Markets continue to reel under the threat of a reduction in energy supplies through Ukraine as well as the concern over the Iraqi oil fields which are under attack by the Muslim extremists. Since the "basis" for all industrialized country’s economies is the ability to obtain "energy", the reduction of basic fuel could curtail economic recoveries. With that in mind, my comments and suggestions as to the various markets we report on will be tempered. Now for some actual information to hopefully "guide" my readers and clients through the maze of ongoing news and data……
The September 30-year Treasury bond (CBOT:USU14) closed Friday at 135 19/32nds, up 11/32nds after posting the largest 3-week loss since December of last year. Investors were not sure how to read the recent statements by Fed Chair Yellen which led some to believe a revision of rate policy might be in the "wings". On Wednesday the Fed told market participants that there was no "rush to raise interest rates", and would continue its low rate policies even against improved labor market and inflation numbers. That left some in doubt and they reacted pushing bond prices and yields back and forth. We maintain our basic position that bonds are in a trading range and are holding our spread positions for our clients.
The Dow Jones industrials closed at 16,947.08, up 25.62 points and set another new record. For the week the Dow gained over 1%. The S&P 500 (CME:SPM14) closed at 1,962.87, up 3.39 points and another record. For the week the S&P gained 1.4%. The tech heavy Nasdaq closed at 4,368.04, up 8.71 points and for the week gained 1.3%. The Nasdaq is closing in on its "record" high close but we need to see it trading over 5,000 for that record to be breached. The U.S. Federal reserve on Wednesday indicated the continuation of low interest rate policy and that was just what the market wanted to hear. Rising oil prices could however, detract from any economic recovery and also the availability of consumer spendable funds which are needed to expand the economy. We continue to view the market as extremely "overbought" and once again strongly suggest the implementation of risk hedging strategies to avoid another "2008-2009" selloff. Once the market starts selling off and investors "abandon" position in order to avoid margin calls, that "exit door" cannot handle the "exodus."
The September U.S. dollar index closed at 80.42 on Friday up 2.4 points against most of its trading partners. The Euro lost 9 ticks to close at $1.3602, the Swiss Franc 11 ticks to $1.1178, the Japanese yen 15 ticks to 0.09801, the British Pound 28 points to $1.7003, and the Australian dollar 13 points to 93.32c. The Canadian dollar buoyed by the increase in oil prices gained 61 points to close at 92.80c. For the week the U.S. dollar lost almost 0.3% but relative to other country’s economic situation and high energy costs, we continue to favor the dollar.
August crude closed at $106.83 per barrel, up 78c and its highest close since last September. The prospect of Iraqi insurgents cutting off supplies from some of the oil wells had a psychological impact on prices which saw the August Brent crude trading over $115 per barrel. With unknown factors as to the production from Iraq, we refrain from any comment at this time awaiting further news from the region.
August gold closed Friday at $1,316.60 per ounce, up another $2.50 after the $40 gain on Thursday (COMEX:GCN14). For the week gold gained 3.3%. The ongoing crisis in Iraq has finally resulted in a "flight to safety" and a rally in gold and silver. The Wednesday statement by Fed Chair Yellen suggesting a continuation of a low interest rate policy also helped gold. We had been on the sidelines in gold as we favored silver to gold in recent commentaries and maintain that position. July silver (COMEX:SIN14) closed at $10.875, up 22.7 cents or 1.1% against gold’s gain of only 0.1% Friday. July platinum closed at $!,4583 per ounce, down $16.20 or 1.1% against September palolad8ium which lost nearly 2% or $16.40 to close at $822.15 per ounce. We continue to prefer the sidelines.
Grains and Oilseeds
July corn (CBOT:CNN14 closed at $4.53 ¼ per bushel, up 2 3/4c on light shortcovering in front of the June 30 USDA annual Acreage Report. We have no opinion until we see those numbers. July wheat (CBOT:WN14) closed at $5.85 per bushel, down 8 1/2c. July soybeans (CBOT:SNN14) closed at $14.18 ¾ per bushel, down 2c also on position squaring in anticipation of the June 30 USDA report.