Equities and currencies on the move

The Market Economics preliminary index of U.S. manufacturing decreased to 55.5 in March from 57.1 a month earlier. The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, added 4.1 percent to 15.61. Ukraine’s foreign minister said the risk of war was growing.


The E-mini S&P 500 (CME:ESM14) is down 12.5 points to 1844.50, falling fast below our key 1867 level. The next key market profile target is 1830. We believe the prospect of higher rates, sooner than the market expected pre-FOMC meeting, is causing bears to start pressing the gas pedal on their selling. Furthermore, today’s economic data out of the U.S. also may be serving to dampen the enthusiasm of the bulls in the SP500. We think the most important item right now is the interest rate guidance. The market really needs to see very strong economic data from the United States to keep the rally going.


The 30-year bonds are up 16 ticks to 133’05. We have seen very strong buying this morning in the bond market, especially on the long end, such as the 30yr. The JUN14 10yr note however, is unchanged on the day, spending most of the morning in negative territory. It looks like the shorter duration bonds are getting sold the most as the market is still adjusting to the most recent interest rate guidance.


The U.S. Dollar Index (NYBOT:DXH14) is up 5 ticks to 80.31, while the Euro (CME:E6M14) is down 12 ticks to 137.80. The Franc is down 18 ticks to 113.19. We believe that the Franc could try to test lower levels, but may be supported in the short term by the uncertainty in Ukraine. The Pound is down 5 ticks to 164.79, but looks to have found buyers before breaking through 164.50. The Aussie is strong today, up 38 ticks to 90.73. We believe the Aussie may be in the midst of a move higher to at least 92.


Gold (COMEX:GCJ14) is down $24 to $1,311. This is mainly due to the interest rate guidance of the Fed last week. Lean hogs has finally sold off, today down around $.015 to $1.24. There is a key quarterly USDA report this Friday, so the market will certainly be on alert for major news that day. Coffee (NYBOT:KCK14) started off the morning below $1.70, but found buyers and is up over 3% today to $1.7655. Agricultural markets are strong, with MAY1 wheat (NYBOT:JWK14) up $.19 to $7.12, while soybeans (NYBOT:JSK14) are up $.13 to $14.22.

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