaq Adv/Dec 1345/1087

9:45AM: Market starts the day on a mixed note with little conviction from either buyers or sellers... Participants digested the Trade Balance (-$55.5 bln) and Industrial Production (+0.3%) reports with relative ease as neither deviated far from consensus estimates of -$53.0 bln and +0.2%, respectively... Separately, Capacity Utilization for November was 77.6%, which is a level that should hold inflation concerns in check... Generally speaking, this particular report starts to pique inflation concerns when the reading moves above 80.0%...

Last trade 82.28 Change +0.18 (+0.22%)

Settle 82.10 Settle Time 23:37

Open 82.28 Previous Close 82.10

High 82.41 Low 82.05

Last tick: 2004-12-14 09:33:40 ET
30-min delayed quote.

articles posted, ain't it?

http://www.latimes.com/business/la-fi-buyouts14dec14,1,164445.story?coll=la-headlines-business

Cash hoards and higher stock prices make firms more willing to take risks on takeovers.

By Tom Petruno and Josh Friedman, Times Staff Writers


A corporate takeover spree is signaling a new aggressiveness on the part of U.S. executives, who suddenly appear less concerned about the economy or about making strategic missteps.

The parent of retailer Kmart is swallowing Sears, Roebuck & Co. Cellular phone giant Sprint Corp. is reported to be in talks to buy rival Nextel Communications Inc. Johnson & Johnson is widely expected to take over Guidant Corp., a maker of pacemakers and cardiac stents.

And on Monday, software company PeopleSoft Inc. ended its 18-month-long fight to remain independent, agreeing to a $10.3-billion buyout by Oracle Corp.

The latest wave of takeovers, and expectations of more to come in 2005, helped to push a key index of blue-chip stocks to a three-year high on Monday. But as corporate deal making ramps up, so do worries that business consolidation will mean more lost jobs in an economy still struggling to generate healthy employment growth.

Experts say a confluence of factors is driving the surge in deals. Many firms are flush with cash after deep cost cutting in 2001 and 2002 helped profits soar. Rebounding share prices since 2002 also have given companies more spending money in the form of their own stock.

more...

http://story.news.yahoo.com/news?tmpl=story&cid=66&ncid=749&e=11&u=/bw/20041213/bs_bw/nf200412133050

The U.S. dollar has dropped to a new record low against the euro and dipped to its lowest level against the yen since early 2000 -- and the slide isn't over. Standard & Poor's expects the greenback to drop throughout 2005, to $1.45/euro. Such a decline will only stop the trade gap from widening rather than narrow it. The tumble poses a greater risk to the rest of the world than to the U.S. economy.


The problem of America's huge deficit in its balance of payments (which measures the country's economic transactions with the rest of the world, including both goods and services) is growing. Moreover, prospects for quick improvement are bleak. The usual market cure for a large deficit is a currency decline. In the long run, the lower dollar will make U.S. goods more competitive overseas, thereby increasing exports, and foreign goods will be less competitive in America, reducing imports.


The mechanism is simple, and it's starting to work. Export volumes have accelerated, and import volumes are beginning to slow. :eyes: The process is illustrated by a recent contract my son's company won. The previous holder of the contract was a British business. Both outfits bid about the same as they did five years ago, but with the pound at $1.90 instead of $1.40, the business went to North Carolina.

snip>

What about Wall Street? The weaker dollar's impact on stock prices could go in either direction. The higher bond yields will hurt price-earnings ratios, but profits will be buoyed by a lower dollar. The effect on earnings is twofold: First, the cheaper greenback makes U.S. outfits more competitive, allowing higher volumes and fatter margins. Second, the earnings from overseas operations will be translated at a higher exchange rate. Since the S&P 500-stock index companies see more than 40% of sales come from overseas operations, a 10% drop in the dollar would boost earnings 4%.

With the greenback expected to keep sinking in 2005, the impact may be mixed for the U.S., but the rest of the world will probably dislike the experience.

more...

Canadian exports were way down in October, the 2nd month of decline. The low greenback is hurting. More in Loonie Watch when the numbers are up.

http://www.bloomberg.com/apps/news?pid=10000080&sid=a9EyVjvSQ21s&refer=asia

Dec 14. (Bloomberg) -- Foreign direct investment in China rose in the first 11 months of the year as companies such as Wal- Mart Stores Inc. and DSM NV expanded to tap rising demand in the world's most populous nation.

