News of air strikes authorized by President Obama to avoid a massacre in Iraq was welcome. Reports that Russia is pulling back from Ukraine also provided some relief to the marketplace. The news agency RIA report that Russia wants to "de-escalate its conflict with Ukraine" provided some respite to concerns of possible cutoff of energy to Europe. With the pressure reduced some return to normalcy occurred pushing treasury yields lower and prices higher.
September Treasury bond closed Friday at 139 14/32nds, up 6/32nds and continues as the "accepted safe haven." After trading as high as 140 11/32nds during the session on word late Thursday that President Obama had agreed to allow targeted airstrikes in Northern Iraq money moved from Treasuries to equities. The advance in equities on Friday took some of the "action" from treasuries but yields continued their decline. The yield on the 30-year bond declined by half a basis point to 3.231%. We are now trading at what I feel is the high end of the trading range so some long liquidation can be expected. For now we would hold current short call positions.
The Dow Jones industrials managed to turn what had been a losing week until Friday closing at 16,553.93, up 185.66 points or 1.1%. The Dow posted its best on day percentage gain in over 4 months and for the week managed a 0.3% gain. The S&P 500 closed at 1,931.59, up 22.02 points or 1.2% and for the week was up 0.3%. The tech heavy Nasdaq closed at 4,371.07, up 36.08 points or 0.8% and for the week "squeezed out" a 0.4% gain. The news from Russia as well as well as the U.S. air strikes to halt the advances by ISIS provided the impetus for shortcovering and new buying in equities. We, however, feel it was overdone as a correction after the early week selling and once again suggest strongly the implementation of risk hedging strategies.
The September U.S. dollar closed Friday at 81.45, down 15.5 points or 0.02% against most currencies. The Euro gained 53 points to close at $1.3413, the Swiss Franc 42 points to $1.1047, the Japanese yen 1 point to 0.09803, and the Australian dollar 6 points to 92.52c. The British Pound lost 58 points to $1.6771 and the Canadian dollar lost 37 points to close at 91.07c. The ongoing concerns over Ukraine, Iraq, and the Gaza/Israeli conflict weighed on risk assets and provided the basis for the choppy action in the currency markets. We continue to favor the dollar but would not add to positions until global concerns are mitigated to some extent.
September crude oil closed at $97.57 per barrel, up 23c as the decision by President Obama to finally take action in Iraq helped quell concerns over Iraqi crude production. The gains by ISIS in Iraq finally prompted action and we welcomed the decision to implement air strikes for both economic and humanitarian reasons. We will have to wait and see how this action plays out and hope it was not "too little, too late" in stopping ISIS advances. For now we remain bearish for crude.
December gold (COMEX:GCU14) closed at $1,311 per ounce, down $1.50 but for the week managed a gain of 1.3%. The decision, finally, to institute air strikes against ISIS as well as the Russian decision to "ease tensions" over Ukraine reduced concerns that moved gold prices higher. September silver closed at $19.94 per ounce, down 5c after trading as high as $20.185 during the session. The "relief" prompted by the U.S. action as well as the Russian decision prompted profittaking in precious metals. The sharp rally in equities also contributed to the "transfer" of funds from metals. We remain on the sidelines. Octo ber platinum closed at $1,478.30 per ounce, down $3.20 while September palladium gained $4.45 per ounce to close at $860.50. Our preference of palladium over platinum continues unabated.