Foreign investment increased 22 percent from a year earlier to $58 billion, after gaining 23 percent in the first 10 months of the year, the Beijing-based Ministry of Commerce said on its Web site. Contracted investment, a sign of future plans, jumped 34 percent to $135 billion.

Companies are building stores and factories in China to tap low labor costs and a market of 1.3 billion consumers. Government efforts to cool the world's fastest-growing major economy with controls on credit to industries including steel and autos haven't deterred foreign investors.

Credit curbs ``have not stopped us from making the right strategic decisions, which are much more long-term,'' said Stefan Sommer, president of the China operations of DSM, the world's biggest maker of drug ingredients.

more...

Scheduled times and days without electricity are becoming more common, according to posts on an energy-related Yahoo group to which I belong.

China is having difficulty transporting coal from mine to generator over its crowded and antiquated roads. It also imports coal, from Australia, I believe, but that it not enough.

Perhaps those now investing in China are prepared to cope with the energy problem for the low labor costs. I hope that they also understand that their proprietary information is likely to walk out the door. I wonder if the rush to establish business in China is going to turn out to be another business fad. While China may turn out to be the location for some businesses, I have a hard time believing that China is the answer to all manufacturing and R&D. In this world, one size usually does not fit all.

http://www.azcentral.com/arizonarepublic/business/articles/1214Stocks14.html

Investors got into a festive pre-holiday mood Monday, pushing a key stock-market index to a three-year high.

A broad rally propelled the Standard & Poor's 500 to its highest level since August 2001, one month before terrorists struck the World Trade Center and the Pentagon.

Recent concerns over surging oil prices, the twin deficits of budget and trade, and the presidential election have given way to renewed investor confidence and a focus on a resilient economy.
"Before the election, we had $55-a-barrel oil, concern about terrorism and uncertainty over who would be elected," said David Daughtrey, senior investment adviser at the Capital Group Inc. in Phoenix. :eyes: Hmmm, where did all that concern come from and where did it go?

"Now, a lot of that uncertainty has gone away." :wtf:

more...

edit to add - Where was the DOW and Nasdaq in August of 2001? They failed to mention that. Wonder why?

http://cbs.marketwatch.com/news/archivedStory.asp?archive=true&dist=ArchiveSplash&siteid=mktw&guid=%7B52E87D7E%2D9D87%2D4ED8%2D8F11%2D7B0D55F34E59%7D&returnURL=%2Fnews%2Fstory%2Easp%3Fguid%3D%7B52E87D7E%2D9D87%2D4ED8%2D8F11%2D7B0D55F34E59%7D%26siteid%3Dmktw%26dist%3D%26archive%3Dtrue%26param%3Darchive%26garden%3D%26minisite%3D

BOSTON (CBS.MW) -- U.S. exchange-traded funds saw a torrent of cash on Friday for the second straight week, taking in $1.1 billion to cap off a $3 billion inflow for the week, according to data from TrimTabs Investment Research.

Last week represented the third-highest weekly total of the year after a $4.7 billion inflow in late June and a $3.6 tally in late November. In the previous week, inflows totaled $774 million....

http://www.hussmanfunds.com/wmc/wmc041213.htm

The CBOE volatility index (VIX) measures the expected volatility that options traders build into call and put option prices on the S&P 100. It closed last week at just 12.66%. Historically, stocks have produced a long-term annualized return of about 10%, with a “standard deviation” of plus or minus 15% a year. That 15% is the historical “volatility” of annual returns. So if you think about stock returns as falling into a rough bell curve, the annual return on stocks would fall between –5% and +25% about two-thirds of the time. Of course, that 15% volatility is a historical average, and there has generally been a wide range of volatilities on a shorter-term basis, depending on market conditions (generally, poorly performing markets are actually accompanied by higher volatility, adding insult to injury from a return to risk standpoint).

Interestingly, the VIX is not a particularly reliable measure of past or future market volatility, but is instead closely related to investor psychology. Typically, options volatilities spike on market declines, when investors become very averse to risk and eager to hedge market volatility. In fact, the volatility priced into options in recent years has generally been much higher than 15%, routinely fluctuating in the 20-30% range. A frightening market decline can push the VIX toward 40% or more. In contrast, the VIX tends to decline during extended market advances, when investors become less eager to hedge against market risk. The recent figure of 12.66% is very low, but shouldn't be considered a lower bound – volatilities were often below 10% at various points in the 1980's and early 1990's.

Still, the current depressed level of the VIX strikes me as unusually complacent in the face of an overbought, overvalued market. Bullish sentiment (another contrary indicator) remains uncomfortably high, with the Investors Intelligence figures pushing to 60.8% bulls and just 21.7% bears last week. Meanwhile, corporate insiders are selling stock at a pace of over 6 shares sold for every share purchased. This figure is generally about 2-to-1, since insiders get most of their stock through stock and option grants rather than purchases, and can become periodically high when insiders are dumping low-priced garbage stocks as they eagerly did on rallies during the past bear market. Despite such influences, the ratio has moved up substantially in recent months, and is well confirmed by other measures of overextended sentiment. Investors Intelligence also notes an unusually large number of “buying climaxes” in individual stocks over the past two weeks (a buying climax occurs when a stock registers a new 52-week high during a particular week but closes down on the week). Industry groups are also very skewed toward overbought conditions.

Cyclically, I continue to view the economy as losing momentum following an induced jolt to demand through “helicopter money” (tax rebates and the peak of the refinancing boom). In contrast to most economic expansions, this one has fostered little emergence of new industries – a supply-side factor that usually characterizes sustained expansions. For that reason, as well as current account issues and other factors, I'm skeptical that the economy has many upside surprises left. Given that stocks have historically turned down about 6 months before the economy, I continue to be alert to economic signals in a variety of measures, most importantly interest rate and credit spreads, as well as the ISM figures.

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http://www.gold-eagle.com/editorials_04/buss121304.html

No matter what we do, we are doomed. No matter what we don't do, we are doomed. These seem to be the two current camps of thought at the present time. I'm not sure if my "radar" is in perfect functioning order, but it seems the world is increasingly becoming "out of whack". Exactly what "out of whack" means is basically relative to the person whom it affects. This can either be positive or negative. To people like Stephen Roach, the world is precariously imbalanced and needs these macro imbalances to be resolved or the risk of a "meltdown" grows nearer. To a certain degree he is totally correct. On the other hand, to a Chinese official, the world is probably looking pretty good -- albeit out of whack as when compared to his former life in a grey factory -- with increased world-wide exports, increased quality of life and the consumption of luxury goods and quietly he grins inward and is joyous at the "nasty westerners" being dependent on his peoples exports. Macro economics scenarios likely play no large and forefront role in his world.

I have read recently, going back to my indexed "pile of papers" on the floor, an article written in 1980. It was written by an American grandfather to his grandchildren and he lamented about the entire economic decay and the lack of fiscal "backbone" of the politicians and how the entire debt (at that time) would bury the US Dollar in the coming few years - he urged his grandchildren to buy gold. Obviously he had been through the !930s Depression. Was he right in 1980? On a certain level, yes. But, also no. Again it is all subjective.

I am going to go out on a rather unorthodox limb and try to explain all this economic "stuff" which we seem to be caught up in. For every article where I read "white" from an experienced market person or intellect or guru, I then read an article "black" which states entirely the opposite, and with an equally intellectual and seemingly strong base of information to support his/her viewpoint.

I currently believe the explanation lies simply in human psychology. In mechanical systems, transitional states which lead to a break down usually occur along fixed physical and known quantities or levels. The stress or fracture point of material, the temperature swings a material can withstand, etc. The fracturing or breaking occurs along these known parameters, usually. The human being is much more resilient. But equally, the human is much more subject to perceptional aspects and thus any fractural stressing points are not fixed and known. They are likely more adhering to the chaos theory. I currently believe we are in such a period of complexity where the human psychology in the West will determine the marketplace. Of course this does not occur in a vacuum - the macro economic parameters must also accommodate the raw numbers.

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http://www.wpbfnews.com/employment/3995704/detail.html

South Has Most Favorable Hiring Climate

MILWAUKEE -- Employers are fairly upbeat about hiring heading into 2005.

In its latest quarterly survey, the staffing firm Manpower contacted 16,000 U.S. companies, and about 25 percent of them said they expect to have more openings in the first three months of the new year.

Only 10 percent think they'll be cutting jobs.

Fifty-nine percent of employers surveyed foresee no change in job prospects, and 7 percent said they are unsure of their hiring plans.

Manpower said hiring plans are much stronger than they were a year ago, and there was a slight improvement compared with three months ago.


more...

http://money.cnn.com/2004/12/14/commentary/column_hays/hays/

Sure, it's a smooth move to higher rates, but the dollar and long-term interest remain questionable.
December 14, 2004: 8:29 AM EST

NEW YORK (CNN/Money) - If nothing else, give Alan Greenspan and his colleagues at the Federal Reserve credit for one thing: They have turned constant interest rate hikes into something that is nearly a non-event for the financial markets.

A quarter-point rate hike in the Fed's key short-term rate is universally expected, so much so that unless the Fed fails to hike the rate, or hikes it by twice that much, Wall Street will barely be able to stifle a yawn.

But is that really what the Fed wants?

Look at long-term interest rates. If the Fed wants to rein in the economy to prevent inflation from rising, it might be helped in this goal if long-term rates would rise along with its increases in short-term rates, but they have not. The U.S. government 10-year note yield is trading at 4.15%,and has held at the level for the months now, even as the Fed boosted the fed funds rate four times this year, from 1% to 2% -- and is on the verge of a move to 2.25%.

snip>

The Fed so far appears to have succeeded in making a transition to higher rates without unsettling a growing economy, or roiling global currency markets. But if they're hoping to move long-term rates higher or to put a floor under the dollar, their smooth, cautious policy may be falling short of the mark.

Dow 10,640.98 +2.66 (+0.03%)
Nasdaq 2,156.23 +7.73 (+0.36%)
S&P 500 1,200.58 +1.90 (+0.16%)
10-yr Bond 4.170% +0.019
30-yr Bond 4.819% +0.012
NYSE Volume 837,074,000
Nasdaq Volume 1,260,606,000


1:00PM : The broader averages hold onto slim gains as the market continues to trade sideways... Much of the hesitation on the part of both buyers and sellers has been attached to the Fed's upcoming meeting in just over an hour... However, the possibility of added supply from a slew of IPOs being priced this week may also be acting as an overhang... With roughly 20 deals expected to debut by Friday, as bankers rush to get new public offerings completed before the end of the year, the stage remains set for this week to be the busiest for IPOs since September 2000...NYSE Adv/Dec 1682/1470, Nasdaq Adv/Dec 1647/1368
12:30PM : Little change in the past half hour for the Dow, as the Nasdaq and S&P 500 climb to new session highs... The Composite has recently broken out of a narrow range and shown the largest gains, pushing to an intra-day high of 2157.67 due to strength in semiconductor (SOX +1.6%), with the next level of resistance near the 2179/2181 zone... Meanwhile, the S&P, which has closed higher three out of four sessions on the recent Fed rate hikes, has pushed through the 1200 level, adding to the three-year high it hit yesterday... NYSE Adv/Dec 1648/1486, Nasdaq Adv/Dec 1642/1341

12:00PM : Indices opened mixed on the heels of economic data, but have remained in a holding pattern most of the morning, as investors await the FOMC's decision... A record Trade Balance of -$55.5 bln (consensus -$53.0 bln), due in large part to a 12% surge in oil prices that pushed the commodity to record highs over $55/bbl during October, has kept a lid on broad-based buying interest...

Meanwhile, inflation appears to be well contained following a November Capacity Utilization reading of 77.6% (consensus 77.8%) and an Industrial Production figure of +0.3% that showed little change compared to expectations of +0.2%... However, with the Fed expected to raise the fed funds rate 25 basis points for the fifth consecutive time, to 2.25%, the market has remained cautious in the early going as it awaits a policy statement that is widely anticipated to restate ongoing rate hikes at a "measured" pace... As higher rates are typically supportive of a stronger dollar, the benchmark currency has shown relative strength despite the growing trade deficit...

Sectors showing strength continue to be semiconductor, disk drive, airline, broakerage, energy, and healthcare while networking, homebuilding, telecom svc, and materials remain weak... Crude oil futures ($41.25/bbl +0.24) appear to have stabilized near current levels while the 10-year note, which is off 7 ticks to yield 4.17%, has held relatively steady most of the morning... NYSE Adv/Dec 1541/1529, Nasdaq Adv/Dec 1630/1316

11:30AM : More of the same as stocks continue to run in place near the flat line, as market internals hold a modestly bullish bias... Advancers hold a slim edge over decliners on the NYSE while advancing issues on the Nasdaq outpace declining issues by a 15 to 13 margin... Separately, the dollar, despite initially dipping after the US trade gap widened 8.9% in October to a record $55.5 bln, continues to show strength against the euro ($1.3275), from $1.3308 and the yen is $105.69, from $104.81...NYSE Adv/Dec 1509/1485, Nasdaq Adv/Dec 1548/1306

11:05AM : Market lifts modestly above the unchanged mark but continues to show little direction, ahead of this afternoon's FOMC meeting... While the market has already discounted a 25 basis point increase in the fed funds rate (to 2.25%), investors have been reluctant to jump in as they wait to see what the accompanying policy statement will say... It will be the wording of the announcement that will suggest whether or not the Fed is done raising rates... Currently, the fed funds futures contract prices in a 99% probability that the Fed will raise rates another 1/4 point at the February meeting...NYSE Adv/Dec 1457/1479, Nasdaq Adv/Dec 1530/1271


Advances & Declines
NYSE Nasdaq
Advances 1695 (50%) 1648 (51%)
Declines 1468 (43%) 1355 (42%)
Unchanged 180 (5%) 169 (5%)

--------------------------------------------------------------------------------

Up Vol* 467 (59%) 629 (52%)
Down Vol* 308 (39%) 562 (46%)
Unch. Vol* 10 (1%) 18 (1%)

--------------------------------------------------------------------------------

New Hi's 191 108
New Lo's 10 15



And the buck making a significant technical

Last trade 82.46 Change +0.36 (+0.44%)

Settle 82.10 Settle Time 23:37

Open 82.28 Previous Close 82.10

High 82.57 Low 82.05

Last tick: 2004-12-14 12:38:18 ET
30-min delayed quote.


The March Dollar was slightly higher overnight due to short covering but remains below the 20-day moving average crossing at 82.36. Multiple closes above the 20-day moving average crossing at 82.36 are needed to confirm that a short-term low has been posted. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If March extends last week's rebound, the 25% retracement level of this year's decline crossing at 84.09 is the next upside target. If March renews this year's decline, monthly support marked by the June 1995 low crossing at 80.14 is the next downside target. Overnight action sets the stage for a steady to firmer tone in early-day session trading.

http://www.forbes.com/business/feeds/ap/2004/12/14/ap1710764.html

Merck & Co., under siege because of lost revenues from its recalled blockbuster arthritis drug Vioxx, will cut about 5,100 jobs by year's end, 700 more than originally planned, and will slash hundreds of millions of dollars in spending, Chairman Raymond V. Gilmartin said Tuesday.

Gilmartin, speaking to analysts during Merck's annual business briefing, said the Whitehouse Station, N.J.-based company is accelerating changes to increase growth, but will stick with its strategy of shunning major mergers. It will seek new drug candidates through more licensing deals and internal research, instead.

"Our focus now is on the future, on renewing the growth of the company," Gilmartin said.

Gilmartin, chief executive officer of the pharmaceutical giant, reaffirmed earnings guidance for this year and next, saying Merck expects earnings per share of $2.59 to $2.64 for 2004 and $2.42 to $2.52 for 2005. Analysts surveyed by Thomson First Call were expecting earnings per share of $2.62 and $2.47, respectively.

Merck's 2004 forecast is reduced by 50 cents to 55 cents because of lost revenues after pulling Vioxx from the market worldwide on Sept. 30 when its own internal study showed the popular drug increased the risk of heart attacks. The company has since been beset by lawsuits and a sharply lower stock price. Merck's legal liabilities have been estimated at up to $18 billion.

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Dow 10,687.53 +49.21 (+0.46%)
Nasdaq 2,161.51 +13.01 (+0.61%)
S&P 500 1,204.48 +5.80 (+0.48%)
10-yr Bond 4.133% -0.018
30-yr Bond 4.785% -0.022
NYSE Volume 1,218,373,000
Nasdaq Volume 1,778,956,000

3:00PM : Stocks continue to trade at improved levels as the market averages touch new session highs... Bonds have also rallied in the closing minutes of trade, paring losses after being under pressure all morning and have climbed to new session highs... The 10-year note has rebounded from -9/32 around noon, returned to the unchanged mark ahead of the FOMC's fifth consecutive rate hike, and just closed up 4 ticks to yield 4.12%... The recovery effort has left yields on the 10- and 30-year notes nearly unchanged from levels seen a year ago...NYSE Adv/Dec 1809/1448, Nasdaq Adv/Dec 1690/1400
2:25PM : Market not showing much reaction to the Fed decision, which makes sense since the FOMC's decision, and accompanying policy statement, were very much as expected...

The actual text of the statement reads as follows: "Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. Output appears to be growing at a moderate pace despite the earlier rise in energy prices, and labor market conditions continue to improve gradually. Inflation and longer-term inflation expectations remain well contained. The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability."NYSE Adv/Dec 1767/1476, Nasdaq Adv/Dec 1686/1375

2:15PM : As expected the FOMC has decided to raise the fed funds rate 25 basis points to 2.25% and has maintained a policy directive that suggests another 25 basis point hike at the February meeting is likely...NYSE Adv/Dec 1761/1465, Nasdaq Adv/Dec 1666/1381

2:00PM : Major indices continue to show resilience as market internals improve... Advancers on the NYSE now outpace decliners by a 17 to 14 margin while advancing issues on the Nasdaq hold a 16 to 13 margin over declining issues... Meanwhile, the Nasdaq banking sector index IXBK has been rallying steadily through the day and has recently broken into positive territory while homebuilding, in contrast, continues to decline (-0.5%)... The Federal Open Market Committee, convening this afternoon to discuss monetary policy, will release their decision in roughly 15 minutes...

The fed funds futures continues to factor in a nearly 100% probability that the Fed will raise rates by 25 basis points to 2.25%...NYSE Adv/Dec 1760/1462, Nasdaq Adv/Dec 1667/1387

1:30PM : Stocks show little vigor, having moved little in the past half hour... Helping the Dow remain in positive territory has been Merck (MRK 29.29 +0.24), which plans to save $300 mln in 2005 after it cuts 8% of its workforce, or roughly 5,100 jobs, by year end... Other Dow components on the rise have been American Express (AXP 55.96 +0.92), which inked a deal to distribute credit cards for Citigroup (C 46.96 +0.19), and Intel (INTC 23.17 +0.54), following positive comments from RBC Capital Markets regarding stronger end-demand for Q4...

Shares of Boeing (BA 52.67 0.00), however, which were up 0.8% in early trading after the aerospace giant raised its quarterly dividend 25% last night, have slipped a bit lower and are now unchanged on the day...NYSE Adv/Dec 1714/1473, Nasdaq Adv/Dec 1626/1407


Buck's not real happy though

Last trade 82.29 Change +0.19 (+0.23%)

Settle 82.10 Settle Time 23:37

Open 82.28 Previous Close 82.10

High 82.57 Low 82.05

Last tick: 2004-12-14 14:40:31 ET
30-min delayed quote.

I feel like dumping my entire portfolio

Dow 10,676.45 +38.13 (+0.36%)
Nasdaq 2,159.84 +11.34 (+0.53%)
S&P 500 1,203.38 +4.70 (+0.39%)
10-Yr Bond 4.132% -0.019

NYSE Volume 1,544,621,000
Nasdaq Volume 2,251,105,000

Close: Stocks held onto modest gains most of the day, despite a 1/4% rate hike, mixed economic data and a surge in oil prices, and closed near their highs of the session after strong comments from GE ignited late-day buying interest... The big news of the day, in conjunction with the FOMC's widely anticipated decision to raise the fed funds rate 25 basis points to 2.25% for a fifth consecutive time, was the accompanying policy statement...

Virtually identical to November's statement, it noted, "With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured"... As expected, equities failed to react much to the Fed's decision and the increased probability that another rate can be expected at the February meeting... With the indices holding modestly above the unchanged mark, it was not until encouraging remarks from General Electric's (GE 37.37 -0.11) Analyst Meeting that equities regained momentum...

Within minutes of saying sustainable double-digit growth starting in Q4 and better than expected revenue growth of 10% (consensus was 7%) can be expected, traders used the positive comments as a broad-based buying opportunity... The Dow, on the heels of component GE's news, showed the biggest improvement, after having bounced in and out of negative territory most of the day following varied economic news... A larger than expected record November trade deficit of $55.5 bln (consensus -$53.0 bln), based primarily on record high oil prices in October, pressured stocks early but was somewhat countered by contained inflation concerns resulting from a November Capacity Utilization reading of 77.6% (consensus 77.8%) and an Industrial Production figure of +0.3%...


buck

Last trade 82.33 Change +0.23 (+0.28%)

Settle 82.32 Settle Time 15:38

Open 82.28 Previous Close 82.10

High 82.57 Low 82.05